Nigeria Money Market – The Role of Nigeria Money Market in Savings Mobilization

Nigeria Money Market – The Role of Nigeria Money Market in Savings Mobilization

Evolution and Development of Nigeria Money Market

Nigeria money market has experienced a lot of problems since its inception.The increasing writes up on this topic lend credence to the enormous roles which an entire money market in play in the economic development of a nation. As Marine Hart Macearty pointed out the development of the money market is an important milestone in the growth of an economy.  It means that funds can be channeled efficiently to borrowers using these funds for capital constriction that help to allocate resources forward for production for future.

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On other development, professor G.O. Nwankwo explained that the country, especially the government had an effective tools for mobilizing it resources at a time when independent was poised for planned development.

Money market development in Nigeria was officially initiated and launched in April 1960 with the issue of the first Central bank of Nigeria (CBN) Treasury Bill.

After the launching of the treasuring bill instrument in 1960, the call money arrangement which had always operated among banks was institutionalized by the central bank of Nigeria (CBN) in 1962, order the name call money fund market.

Under the scheme, the commercial banks and other participating financial institution kept temporarily surplus cash with central bank of Nigeria (CBN) which tehn invested in short-term money market instrument which earns interest at less than the prevailing Treasury bill rate.  The schemes therefore, provided not only an essential investment at let, but also served as a cushion which absorbed the immediate shook of liquidity pressure in the money market.

OBJECTIVES FOR THE ESTABLISHMENT OF THE MONEY MARKET

Nigeria had no organized domestic market at independence in 1960 because the financial system was merely foreign owned.  What existed then was a market linked to the London money market.  This meant that those who has surplus fund to their immediate requirement had no market to invest them in Nigeria.

The country especially, the government had no effective tools for mobilizing the resources for planned development. The reason for the establishment of Nigeria money market area.

i.        The money market was found necessary to provide machinery needed for the mobilization of savings which one made available to meet government short-term financing requirement.

ii.       The establishment of Nigeria money market is seems as one of the essential steps to independent nationhood. It is also considered as a part of a modern financial and monetary system which according to professor G.O. Nwonkwo “enable Nigeria to establish the monetary out coming which its part and parcel of workings of an independent modern states”.

iii.      The establishment of the money market is to provide the basis, for operating and executing effective monetary policy.

iv.      The establishment of money market is considered necessary to implement these declared objectives by providing local investment outlets for the retention of funds in Nigeria and for the investment of funds repatriated from abroad as a result of government persuasions to that effect.

INSTRUMENTS USED IN THE MONEY MARKET FOR MOBILIZING SAVINGS

The instruments commonly used in the Nigeria Money

market are treasury bills, banker until fund and stabilization securities and eligible development stocks.

TREASURY BILLS

Treasury bill are short-term debt instrument of 91 days maturity by the central banks of Nigeria (CBN) to raise finance for the federal government. This issue for the first time in Nigeria was provided for under the treasury bill ordinance of 1959.

TREASURY CERTIFICATE

Treasury certificate is another money instrument which and in the mobilization of savings, which is made available to the needy sectors of the economy. It is a medium-term government security which matures after a period of one to two years and it is intended to bridge the gap between the treasury bill and long-term government securities.

ELIGIBLE DEVELOPMENT STOCKS

This is a money market instrument t used by the federal government for finance long-term development project. It has a maturity life of three years and above.

BANKER’S UNIT FUND

This was introduced to mop-up excess liquidity in the economy in 1975.  The need for this money market instrument arose because of the excess liquidity in the economy. It is an interest bearing asset and is payable on demand if accepted as one of the specified liquid asset and the interest rate is fixed.

COMMERCIAL BILLS

Commercial bills are used in the money market referred to local and foreign bills discounted by banks and financial institution for the financing of trade transaction. It may also refer to the finance provided to a buyer to enable him pay for his purchase and for payments form proceeds of a resale transaction.

 THE EFFICIENCY OF THE MONEY MARKET IN SAVINGS MOBILIZATION

The purpose for the establishment of money market is to allocate savings efficiently in an economy to the ultimate users.  Without money market to economy could be greatly constrained in its investment behaviors, if the amount required for relation to current savings and economy would have to post phoned investment until it had accumulate sufficient savings.

The more develop the money market of the country is, the greater the efficiency bankers are participate in the money market are better placed to enhance efficiency.

Banks do this by fixing attractive interest rate with the aim of attracting saves because banks are specialist, whose continued business is that of matching the need of fund with the supply.  Usually the banks are able to do it more efficiently and of a lower lost than an individuals.

THE IMPORTANCE OF THE MONEY MARKET IN SAVINGS MOBILIZATION

The money market is made up of financial intermediaries and non financial intermediaries.Example are the Central Bank of Nigeria (CBN) while its as the controller of the market, Merchant Banks, Commercial banks, Insurance Banks, Pension and Profit-sharing funds, Savings banks.

As participant in the money market, they provide revenue for the mobilization of sharing which are channeled through the money market for an onward sectors for investment.

The financial institutions are increasing by utilized to mobilize and channel available domestic resources to the economy sectors which are considered essential for growth.

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This article was extracted from a Project Research Work/Material Topic THE ROLE OF NIGERIA MONEY MARKET IN SAVINGS MOBILIZATION

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 Nigeria Money Market – The Role of Nigeria Money Market in Savings Mobilization

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Comments

  1. ibikunle laniyan says:

    i need newsletter and i also need publisher to help me publish my books on financial market

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