THE ROLE OF COMMERCIAL BANKS ON THE DEVELOPMENT OF MONEY AND CAPITAL MARKET IN NIGERIA

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THE ROLE OF COMMERCIAL BANKS ON THE DEVELOPMENT OF MONEY AND CAPITAL MARKET IN NIGERIA

CHAPTER ONE

1.0 INTRODUCTION

1.2 HISTORICAL BACKGROUND

The central bank of Nigeria was established because of the enractoristic and difficulty of the monetary system. In this case, the currency or legal tender obtained in the colonizes board so the development of indigenous banking and growth in the financial mechanism would not be achieved without the assistance of a central bank institution in west Africa currency board, which was established to finance the need of the expert trade of repatriate fixing in west African for the objective of issuing a spade convertibility a currency providing team whereby the colonial government might impendent currency with Nigeria currency was tied on the spoon string of the British bound. There was no room for monitory management.

According to Professor W.C Uzoaga (1976) in his book tittles “Money and Banking in Nigeria” the system was operationally right and institutionally limited, it result that the board lacked any power to intimate and execute monetary policy. It also did nothing to train African institution which resulted that West African currency board had no discretionally power over the total amount of money, and would not perform any banking functions. The effects were that banking habit in the country was not developed. Demand deposit constituted loss than half the size of the currency e.g nearly half of time deposited were held by government organization for the indigenous sector, banking was even has significant because an over whelming put of deposit was held by Europeans and Europeans firms. No local investments out less where developed, because it invested all its reserves in starting oversea in wisdom.

The central bank of Nigeria was finally established by CBN ordinance in 1958, to issue legal lender currency in Nigeria to maintain external reserve to safeguard the international value of the currency and to promote monetary stability and a sound financial structure in Nigeria. Also, to act as bankers and as financial advice to the federal government.

According to Professor E.C. Nwankwo (1989) in his book titled “Nigeria Financial System” the Nigeria money was established by the central bank of Nigeria, to enable government to recoup their short fall in revenue. This period the government has been experiencing increasing short falls in revenue as a result of this glut in the world and market.

1.2 STATEMENT OF THE PROBLEMS

The Central Bank of Nigeria according to Professor G.O Nwankwo (1989) in his book titled “Nigeria Financial system” as on the function to develop the Nigeria money market. The problem to the investigated here are the extent to which the bank of Nigeria has performed is role towards having a higher achievement in developing money market is usually characterized by the availability of proper investment in the market e.g. cash call money, treasury etc.

1.3 OBJECTIVE OF THE STUDY

The project is aimed to achieve the following solutions to the central bank of Nigeria through the government, with a view to implementing those project that will help the development of a highly organized money market in Nigeria.

1.4 RESEARCH HYPOTHESIS

1. H0: CBN not make provision of central bank credits

to most financial institution.

H1 CBN make provision of central bank credits to

most financial institution.

2. H0 The money market amnesty does not rely in

Central does not financial purposes.

H1: The money market amnesty relies in central

bank of Nigeria for financial purposes.

3. H0: CBN actually does not promote monetary

stability and a sound financial system in Nigeria.

H1: CBN actually promote monetary stability and a

sound financial system in Nigeria.

4. H0: There is not strong implementation of credit

instrument of the CBN in commercial Banks.

H1: There is no strong implementation of credit

instrument of CBN in commercial Banks.

1.6 SIGNIFICANCE OF THE STUDY

The significance of the study offers relevant information about the role of central bank in the development of money market, which contributes immensely to the economic development.

1.7 DEFINITION OF TERM

a. Central Bank: this is an apex financial institution which

manage the cost of money, the volume of money available within the economy, and the direction of money and credit following in the same economy, and to realize the designed monetary and credit objectives.

b. Commercial Bank: Commercial bank is an institution that accepts cash, near cash asset and other credit, and also makes payment on demand using its money market institutions.

c. Discount House: There are financial institution whish

pays the face value of a bill upon materially to the holder of such bill discounting.

d. Money Market: This is the arrangement whereby

borrowers and lenders of money, on short term basis are brought into contractual relationship.

e. Capital Market: This is a market for long term capital.

It supplies investors with the opportunity to borrow and lend money on medium long term basis.

f. Stock Exchange Market: This is a market that

facilitates buying and selling shares stock bond debenture and other securities.

G. Call Money: This is an arrangement whereby the

commercial banks borrow money from one another on over night basis or short notice.

H. Treasury Certificates: This is the certificates used for

raising money from the money market by government for duration of between 1 and 2 year