THE ROLE OF MONEY MARKET IN THE NIGERIAN ECONOMY

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THE ROLE OF MONEY MARKET IN THE NIGERIAN ECONOMY

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The first batch of treasury bills issued by the central bank of Nigeria (CBN) in April 1960. Saw the birth of money market in Nigeria. The market has experienced a remarkable increase in size. Since that date with the addition of a number of traditional short term money market entrustments. In circulation today are eight of such instrument as contained in the subsequent chapter. Money market can be defined as the place of mechanism whereby funds are obtained. For short periods of time (from one to one year) and financial assets representing short term claim are exchanged. As a section of the financial market, it is made up of financial organization and dealers. They as a group quicken the borrowing and lending of short-term money (bank credit and non bank credit) by bringing under one umbrella those institutions with surplus funds, which wish to lend on a short-term basis and those wishing to borrow. In this country, money market is composed of the central bank of Nigeria (CBN) commercial banks, merchants bank, federal savings bank, insurance companies, the federal government and statutory corporations.

Accounting for over 50% of average total holdings of its instruments. Commercial banks dominated it in 1984. It is important to note that although the money market is so crucial to the workings of the Nigeria economy. Is not geographically centered, as in the case with stock exchange. Even in a developed country like America for instance, one cannot find in the same physical sense can find the flea market and farmers market Paris and loss ageless respectively. However, this does not mean that money market activities cannot be carried out at a specified area or street in a more developed country a typical example is London. In London, borrowers and lenders of short-term money meet at Wall Street in London. They also trade on short-term debt securities. Infact, money market is a loose network of dealers, bankers and treasures of public and private corporations talking in very large round numbers over telephone and personal contacts.

1.2 OBJECTIVES OF THE STUDY

Since there is no doubt that money market serve as one of the major basis for assessing the economic health of a country. Moreover, that the activities are influenced by the position of the countries foreign reserve, balance of payment and the state of the economy in general it is now necessary to do the following:

1. See the results of money market on the rural and urban business transactions.

2. To evaluate the scope of money market.

3. Understand the conditions under which money market can operate effectively.

4. Ascertaining its impact on the financial development of the nation.

5. To draw attention of the government and the entire borrowers and lenders to the need of expecting money market to have a sizeable and rapidly increasing positive effects on the process of developing the less developed countries in the foreseeable future.

6. To highlight task facing money market and its major participate which must be accomplished in the economy.

1.3 SIGNIFICANCE OF THE STUDY

The work would be of immense use to various players in the economy such players are researchers, bankers, investors, government and general public. The benefit will be in the following order:

1.It will aid other researcher who want to carryout further research on the topic.

2. Some recommendation in this work will direct authorized investors when they use them as a guide and hence will help in reviving the nation’s economy.

3.To commercial banks: commercial banks which most operate effectively must have a sharp sense of the money market at any given moment an instinct for knowing whether its prices as expressed in interest rates will go up or down, and correspondingly, whether the demand for loans will increase or decrease.

4. Besides, the investors will gain more from this study because it will help them with the techniques or mechanisms of how to adapt to and manage changes which may be either favorable or not as a result of the money market appraisal.

5. Above all, operators in this market will know exactly in which areas of the exchange or instrument is of more idea.

1.4 STATEMENT OF PROBLEMS

One of the problems is that the money market could not collect its report for the work activities.

1.5 DEFINITIONS OF TERMS

MONEY: Defined as anything that is generally accepted as a medium of exchange.

MARKET: A place where goods are sold and bought by sellers and buyers respectively.

LENDERS: A person who allows or gives money or any other property to another person on the understanding that it will be returned.

BORROWER: A person who obtains something from somebody temporarily.

BANK CREDIT: this means bank loans.

NOW BANK CREDIT: loan from other corporation other corporation other than banks.

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