CHAPTER ONE
1.0 INTRODUCTION
The money market in our economy in a very
vital sector and its position in the economy cannot be over emphasized. The
money market in Nigeria was
fashioned along with that of Britain,
established and nurtured by the CBN primarily for mobilizing domestic savings
for productive investment as well as
providing the government with funds to enable it implement its economic programme.
Money market as an intermediary for short
term financial assets that are close substitute for money consists of the CBN,
Deposit money bank, Discount house, corporate bodies, individuals, finance
companies Bureau de change as its major operators and deals on various financial
instrument such as bills, certificates, commercial papers, certificate of
deposit etc which one transferable and desirable in nature.
Notwithstanding, the recent global
economic meltdown which tends to set a disjunction between the surplus and the
deficit sectors, the surplus sector appears not
to be interested in lending to the deficit sector, this pose a serious
bottleneck to the proper functioning of the money market, thereby reducing the
level of investment in the economy. The logic question now is what would be the
lot of Nigerian economic and its inhabitants in general.
1.1 BACKGROUND
OF THE STUDY
These
are various financial markets which are institutional arrangements that facilitates the intermediation of funds
in an economy. They financial market is segmented into two- of is money market, which deals in short term funds and the other capital market
that is for long term dealing in funds (
Anyanwu 1996). The basis of distinction
between the money markets and the capital market lies in the degree of
liquidity of instruments bought and sold in each of the market which can be further sub –divided into primary and
secondary markets, while primary market is concerned with the raising of new
funds, the secondary market exist for the sale and purchasing of existing
centuries that are already in people’s
hands thus, enabling savers who purchase securities when they have surplus
funds to recover their money when they are in need of cash to (Afolaki 1991).
Money market play a key role in banks liquidity management and transmission of monetary policy. In normal times, money markets are among the most liquid in the financial sector. By providing the appropriate instruments and partners for liquidity trading the money market allows the refinancing of short-term and medium term positions and facilitates the mitigations of your business liquidity risk. The banking system and the money market represent the exclusive setting monetary policy operates in a developed active an efficient inte banks market enhances the efficient of central banks monetary policy, transmitting its impulses into the economy best thus the development of the money market smoothes the progress of financial intermediation and boosts lending to the economy , hence improving the country’s economic and social welfare.
Therefore,
the development of the money market is
in all stakeholders interest the
banking system itself the central banks and the economy on
the whole.
1.2 STATEMENT OF THE PROBLEM
The
role of the financial market in the
development of the real sector and the economy at already cannot be overemphasized.
A critical characteristics of the money market is that it should deep and broad so as to absorb large volume of transactions without significant effect on security prices and interest this characteristics requires that these exist many active market participant such that the transaction of an individual investors will have just infinitesimal effect on security prices are interest rates the characteristics also requires that there are always alternative investment instrument available to satisfy the respective return risk desires of investors in markets.
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