The money market is the market where short-term securities or liquid securities are bought and sold. 

In other words, the money market is the market where short-term debt instruments are traded.

Many instruments are traded or have been traded in the Nigerian money market. They include Treasury bills, treasury certificates, commercial papers, certificates of deposit, stabilization securities, banker unit funds, eligible development funds.

To understand more, let's take a deeper look at each one of them

1. Treasury Bills: These are government-issue short-term debt instruments issued by the central bank of Nigeria.

In Nigeria, they were issued for the first time in April 1960 following the promulgation of the treasury bill ordinance in 1959. 

Treasury bills are issued by the central bank of Nigeria on behalf of the federal government. 

They are sold at a discount for a period ranging from 91 to 364 days, with the income received equal to the difference between the purchase price and the amount received at maturity or before the sale.

Treasury bills are considered to be default-free since they are backed by the full faith and guarantee of the Nigerian government.

They provide the government with a very flexible and low-cost means of borrowing the g cash. 

The Central bank usually employed treasury bills to conduct open market operations, which is one of the monetary policy instruments.

2. Treasury certificates: These were first introduced in 1968.

They are similar to treasury bills but have a longer maturity than treasury bills. Treasury certificate typically has a maturity between one and two years. 

The amount paid on the acquisition of the certificate is normally less than the discount on the bill but the actual amount is repaid by the central bank at maturity.

However, they are no longer issued in Nigeria.

3. Commercial papers: These were first issued in 1960. Commercial papers are short-term unsecured promissory notes having a maturity ranging from 2 days to 270 days.

They are issued by large corporations with unquestionable credit ratings to get funds from the public short-term capital needs.

The way commercial paper works is like this: Large companies with goods credit ratings issued commercial notes to raise funds for their operation. These notes are then purchased by investors in the money market".

This means the investors are effectively lending to the company by issuing the note.

It is important to note that commercial papers come with high default risk as they are not backed by any form of collateral. 

Because of this, commercial papers attract higher returns than even treasury bills.

4. Certificate Of Deposits: These are interbank debt instruments that allow commercial banks to send excess funds to merchant banks.

It can also be defined as a receipt or certificate issued by a merchant or commercial bank in relation to an annual interest bearing fixed/time deposit debt with them.

They were first introduced in Nigeria in 1975 to channel surplus funds from commercial banks into merchant banks. They are issued in multiples of N50,000 and are re-discountable by the CBN if the issuing bank fails to redeem them at maturity.

The maturity phase is between three and thirty-six months. 

This certificate of deposit may be negotiable or non-negotiable. A negotiable certificate of deposit is transferable using sale while a non-negotiable certificate of deposit is not transferrable.

5. Stabilization securities: These are cost-effective monetary policy that was introduced in 1976 to curb banks' excess liquidity.

With stabilization securities, the central bank of Nigeria (CBN) can issue security and sell them to banks and other financial institutions that are legally obligated to take up any assigned amount or face a penalty.

6. Call Money scheme: Call money are short-term provided by one financial institution to another financial institution

Call money is paid back as soon as the lender demands it and the lender is not to give any advance notice of the payback. Call money is also referred to as " money at call" and is regarded as the most liquid money market instrument next only to cash.

As it relates to Nigeria, Call money is administered by the central bank to allow participating institutions to invest/lend surplus funds on an overnight, 7 day, or 30 days basis.

Only commercial banks were initially allowed to partake in the scheme, but it was extended to include other financial institutions.

7. Bankers Unit Funds: This was introduced by the CBN in 1975 to remove excess liquidity from the Nigerian financial system. 

It is quite similar to the call money but does not require a statutory minimum cash deposit.

The bankers Unit fund allows financial institutions to invest a portion of their surplus with the CBN. 

Following the receipts of these surplus funds, the CBN reinvest them into government stocks of various maturities.

Bankers' unit funds are popular for their fixed rate of interest and are usually issued in multiples of N10,000. 

The banker’s unit fund failed to achieve its objective. As a result, it ceased to exist in Nigeria in 1989.

8. Eligible Development stocks: These are long-term debt instruments with fixed interest rates used by the federal government to financed long-term development projects.

They are usually issued by the central bank of Nigeria on behalf of the central government. 

It is worth noting that only development stocks with maturity lesser than 3 years are traded in the money market. Any development stock with a maturity greater than three years is traded in the capital market.

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