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The money market is a market where short term and liquid securities are traded. Several institutions partake in the Nigerian money market. These are commercial banks, the central bank of Nigeria, merchant banks and discount houses.

In this post, we take a closer look at each one of them.

Central Bank of Nigeria (CBN)

This is the apex banking institution saddled with the responsibility of creating, regulating and controlling the supply of money.

To achieve this purpose, The CBN perform two functions in the Nigerian money market:

1) Regulatory function: The Central Bank of Nigeria (CBN) is the apex institution in the Nigerian money market, and it collaborates with the Securities and Exchange Commission (SEC) to ensure that all institutions trade in accordance with the rules and regulations in place.

Furthermore, as the guardian of the monetary policy of the federal government, they ensure that every financial institution trade in a way that promotes the federal government's monetary policy.

2) Participative function: The Central bank also trade in the Nigerian money market when it partakes in open market operation (OMO).

Open Market Operation is the buying and selling of government securities by the Central Bank. Routinely, when the central bank needs to increase or decrease the money supply, they trade government securities such as treasury bills in the money market.

Commercial banks

Commercial banks are financial institutions established to carry out financial services such as accepting deposits and granting loans for the sole aim of making a profit.

Commercial banks are one of the biggest players in the money markets and they have been in existence since 1982. They serve as the suppliers and users of money market funds.

They can, sometimes, serve as the middlemen as they help prospective investors buy and sell money market instruments. 

In most countries, the checking account at commercial banks constitutes a large part of the nation's money supply.

Merchant banks

According to the Nigerian banking amendment decree 88 0f 1979, ''A merchant bank is any person who engages in wholesale banking, medium and long-term financing, equipment leasing, debt factoring, investment management, issue and acceptance of bills and the management of unit trusts.

In Nigeria, merchant banks have continued to play an integral role in the Nigerian money market as they serve as an agent between lending and borrowing trader.

Discount houses

In Nigeria, discount houses are run by private enterprises with the goal of discounting bills of exchange on behalf of the company.

In the money market, discount houses play an important role as they act as intermediaries between borrowers and lenders by discounting bills of exchange at a small fee.

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