Role of Nigerian money market in the national development

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.