Money market refers
to the arm of the financial market where real money and other monetary
instruments are traded for a period of between a day and 18 months in any
single and transaction. Traditionally, players include banks and other
financial intermediaries, individuals and institutional investors as well as
the central bank of
to the arm of the financial market where real money and other monetary
instruments are traded for a period of between a day and 18 months in any
single and transaction. Traditionally, players include banks and other
financial intermediaries, individuals and institutional investors as well as
the central bank of
Nigeria, which is a participant by virtue of its
supervisory and regulatory roles.
In money market investments, the
instruments traded are:
instruments traded are:
·
Treasury bills
Treasury bills
·
Treasury certificates
Treasury certificates
·
Development stocks
Development stocks
·
Commercial papers
Commercial papers
·
The interbank deposit market etc
The interbank deposit market etc
The federal
government development stock introduced in 1959 are designed to profit long
term finance for government development projects, and latter most of the
proceeds were on lent to state governments
government development stock introduced in 1959 are designed to profit long
term finance for government development projects, and latter most of the
proceeds were on lent to state governments
1.
Treasury bills: these were introduced in 1960 to develop the domestic
money market. Both instruments (government development stocks and treasury
bills) were intended to create investment avenues for banks surplus fund
previously exported abroad and provide cheap source of credit for rapid
economic development
Treasury bills: these were introduced in 1960 to develop the domestic
money market. Both instruments (government development stocks and treasury
bills) were intended to create investment avenues for banks surplus fund
previously exported abroad and provide cheap source of credit for rapid
economic development
2.
Treasury certificates: theses consist of one and two years tenors; it
was introduced in 1968 to increase the range of money market instruments. All
the three instruments are known to have had significant growth over the years
Treasury certificates: theses consist of one and two years tenors; it
was introduced in 1968 to increase the range of money market instruments. All
the three instruments are known to have had significant growth over the years
Money market policies
of the Military Era
of the Military Era
One would recollect
that in 1986 when the structural adjustment programme (SAP) regime was
introduced which included the over simplification of the format for sectoral
allocation and deregulation of bank deposit and lending rates, introduction of
auction system for dealing in treasury
instruments and liberalization of procedures for establishing new banks. The
deregulation approach through SAP, then affected financial institutions, the
use of monetary policy tools through the use of direct control mechanism
however affected the cost and availability of credit, which are determined
through our financial market
that in 1986 when the structural adjustment programme (SAP) regime was
introduced which included the over simplification of the format for sectoral
allocation and deregulation of bank deposit and lending rates, introduction of
auction system for dealing in treasury
instruments and liberalization of procedures for establishing new banks. The
deregulation approach through SAP, then affected financial institutions, the
use of monetary policy tools through the use of direct control mechanism
however affected the cost and availability of credit, which are determined
through our financial market
After this deregulation,
the economy witnesses the licensing or registration of many finance houses when
it was perceived by market operators that there existed openness in the
economy. Many financial houses in the country engage in sharp practice in an
attempt to source funds from investors
the economy witnesses the licensing or registration of many finance houses when
it was perceived by market operators that there existed openness in the
economy. Many financial houses in the country engage in sharp practice in an
attempt to source funds from investors
This exacerbated huge
drawing from deposit accounts of banks to the financial houses. Some greedy
invetso0rs sold off their properties and plunged the proceeds into financial houses,
primarily motivated by spurious expectations of high yields on investment
without appropriately envisaging the risk of such placements. This led to
excessive disinvestment from treasury bills by government agents, individuals
and corporate bodies that of course undermined the function of underwriting of
issues on treasury securities, which are primarily undertaken by the CBN
drawing from deposit accounts of banks to the financial houses. Some greedy
invetso0rs sold off their properties and plunged the proceeds into financial houses,
primarily motivated by spurious expectations of high yields on investment
without appropriately envisaging the risk of such placements. This led to
excessive disinvestment from treasury bills by government agents, individuals
and corporate bodies that of course undermined the function of underwriting of
issues on treasury securities, which are primarily undertaken by the CBN
There was no doubt
that the full impact of the excessive credit to government on money supply was
realized when government draws on the proceeds of the issues of treasury
securities to finance its operations. Many finance houses battled with how to
pay huge debt dangling on their neck, with court actions instituted here and
there
that the full impact of the excessive credit to government on money supply was
realized when government draws on the proceeds of the issues of treasury
securities to finance its operations. Many finance houses battled with how to
pay huge debt dangling on their neck, with court actions instituted here and
there
Statistics have shown
that about N2.1billion was lost during this period through financial
recklessness of these ‘funky’ fiancé houses. The bubble then burst and the
decision would all be yours. It is either your are chasing high yield on your
investment with the attendant high or moderate and appreciating interest on
your investment that will guarantee safety and comfort. Therefore, there must
be a trade off between Risk and Returns.
that about N2.1billion was lost during this period through financial
recklessness of these ‘funky’ fiancé houses. The bubble then burst and the
decision would all be yours. It is either your are chasing high yield on your
investment with the attendant high or moderate and appreciating interest on
your investment that will guarantee safety and comfort. Therefore, there must
be a trade off between Risk and Returns.
Port Folio management
In portfolio
management, it was necessary that investments are properly evaluated to
ascertain the nature and character of the risks. In our market investment,
treasury bills have low yields but risk free. Some other instruments traded in
the money market are also less risky depending on the instrument. Today in the
new millennium things have brightened up. Then public confidence in the money
market was seriously eroded.
management, it was necessary that investments are properly evaluated to
ascertain the nature and character of the risks. In our market investment,
treasury bills have low yields but risk free. Some other instruments traded in
the money market are also less risky depending on the instrument. Today in the
new millennium things have brightened up. Then public confidence in the money
market was seriously eroded.
The emergence of
discount houses with high capitalization, which are non-bank financial
institutions, played a significant role in the development of the Nigeria
Financial system through continuous effective intermediation of short term
liquidity, using low-risk securities. Its main business in the money market
consisted of trading in, and holding of government treasury bills treasury
certificate, development stocks, commercial papers and other market
instruments.
discount houses with high capitalization, which are non-bank financial
institutions, played a significant role in the development of the Nigeria
Financial system through continuous effective intermediation of short term
liquidity, using low-risk securities. Its main business in the money market
consisted of trading in, and holding of government treasury bills treasury
certificate, development stocks, commercial papers and other market
instruments.
