Role Of Nigerian Money Market In The National Development (Nigeria As A Case Study)

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Role Of Nigerian Money Market In The National Development (Nigeria As A Case Study)


Abstract


Money market, like most financial market involved in the intermediation of fund is the hub of any economy. It is a common knowledge that operators often are strict for trading of money market products/service, problems often arise on the operations a grapple with such question on the following; Whether the supervisory role of the regulators has any impact on the money market operation; Whether the operators operations affect the money market operation; Whether there is a hindrance in money market operation; To offer suggestion on how to improve the money market operation. This project is vital in answering this question in relation to money market. From the findings, the Nigerian money market has strong impact on the Nigerian economic society. The money market is agood place for long- term capital generation thus, has a strong impact on industrial development of the economy. It is concluded therefore, that money market helps in financing trade and business activities as well as promoting fair competition within the market. Based on these findings of this project, the study recommends that regulators of money market should make legislation to keep pace with the changes in modern money market operation. Also, the management of money market should be in the hand of qualified personnel so as to ensure that its objectives are achieved.


Table of Content


Preliminary Page(s)

  • Title Page
  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Content

Chapter One

1.0 Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of Problem
  • 1.3 Research Objectives
  • 1.4 Research Questions
  • 1.5 Research Hypotheses
  • 1.6 Significance of the Study
  • 1.7 Definition of Terms
  • 1.8 Organization of Study

Chapter Two

2.0 Literature Review

  • 2.1 Conceptual Review
  • 2.2 Theoretical Review
  • 2.3 Money Market in the Nigerian Financial System
  • 2.4 Reasons for Money Market Establishment
  • 2.5 Features of Money Market
  • 2.6 Operators in Money Market
  • 2.7 Regulations of Money Market
  • 2.8 Instrument of Control
  • 2.9 Instrument of Money Market
  • 2.10 Money Market in The National Development
  • 2.11 Empirical Review
  • 2.12 Summary of Literature Reviewed

Chapter Three

3.0 Methodology

  • 3.1 Research Design
  • 3.2 Area of the Study
  • 3.3 Sources of Data
  • 3.4 Population of The Study
  • 3.5 Validity of The Instrument
  • 3.6 Method of Data Analysis

Chapter Four

4.0 Results and Discussion

  • 4.1 Results

Chapter Five

5.0 Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • Appendix

Chapter One


1.0 Introduction

1.1 Background of the Study

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 programmes.

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 Bureaux 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.

The link between the deficit and the surplus sectors of any economy is very important, if the link does not exist, the surplus sectors will have excess funds which will probably be held as idle balances instead of investing such funds to earn interest. Conversely, people in the deficit sectors who can invest profitably may not be able to do so because of lack of fund. Though both of them will be losing but it is the economy that sustains the height loss as economic growth and development is hampered due to low level of investment arising from poor capital formation. This will initial a problem, the question now is what will be the lot of Nigerian economy and its inhabitant in general. There is need therefore, to evaluate the role of the Nigeria money market in the national development of the country.


1.2 Statement of Problem

The Nigerian money market is two, which can be broadly classified into primary market and secondary market. Primary market is a market where new securities are issued. According to Anyafo ( 2004 ) , primary market is a segment of money market where securities are first issued and i t is sometimes refers to as the new issues market, securities sold in the primary market being launched into the market for the first time. In other words, i t is a market for buying and selling of virgin securities. Examples of primary market are issuing house.

Secondary Market is a market for trading for existing securities. In other words, secondary market is a re- sale market where investors buy and sell previously issued securities which Emekekwue ( 2000 ) in fun referred to as bend- down boutique. Example of secondary market includes Nigeria stock exchange, the activities of brokers and dealers.

The money market is not void of problems: the limited numbers of available instruments traded in the market were discriminated in favour of large firms; the problems of unclaimed dividends among others have been able to hinder or draw back the swift/ function of the money market in Nigeria. Also, considering the underdeveloped state of the Nigerian Stock Exchange, what could be done to position it strongly as its western counter parts. Thus, the study focuses, on the assessing the role of money market towards the national development of the Nigeria economy.


1.3 Research Objectives

The objectives of the study includes:

  1. To ascertain the role of the capital market towards the growth of the Nigerian economy.
  2. To examine whether the establishment of money market in Nigeria is justifiable.
  3. To identify the vital function performed by the primary market in Nigeria.
  4. To identify the causes of the recent Nigeria money market melt down.
  5. To identify the role of secondary market in Nigeria money market.

1.4 Research Questions

The study seeks to provide answers to the following questions:

  1. What is role of the capital market towards the growth of the Nigerian economy?
  2. Is the establishment of money market in Nigerian Justifiable?
  3. What is the vital function performed by the primary market in Nigeria?
  4. What are the causes of the recent Nigerian capital market melt down?
  5. What role is played by the Nigeria secondary market?

1.5 Research Hypotheses

In embarking on this study the researcher has the following hypotheses to be tested:

  1. H1: The role of the Nigerian money market is to mobilize long term funds, create wealth and generate employment.
    H0: The role of the Nigerian capital market is not to mobilize long term funds, create wealth and generate employment.
  2. H1: The role played by the Nigerian secondary market is buying and re- selling of previously issued securities.
    H0: The role played by the Nigeria secondary market is not buying and re- selling previously issued securities.

1.6 Significance of the Study

This research work is carried out to reveal the vital role of a sound money market system in relation to maintaining an efficient and dynamic financial sector.

These works will also be of great help and benefit to other sectors, both public and private sector. I strongly believe that the management of Nigeria money market will use the findings of this research work to equip themselves with appropriate checks and control that are necessary for the development of an enviable financial system. Prospective investor, promoters and shareholders would as well find this study very useful it will serve as an eye opener on what it takes to invest in the money market. Government agencies and parastatals are not left out in the array of people that will find this study beneficial. This is with the belief that the findings will help them avert improprieties that characterized the system.


1.7 Definition Of Terms

Bills:

Is a form of agreement promising to pay whosoever hold it a certain sum of money on a specified future date.

CBN:

The central bank of Nigeria is the issuer of the domestic currency, it participates actively in the money market in the process of implementing its monetary policy and by virtue of its role as the bankers bank.

Certificate of Deposit:

Is an inter- bank dept instrument designed to channel surplus funds from one institution to another.

Commercial Paper:

Are promissory note with maturing period range from few days to 270days (9 months). They are issued by corporate entities evidencing indebtedness.

Financial Companies:

These are institution that specialized in short term non-bank financial intermediation.

Individuals:

This constitutes the basic economic units in any society.

Investment:

Are assets acquired by an enterprise for purpose of capital appreciation or income generation with out any activities in the form of production, trade or provision of services.

Operators:

These are financial institution operating in the country. They are actively engaged in the financial intermediation process.


1.8 Organization of Study

The study comprises of 5 chapters. In chapter one, the concepts are introduced and the problem of the study is established with the research objectives and questions. Chapter two presents the literature review while chapter three presents the research methodology. The fourth chapter presents the results and discussion, and the last chapter presents the conclusion and recommendation.


Chapter Five


5.0 Conclusion and Recommendation

5.1 Summary

The main purpose of this study was to investigate the role of money market in National development especially Nigeria. It was found that money market has much benefit to present to the economic and the nation at large.If this sector must complete favourably with other similar sector in other economy (country) and the country boasting of a sound financial system. The sector must be well developed by the country and its inhabitants

Also, regulatory instruments used by the regulatory authorities to manage these sectors should be that which contributes towards its development and growth.

Finally, operators and regulators should be enlightened of the role played by this vital sector and the market should also be embrace despite all odds its may present.


5.2 Conclusion

Money market is a financial market that provides facilities for mobilizing and dealing in medium and long term funds. The players in the money market are the operators who act as intermediaries between the providers of the funds and the fund users.

The Nigerian money market has strong impact on the Nigerian economic society. The money market is a good place for long- term capital generation thus, has a strong impact on industrial development of the economy.
In line with Anyanwu and Nwokoro (2007) it was found that a well developed money market is comparatively efficient in the sense that it is responsive to changes in demand for and supply of funds in any of its segments.

It is concluded therefore, that money market helps in financing trade and business activities as well as promoting fair competition within the market.


5.3 Recommendation

Based on these findings of this project, the study recommends that regulators of money market should make legislation to keep pace with the changes in modern money market operation. Also, the management of money market should be in the hand of qualified personnel so as to ensure that its objectives are achieved.

  1. The Securities and Exchange Commission should assure the payment of dividend to shareholders.
  2. The instrument used in the money market of Nigeria should be increased.
  3. The laws regulating banks in Nigeria should allow development banks to get enlisted at the money market.
  4. The Nigeria money market should be re- packaged by the Central bank in line with current globalization standard to allow a f low of foreign investment into the economy and enhance industrializations process.

Role Of Nigerian Money Market In The National Development (Nigeria As A Case Study)


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