June 16, 2014


  In this critical review we appraise the financial market landscape in Nigeria as part series of the review of the entire financial system in Nigeria .Ibikunle Laniyan The Blogger explores its potential for optimal economic development and evolution and how it can be trapped by economic agents and investors alike .Understanding the way the market functions would go along in boosting economic development in the country by stimulating out of sluggish growth investors education in general .Enjoy the reading
                   1st essay/market review   -INTRODUCTION
Financial structure planning is the basis through which economies worldwide evolve .It must not be stunted but where it is stunted  finance is inaccessible  as the economy fails to grow.Finance indeed as the livewire of any nation and economic projects is oriented to smoothen and lubricate an economy to massive development  and no matter how good an idea ,policy or institution or goal can be or is without the wherewithal of finance is an exercise in futility .
Besides technology ,though the emerging markets are fast catching up with the bug ,the other factor and major disparity that distinguishes the OECD club of rich countries  and the developing nations is finance .Infact it is the harbinger of both .SO,every nation-state of the world  has its own  distinctive local market in which finance can be raised  for socioeconomic growth and development .They are generally regarded as financial  market -a major subsidiary and component of the financial system  in an economy where facilities are provided for optimal project finance .It is an advocacy of sustainable social and economic development  in the long run.
                           THE STRUCTURE OF THE FINANCIAL SYSTEM
Generally , in any clime , the financial system is an important structure of the economy  which plays a pivotal role in the financial intermediation process ,creating enabling environment and therefore promotes economic growth and development .The Nigerian financial system  comprises of the regulatory and supervisory  authorities ,the financial  markets ,the legal charters  and the enabling laws ,the banking enclave  and other non-bank financial institutions .
The regulatory and supervisory authorities include the CBN ,the federal ministry of finance -FMF,the Nigerian Deposit Insurance Corporation-NDIC, the securities  and exchange commission -SEC and the National Insurance commission -NAICOM .By the nature of their technical framework , operation  and legal mandate  are very crucial to the economy  and determine the efficient functioning of the financial system .Through the system ,they act as the regulatory framework and umpire for  the financial empire of the economy  determining  domestic mobilisation climate ,exportimport nature  and inflow and outflow  of funds  in the entire financial environment .
Generally, this piece is based on the money market but at this point  we focus on the financial market  which is subdivided or dissected into two  mainly -the money markets  and the capital market .In like manner  through the system  being the  regulated  act as  major institutional mechanism  and trading power  houses of a nation s financial community ,circulating finance  to the needy sectors .
To be precise ,money markets  are financial market for short term loans ,trading claims and asset of a relatively short to medium term .It facilitates  funding  mechanism  as well as raising short term facility from the surplus to the deficit sectors .Hence ,the latter follows closely from the shadow concentrating financial instruments from the medium to  the long term trading illiquid assets ,debt securities and equity.The short term being  a year  or less  and the medium term  is a duration of one to five years  while the long term goes beyond  or spread over 5 to 10 years and beyond .
In the former ,short term funds and liquid assets are being traded .These liquid assets make for high liquidity  and are much less risky  and possibly  with risk free rate of returns but earning low returns or profits than the latter  with illiquid assets though earns high profit  are highly risky .Trading motives and investment precedence  determine asset allocation  and portfoillio management  in these markets -Uremadu;2009
Each market parades a different tradable debt instrument by which finance  can be allocated  and provided  or accessible for economic growth and development .We shall continue in the following piece with the exposition.

  2nd  essay----     

In the previous article we treat briefly financial market analysis . Financial market is defined as a cluster market  or a market specifically oriented to trade securities .In other words it is a securities market where financial securities are traded  in addition to commodities fungible value items can be traded at low cost transaction ,products easily disposed and based on  the choice of investor  ,at market affordable prices and such prices reflect market forces.The tradable securities include -stocks and bonds .The commodities include  agricultural goods  and precious metals .
They are general market trading general securities  and specialist markets trading in specialised products.In the market,  regulators  and supervisory authorities   have  been  successful in set up rule guiding market tradition  and the markets work through dealership of buyers and sellers involving or on behalf of interested households ,firms and government agencies ,smoothening access to readily demanded credit products .
An economy is subdivided into two mainly those relying on market forces in the allocation of resources -free market  and other a command economy or centrally planned  economy or market socialist economy managed by the public sector .Nowadays mixed economy is popular and rampant even though there are no clear model for it .As the centre of the market economy financial market is the most readily available and accessible  institution in any country in the world  ,due to its  ability to monopolise access to public
and private finance . 
According to  Robert Schiller - a Yale University Professor -it facilitates the raising of finance and circulation of  capital resources to the needy people or scarcity sectors .In this market ,he noted financial institutions are clustered as --[a pillar of civilised society supporting people  in productive economic risks they take .The workings of these institutions are important to comprehend if we are to predict their actions today  and their evolution  in the coming information age --.They  are indeed the pillars as noted by Schiller , paramount to market evolution ,determinant of its general wealth creation and are important to comprehend the acceleration of economic growth .This is vital to predict the nature of growth in the market in the long run and further evolution in the fields of their diversity  and the  age of information technology.
It is a broad term used to describe any market place where buyers and sellers flock together and a meeting point to trade in equities ,bond among other financial assets -securities , derivatives and currencies .It is a typically transparent pricing bourse enamoured with erudite basic regulations on chargeable fees ,market ethics and costs sensitive to market forces determining securities prices during trade.In some markets ,particpants are allowed only when they meet eligible criteria such as minimum capital base ,geographical location , disclosure rules and expert knowledge  among others.As the cluster market ,dominated by financial institutions , government agencies, individuals and households, they readily dictate the pace and vibrant direction of an economy depending on the use at a particular period .
According to Investopedia it is a financial hub  and -;-'the exchange of capital and credit in an economy,It is a market that specialises in risk transfer especially in derivatives market ,facilitates price discovery ,cultivate  global transactions through financial market intergration ,engage liquidity transfer as in money market.It enhances and promotes international trade  in currency movement ,pooling fund into needy sectors .It invariably offers a platform for borrowers to stimulate the economy influencing credit access and enhance motive to borrow while making a pledge to repay back loanable capital.
Generally , when a borrower issues a receipt to the lender ,these receipts are termed -Securities- that may be freely sold or bought  in return for the lending .The lender charges an interest or a dividend as a form of compensation or relief  and profits made on the loanable capital .This gain according to theory and practice is the reward and primary motive of the lender and a basic determinant governing  market supplies of funds.
Lenders are people with surplus capital in excess of their desired expenditures and being tempted or lured to loan it out ,  look for potential borrowers  to buy its use and rent the use of this surplus capital for a particular period .In most cases ,this venture is collateralised .Several studies have shown that the markets serve 6 main functions;
---Quick access -borrowing and lending -easy transfer of funds from agent to agent for the purpose  of  investment and consumption
;price determination ;-through this vehicle ,the financial assets and securities  are both traded and prices of old and newly issued instruments are readily determined and unraveled ;As liquidity enabled mechanism , help investors re-liquidate and re sell these  assets  ;Risk sharing -it promote risk sharing and risk transfer .The tradability of these assets  and asset category provides a platform for information generation and information flow about clients asset values and consequently ,the flow of funds is smoothened  between lenders and borrowers.
                             THE CONCEPT  OF  FINANCIAL ASSETS
Market participants  trade financial assets .Basically , assets are any item of value and act as a means to store value .It differs and  can be real asset including  land , physical building , or landed properties ,equipment as opposed to working capital  .Those assets in physical form,including  natural capital buried in the land such as oil and gas  and human capital -an  asset embodied in human form or people with natural abilities  ,skills , competences and  knowledge  .Financial assets constitute claims against real assets  and  can be traded directly through stock, shares and security  claims and indirectly through money holdings and future income; that ordinarily emanates from real asset investment .They are exchanged  in auction  and through  over the counter markets and can be distributed subject to legal requirement of market regulators .
Financial assets tradability also enabled re-trading process such as exchange of formerly issued financial assets .This encourages trading on a daily basis to reach its desired clients target and new and old assets  are periodically traded .For instance , previously issued securities and bonds on the New York stock exchange or similar exchange worldwide can be sold or resold .by U.S.government or any other government hosting the market .It can be previously issued bonds ,and securities on the New York stock exchange .As defined by Schiller financial institutions  trading in the market  constitute the pillar of civilized society with the primary motive to profit from financial asset trading , risk transfer and diversification of investment assets for better yield .
Ouite simply financial market are of any type motive  of financial transactions  with the primary to help businesses grow and make  money .So , from simple overview to the complex , it deals with stock investment and shares as ownership  asset of companies sold to investors -lenders for the purpose of investment returns.A lot of funds can be raised in this way making private sector bouyant and increase their earnings
The market is broad  .For instance , the Dow Jones industrial average is just one too many .They have  Dow Jones Jones transportation average ,Dow Jones utilities average , NASDAQ index  among others in the U.S.alone .The U.S. investors  prefers Standard and Poor 500 and a host of other indices that track stock market progress.
Though the development and concentration of world securities market  is predominantly U.S. based controlling  over 50 percent of world stock exchanges ,in terms of the aggregate trading nevetheless the overwhelming growth of London Securities market is phenomenal in recent times especially after the downturn crisis and meltdown of 2008.These securities  market  permits firms to raise long term finance by issuance of financial assets  directly froim investors .As at the end 31st December of 2012 according to world federation of exchanges ,the London stock exchange is the oldest and  4th largest exchange in the world with over three trillion -3,266 trillion dollars by market capitalization after Tokyo exchange ; NASDAQ OMX; and NYSE with market capitalization of 3,325tr; 4,687;and 14,242tr. respectively by 2011 prices . Consequently , the efficient activity of U.K. single regulator -the financial services authority -FSA  has heavily impacted on the market witnessing rapid rise as securities market world wide became internationally listed  and increasingly globalized .Its trading  models are now being copied  and emulated worldwide especially by other advanced economies .It had been noted that 4 or 5 years ago securies even grew faster than even  bank deposits and corporate bonds took the lead in the overall trading and growth ranking .
It is most international and the most globalised with highest population of companies on its bourse controlling 3,000 companies on its bourse from over 70 countries It operates global depository receipts to accommodate companies that fall outside the European union and the alternative investment market-AIM to accommodate SMEs as opposed premium listed main market that accommodates bluechip companies.It generates not less 50 percent of revenues from crossborder foreign listings and now the winbledon  of worl financial market.
The impact of financial markets world wide cannot be over emphasized to say the fact and by most estimates over 630,000 firms or companies are publicly traded in the exchanges alone  .The Asian market is also growing very fast and many of the largest bourses or exchanges now reside there, little wonder mass poverty was massively reduced and the fastest growing economies were clustered in the region unlike in Africa-the poorest region of the world .Understanding the place of financial market and the trade in financial assets to procreate  general wealth  is still mystery to most economies in Africa ,even NIGERIA inspite of stockmarket return and recovery of downturn of 2008

Throughout the revolution of financial market both in the U.S. and worldwide , it has immensely evolved through the interplay of three factors .According to Frederich Mishkin -author of Economics353-Money Banking and financial institutions,a former President of the Federal Reserve Bank of New York .He consistently stresses the importance of information in the market or the economy at large and that without understanding the peculiar types of [assymetric information problems-intrinsically related with financial assets it will be impossible to understand the special nature of financial markets relative to real goods market and services offered .Historically, the problem was responsible for financial market structure and with the dawn of information age more challenges crop up and the fundamental dramatic restructurings of the markets has taken the markets by storm today.Mishkin conluded -In short , history matters and it matters a lot - Without a given level of information transparency ,it would have been very difficult to achieve its modern phenomenal growth .Access to information and especially timely driven  information  resources is a secret code for the success of market participants .
 The innovative competences of animal spirit to manage such information and mountain of data lies in the dexterity of entreprenership and industry are the driving forces of modern economic growth .Joseph Schumpeter in 1911 in the Schumpeter theory was the first to emphasise the nexus of finance as panacea to economic growth .The theory widely known as creative destruction noted that innovation and entrepreneurship are the driving forces of this growth and also viewed finance as an essential elements of this growth
Innovation and entrepreneurship can thrive in an economy where productive savings are mobilized and resources allocated in an environment in which the problem of information asymmetry noted by Mishkin has been reduced  drastically to grow risk management .
Although a couple researchers have critics Schumpeterian hypothesis but later empirical  evidences proved them wrong and that came first in 1993 in a paper by Robert King and Ross Levine addressed the correlation-not causation issue.They back their evidence with mountain of proven data showing evidences that in the 1960s that countries with higher level of financial development experienced high economic growth in the following three decades .To back up their evidence ,they used terms and ratio of credit and credit creation in these economies .These include bank loans , bonds and capital market capitalisation as proof of Schumpeterian modeling sanctity.This metric is still being widely used today.Studies by Rajan and Zingales also endorsedthe impact of foreign finance
So,information,innovation, entrepreneurship and finance play a major role .In the developing nations lack of finance is amajor and many innovation entrepreneurial knowhow has died without such access to finance .This is where developing nations have to take their domestic market serious and the challenges of how to exploit their finasncial market to facilitate finance to entrepreneurship is the gretest problem.King ,Levine,Rajan,Zingales and a host of other scholars have intimidating evidence that the blood of entrepreneurship and innovation is finance .

In Nigeria today , maintream financial system touches or accounts for  less than 40 percent of the population and the capital market itself does not go beyond 10percent of national population and 80 percent of Nigerians are outside the banking system  compared to less than 2o percent in South Africa-its next competitor economy in Africa. .Unemployment is high , available fund is costly at between 30-40 percent  , high inflation persists and according to human poverty index  80 percent wallowing in poverty.This could be a lot more  if we use poverty profile rather than poverty line concept popularly endorsed by world bank , it could be a lot worse at 90 percent of the population  .Understanding the way capital market or money market functions  and devising ways and means and a new access programme to empower  the marginalized people of the informal sector can liberate Nigerian  economy of this problem.
As it is today access to finance and micro finance  in the rest of Africa is absymally low at 4 percent and 1 percent respectively .That indicates with the right policies and enabling platform , the financial market can come to the rescue .
We shall focus fully on money market in the next article


            In view of the above context ,  money market  is a specialised market for short term debt securities  facilitating finance to the deficit sectors of the economy where it is appropriated by endusers public or porivate corporation .Consequently marginal projects  and many more can be undertaken  in lubricating economic growth and development and expansion.
This mechanism allows borrowers  and lenders  as gregarious economic animals to flock together meeting short term needs and obligations while providing liquidity or cash to creditors .It is a collective markets -an organisational environment that comproises  of several subordinate markets  where  different corporations and regulated users can trade and be traded dealing in variety and several grades  of near money -Crowther 1958 and Shekhar and Shekhar-1999.Culbertson-1972 reckons that it  is a network of markets trading similar financial instruments ------------Or where close subtiitutes  for money are traded and wholesale market that trade larger volume of financial assets for together on a daily  basis -Jhingan ;2001.
According to Wikipedia as money became a commodity , the money market became a component of financial market trading shortterm assets lending and borrowing  of  one year maturities or less .Trading is done over the counter and a wholesale market with varying level of instruments,maturities ,risk ,structure,currencies ,credit risks being used to distribute exposure ,  providing liquid funding for global financial system.The history of the market began as a result of the need and the parties that had surplus to trade with those in need of it and those that needed cash or temporary cash to meet individual or corporate obligation .It trades in paper instruments  in contrast to capital market that trade in equity and bonds .  By issuing large amounts of asset backed commercial paper -ABCP, finance companies are able  to fund their operation and secured by the pledge of eligible assets into its conduit .Auto loans ,credit card receivables ,residential and commercial mortgages  loans ,mortgaged backed securiies  and a host of other financial asssets .constitute eligible assets .On their own credit and credit standing ,large corporation can issue commercial paper or arrange with financial institutions to issue it on their behalf.Federal and state and local government issue paper   to meet funding needs local and statesalso issue municipal paper to  as well as TBs to fund public debt
According to Uremadu ,another financial market authority ;is a melting pot where highly liquid short term debt instruments are mobilized and provided ,highly marketable  or easily traded with little chance of loss .And where high powered money  are converted for immediate uses .Uremadu also noted that the preeminence of of this  multiple market truly lies in the ability to provide liquidity  or near asset money ,rather than its size or magnitude facilitating cash flow to every economic sector  on a daily basis  or at few  hours notice .It is the current account  of a nation s credit system-Shekhar and Shekhar-1999.The market refers to a collection of group or specialised group of financial institution and a value added exchange system specifically set up to deal in short term credit instruments of high quality .
Therefore the short term securities market abound and is composed of subordinate markets such as treasury bill market ;treasury certificate ; call money;Bankers acceptance ; Call money ; Bankers unit fund ; ways and means advance ,gold and foreign exchange dealership ;Bank certificate of deposit-BCOD;Commercial papers market; Federal agency notes ;Commercial bills;repurchase aggreements -repos and  interbank market .These are subordinate markets  that form a wholesale as identified by Jhingan -2001.It must be noted that these classifications and markets in some cases overlap the long term capital market  in that some money market instruments  ,items and deals  fall rather far into the future .For instance treasury notes or certificate run for an intermediate period from one to five years  and treasury  bond obligations  or issues  cover from five years upward.Should we view  the market in its narrowest only treasury bills-T.Bs are truly money market media with duration of a year or less . The others fall within ,nearer to , overlap  long term funds but these longer tenure matrurities as they approach liquidation  are considered  as money market issues -Jacobs,Farwell and Neaves;1972.They involved a small risk of loss due to the fact they involved with or are  issued by obligors of higher credit rating with maturity of a year .In other words ,the supplier of funds for these instruments are  institutions looking for high liquidity or with preference for high liquidity with the lowest level of risk
A detailed analysis and functioning of these instruments may not be necessary at this point as possible in successive editions it is however proven that rate charges  and the need  to adjust their reserves  especially for banks constitute the prime target and gravity in the markets.An interrelationship of rates  in these  markets  determines the level of activity and induces  competition  and market forces between tradable instruments .And obviously market players especially banks do shift their operations to location most attractive leastexpensive and highly profitable  outlets as a convenient way and means of reserves adjustment .This tends to keep competitive rates in line with one another -J.F.N.1972
Nevertheless ,treasury bill market is the most dominant .TBs are the most dominant and the most powerful  government traded instrumnent or security in the market .TBs were first introduced  and utilised  as an instrument  and forms of federal finance in 1929 been tradable  to attract short term funds.Its holdings were increased exponentially after  second world war  in which not only banks were traders but also non-bank corporations and non-financial institutions  .More specifically ,it is an instrument  through which government borrows from the public  and consequently utilised the same to manage liquidity in the banking  sector by influencing banks reserves  in line with short term non-inflationary objectives of the monetary policy  and the economy at large.
It is to be noted that 70 percent  of banks deposit liabilities in Nigeria are short term obligations ,precisely 30-90 days funds .Larger bulk of which are daily traded in the money market and dominantly handled by the discount houses  whose shorterm  tresury securities  control 60-to-70 percent of total tradable instruments and volume giving direction to the market through its risk free rate of of returns  pegged to the CBN moneteary policy rate.A comprehensive analysis  of OMO  or monetary liquidity  management  in the coming edition shed some light or elaborate various monetary policy tools deployed by CBN  in its attempt to macoroeconomic stability in the economy at large .
In recent times ,the money market  has grown rapidly especially since the emergence of post  consolidation era..This phenomenal growth began with the commencement  and evolution of open market operation in 1993.This has broadened the size and scope and depth  of the market.With the establishment of five discount houses , more market participants were added including finance houses and banks that are major market players .
However , much more still needs to be done in terms of scope ,size and depth .Several scholarly researches and findings have revealed  the underdeveloped nature of the market in the country .This could be linked to low government participation and patronage ; the nature of banking illiquidity  and corporations inability  to optimize its premium incentives  and size for capitalisation purposes  and the low level of investor education  and awareness being the main aim of this column. Therefore more participation by both public and private sector  is a necessary leverage  for further instutitonal broadening and tapping the existing  opportunities that abound in the market for finance is vital for the  lubrication  of development for the good of the economy as a whole
              The 2nd part of the   3rD essay-  The Nigerian Money Market-
We have noted in the first part of this piece that the money market by orientation and expertise deals with shorterm funds -loans between 91 days to one year .Established purposely to provide vital machinery to meet the need of the individual ,corporate and also government short term financing needs and to create an avenue for executing effective monetary policies of the CBN being the apex regulator of the financial system.
Truly speaking ,it plays a leading role in banks liquidity management and the transmission of monetary policy -Rigg and Zibell,2009.The market is among the most liquid  financial sector in normal times ,providing appropriate instruments to patners in liquidity trading and also allows  the refinancing of short term and medium term positions facilitating business liquidity risk mitigation .It uses the banking system ,monetary policy and efficient interbank market activity to enhance its efficiency as well as that of central bank transmitting general impact on the economy at large -Rigg and Zibell-2009,Laniyan-20013.This smoothens financial intermediation process and enhances the  transmission mechanism of the central bank monetary policy activity and an avenue not only for sustainable capacity building  but also a conduit for sustainanble economic growth and development-Laniyan-2013 .
The core of the money market consists of interbank lending -of banks borrowing and lending between themselves using the instruments such as repos among others to trade and are often benchmarked such as London interbank offered rate-LIBOR.
The money market has both primary and secondary markets .In the former ,quick access to shorterm funds is provided and interest rates vary according to creditworthiness of the borrower ,the fund source and the nature of borrowing instruments.Almost all money market instruments have a secondary market in which claims are traded at various interest rates  and determined by market forces.
It is noted the fastest growing economies of the world are credit economies like U.S.A,Canada ,U.K.etc operate credit economies.Banks are prominent in credit creation and the  issue of credit instruments and credit creation in turn plays a major role in funds transfer from depositors to investors.With robust credit system people can make payment both locally and internationally and consequently credit expands investment ,public savings and encourages circular flow of income in the economy .Money borrowed from money market or lent on short term basis passed  from savers to borowers boosting funds transfer activity can also boost economic activity and alleviate poverty.All transactions in this market are meant to boost credit creation .
Commercial banks are the lynchpin of the Nigerian financial system and their level of credit creation determines our economic growth.This is vital because .................credit is the life of the business  and it is vital ingredient that oils the wheels of development-Adewunmi-1982;24.
The activity of the money market is influenced by foreign reserves position of the country and balance of payment position in addition to the health of the economy at a given period .And so in the period of 1964-66 the goal of monetary policy was to defend balance of payments ,given the impact review of the succession of cheap money policy that bankrolled the era  which had led to drain of foreign reserves due to increased demand during the period-Adekanye 1986;67.
The study by Adekanye-1986 also noted that the main priority of the government of the day was to promote economic activity during the civil war period .And the focus of the monetary policy shifted to the use of interest rates after relaxation of credit ceiling and banks were persuaded to continue a restraint on the financing of non-essential imports.
Banks suffering from liquidity problems during the period had no central pool to avail themselves of temporary shortage of liquidity or banks with surplus funds had no place to invest their surplus  funds and worsened by lack of telecom infrastructure .Such funds remained idle at the CBN current account .But the economy has rapidly changed over the years with the growth of banking activities as core players in the emerging  money market especially after the SAP liberalization of 1986 began to evolve .In an  underdeveloped financial system like ours in which banks have been dominant ,we are faced with lot of institutional challenges .The monetary and credit guidelines have also over the years  directed banks to allocate 75 percent of their loans and advances to preferred sectors of the economy .
Generally, the money market  development in the country began in April 1960 when central bank issued the first treasury bill as provided for under the treasury bill ordnance of 1959 .This was followed by institutionalization of the call money market that was  begun by the same central  bank in 1962 under the name call money fund market .Commercial banks and a host of other institutions under the scheme saved temporarily surplus cash  with central bank which  were traded in the money market instrument and earns interest at less than prevailing TB rate .The scheme provided cushion as well as absorbed immediate  liquidity pressure in the market .With this fact , it is easily contended no money market exist prior to the establishment of central bank in 1960 .But that does not mean a short term funds market did not exist before this period .Elements of short term funding-lending and borrowing specifically commercial paper based  had always existed even before the advent of commercial banking through its link to london market moving funds from london to Lagos to finance export of produce.They seasonally moved funds back to London to experience full money market activity .Money market establishment in Nigeria was meant to exploit this missing opportunity .
At independence in 1960 to corroborate Adekanye Nigeria truly  had no money market and what existed was a patchwork of  colonial market linked to London money market .Those who had surplus funds were unable to find market to invest them .So ,some of the reasons for the establishment of the Nigerian money market include;
-To provide facility and machinery for the mobilisation  of domestic savings made available to meet government short term financing needs ;
-Established as one of the major priorities of emerging government  and essential steps of nationhood as a part of modern financial and monetary system .-Nwankwo-2013
-Provide basis for the execution of monetary policy;
-Provide avenue for local investment outlets for funds retention  in Nigeria and for investment of funds  repatriated from overseas as a result of government persuasions to that effect.
The efficient allocation of savings in an economy to ultimate users remains the primary purpose of the money market .The investment psychology and public savings welfare of the economy could not have been well safeguarded without this market . Banks are gifted in fixing attractive interest rates and are able to survive in the business due to their ability to match the need for fund to its supply .As a market in which money is  bought and sold it is not only used by business enterprises to raise funds for inventories purchase  or by banks to finance temporary  loss of reserve or by corporations to fund consumer credit but also used by government to bridge gap between its  receipts and expenditure.
Unlike a market where foodstuff is sold there is no place one call a money market even though activities may be concentrated in a particular street like Lombard street in London  or Broad street in Lagos .Ajayi and Ojo,1981noted that transactions in the market are impersonal  taking place  in most cases by telephone .Therefore , it is a market for the collection of financial institutions  established for the granting of short term loans  debt securities , gold and foreign exchange -Anyanwu,1993].

-------4TH essay-
Prior to 1993 the money market was dominated by deposit money banks- DMB.The population of market participants has increased substantially especially with the establishment of five discount houses  and low income rural financial institutions in  the country.The deregulation of  financial sector in september 1986 set this pace.As at 1997 total market instruments outstanding stood at 251,317.6million naira .The major players in the market include;
Discount Houses -They provide discounting and rediscounting  facilities in government short term securites .They were first established in 1993  and by 1997 there were five discount houses in the country with total assets of 6,996.1million naira .
Commercial banks ;These are the major players in the market and have been operating since 1872 when banking activities began  in the country .This was started with the operation of  African banking corporation ,charged with the responsiblity of distributibg bank of England notes , on behalf of British treasury .The Bank For British West Africa now first Bank started operation in 1894 followed by Barclays bank now Union Bank as second commercial bank established in 1917 .First bank was a major currency exporter  for the british treasury even till now.and an agent of west African currency board .The first indigenous bank in Nigeria -National Bank began operation in 1933 .The 1986 deregulation ballooned the number of banks in the economy which rose to 64 in 1997 from 30 in 1986.These banks controlled 83.9 and 89.7 percent of the banking system total asset and deposit liabilites respectively during the same period.While total assets and liabilities stood at 578.543.million naira deposit liabilities amounted to 267,378.3 million naira in 1997.
Merchant banks ;They provide medium to long term financing such as equipment leasing ,loan syndication , project financing and debt factoring .They act as issuing houses as well as offering advisory services to clients sourcing for funds.They skyrocketed from one merchant bank in 1960 to 51 with 147 branches in 1997 including total assets of 118,967.6 million naira.Due to unfavourable climate in which they operate merchant banks due to lack of access to clearing house, gradually converted into either commercial banks or investment banks.
People s Bank of Nigeria .This institution came into operation in 1988 with mandate to meet credit demand  small borrowers  previuosly marginalised from mainstream banks .At one time ,it had 278 branches with total assets of 141,137.4 million and prior to the time of its demise expanded consistently since inception with total loans and advances of 360.1m.
Community banks ;They are placed under special supervision of  CBN and National Board  for Community  Banks -NBCB.They are owned by local communities and self sustaining .In December 1990 the first community bank started operation  and by 1997 they ballooned to 1,015 CBs and total assets,deposit liabilites and loans stood at 5.321.2 million,2,511.3 million  and 1,891.0million naira respectively  .
Microfinance banks ;These are the latest entrants in the market following the banking consolidation of 2005 and the succesful conversion of 600 community banks into microfinance banks . We  sha e ab rate  ater  n these

                          --------5th essay-MONEY MARKET INSTRUMENTS IN NIGERIA
Based on the level of institutional arrangement ,it provides both temporary surplus funds and temporary shortage of funds to the market as monetary policy tightens and loosens and also enables business enterprises to effectively manage their cash holdings and short term liquidity in order to meet working capital needs of their businesses.As beneficiaries , banks are able to readjust their existing reserves to meet current obligations .The central bank is able to augment its deficits in both tax revenues and FAACproceeds using money market to meet current obligation for short term funds .The money market instruments are used in various ways;
                                                                          Treasury Bills
Treasury bills are truly  money market instruments and one of the safest issued by central bank -a zero-risk instruments with not so attractive returns .It is circulated in both primary market for new issues and secondary markets for trading existing securites .They come with maturities of 3 months, 6months and 1 year duration or maturity .The buy value of the instrument is subjrect to bidding process through auctions.Governments often issue it at less than face value and the gain is spread between buy value and maturity value.TBs are sold at a discount rather paying coupon interest mature within 90 days providing cheap fund to public sector  and flexible of borrowing .
When it was first issued by government to borrow for short period of about three months pending the total collection of full tax proceeds ,it was issued in multiples of 2000 later  reduced to 100 in order to expand holders  coverage to 91 days and at fixed discount .In 1989, TBs outstanding averaged 34.421.8 . About 10,879.5m was issued between 1992 and 1995 when it averaged 2 585.05M.-Francis;2009].
                                       Eligible Development Stocks ,Bank s Unit Fund And Commercial Bills
While the commercial bills are used to refer to  local and foreign bills discounted by Banks and financing institutions for the pourpose of trade finance or finance provided to a buyer that enabled him make or pay for his purchase ; Banks unit funds as an interest bearing assets is payable on demand especially when accepted or endorsed as part of the specified liquid asset with fixed interest rate.The latter like the stabilization securities of the 80s  was introduced in 1975 basically to mop up excess liquidity in the banking sector It basically arose to meet this need.Eligible development stocks have maturity of three years and above and is meant to finance long term  development project of the FGN-Federal govt.
                                                                        Treasury Certificate
Treasury certificate as another instrument is for  savings mobilization catering for the need of the needy sectors.It is a medium term instrument maturing between one to two years bridging the gap between TBs and  long term government securities . It shares similarities with TBs but issued at par or face value as well as its capability to pay fixed interest rates .usually known as coupon rates .Every issue is a pledge to pay this coupon rate .By tearing the coupons off the edge of certificate , investor collects the interest cashing at the bank or post office  or specified federal office .
TCs were first issued in 1968 under discount of  45/8 percent  for one year certificate and 4 1/2 percent covering two year certificates .TCs out standings at the end of 1990 stood at an increase of 34214.6m. rose to 36554.32million naira in 1993 .and 37342.7million in 1994,later nosedived to 23596.5m.a year later.Major holders are cmmercial banks and the CBN.-Francis;2009]
                                    Federal agency discount notes and Short term Municipal Securities .
Federal agency notes  are a little bit different operating in a market heavily dominated by money market mutual funds and commercial banks .Institutional investors such as insurance companies , pension funds , thrifts and individuals are also payers .Like TBs agency notes offer no interest  even though it is offered at a discount  from face value and the amount of discount is set by the agency unlike TBs.In an attempt to favour certain economic activities such as education ,housing etc government all over the world often provide these activities with access to cheaper credit to better stimulate them .Due to risk free or low default risk that government debt carries including the resultant cost savings and low interest rates such benefit can passed to this favoured activities 
Thus federal  notes are often issued or used to stimulate such sector.
In the case of short term municipal securities , they are tied to the activities of states and local government when they require temporary cash to meet their obligations often tied to the anticipations of their various tax receipt among other revenues prior to the sale of bonds.Short term municipal securities are often issued to meet these needs .They often come in two issues -both interest bearing and discount notes -the former is common and often carries a variable interest payment tied to the same rate as open market  rate or treasury yield .   

                                                                Bankers Acceptance
The commercial banks , discount houses ,development banks,merchant banks  and  investments banks.are commercial operators deploying its use ..Money market instruments like bankers acceptance besides TBs are issued by companies not necessarily blue chips to guarantee the investors of payment as at when due.It is a short term debt instrument issued by a company and guaranteed by commercial bank and are issued by firms as part of  commercial transaction and similar to TBs in the money market
and can be traded at a discount from face value on the secondary market and beneficial given the fact that it  may not be held until maturity.They are used similarly to facilitate international trade.
The nature of its commercial transaction determines its size and the date of its maturity which ranges between 30 and 180 days or one to six months  from the date of issue .They are considered relatively safe and both the bank and borrower are liable for the amount that is due upon maturity of the instrument .Bankers acceptances trade at a spread over T.bills
                                                            Certificates  Of  Deposit -CDs
These are time deposits issued by commercial banks with maturity ranging from 3 months to five years and often commands return higher than treasury bills due to the fact that it assumes a higher level of risk .They are certificates issued by federally chartered  bank or commercial bank against a deposited funds and for a period of time earns a specified sum in return.At the end of the time period , a specified  rate of interest will be paid by the accepting bank in exchange for the loan earlier advanced to it   from an individual or corporation.The certificates constitutes the basis of bank  s aggreement and terms and condition for  loan repayment .For early withdrawal of funds , penalty is natural but for some types of CDs if the original purchaser requires access to the money it  can be sold to another investor prior to maturity date .Introduced in 1975 into the country,issued by fellow bankers to cover maturity period .CDs outstanding in the country  reached 2079.2million  naira in 1989.
In the United States , large CDs denomination say  100,000 thousand dollars or more of such jumbos often negotiable pay higher rates of interest than lower denominations .Certificates are insured up to this specified limit by the FDIC .Brokerage firms have a large pool of  these instruments nationwide and receive fees for trading in them and their ability to deal in large sums enabled brokered CDs to pay more interest than a normal commercial banker or commercial bank purchased CDs.
As a tradable instrument issued by banks  with stated interest rates over a specified period of time like other securities, it comprises of four classes of negotiable certificate of deposit-NCD .NCDs are issued in  denominations of 100.00 naira ,higher CDs have maturities ranging form 7DAYS TO 12MTHS.Most transactions range between 1-3months of maturity laden with fixed interest rates at maturity . They parade different rates of risk ,interest  and liquidity.Those issued domestically by Nigerian banks are called domestic CDs as opposed to Eurodollar CDs issued abroad by foreign or offshore branches of foreign banks operating in the country .Denominated in U.S. dollars boasts of maturities  ranging between 1-2mthsbut most have fixed  interest rates .A larger percentage of Eurodollar are generally  issued in London -being the center for Eurodollar market.While YANKEE CDs are issued  in America ,thrift CDs are issued by large saving and loans institutions .
                                                  Call Money Fund Scheme/MOney at Call/Short Notice
When money is lent  by banks on the understanding that it  is repayable  at the bank s demand or at short notice or 24 hrs  or overnight it is regarded as call money or money at call.When banks reserves are loaned  from surplus banks  to scarcity banks such funds are regarded as overnight loans or overnight funds.The borrowing bank then pays overnight interests to banks with excess reserves so as to hold it  as a day s deposits.This one day reserves are required to  sustain   the legal reserves that  the central bank examiners expect banks to maintain.
This scheme was introduced in 1962 but was abolished in 1974 as a result of the surplus wealth generated in the oil market .But previously under the scheme ,the CBN created a fund in which participating banks agreed to keep a minimum balance at the apex  bank.Every surplus above the minimum balance was linked to the fund administered by the apex bank on behalf of commercial banks .It earned a fixed rate of interest a little below TB rate and the fund were also invested in the TBs.The scheme contributed immensely to economic growth having enabled banks ability in the management of their cash holdings and balances helping them reduce their dependence on foreign overseas money market facilities   -Francis-2009..
                                                                    Commercial Paper
It refers to unsecured notes short-tenored promissory notes and can be issued by financial  and nonfinancial  institrutions with maturities of 50 days up to 270 days  a specified limit without allowed SEC-securities and exchange commissioin registration requirement  .
Unlike some money market instruments that engage banks as intermediaries , Commercial paper is issued directly by established institutions .This indicates cutting out intermediaries  and this allows major companies to borrow cheaply at below market rates of  1-1 1/2percent rates below rates charged by banks even though banks may act as agents  in the transaction with condition to assume no principal position and not obligated in respect to repayment of the CDs.It can also be sold through dealers by companies who charge a fee for transfer services arranged for funds transfer between lenders and borrowers .Companies sell it to obtain loan and such notes are not backed by collateral but rather rely on high creditworthiness or high credit ratings  of the issuing  companies.
.The commercial paper issuers normally maintain open lines of credit or unutilised  borrowing powers at a bank enough to pay back all C.P. outstandings This type of credit can be easily  facilitated or accessible better  than bank loans  and so issure patronise this form .
Commercial papers came in 1962 specifically meant to finance the  export marketing operations of the then Northern Marketing  Board .The marketing boards were able to meet their cash requirement drawing 90 days bills of exchange on their busineses. as discounted with commercial banks and acceptance houses under the scheme..The bill market died in 1968  when the central bank took over the activities of the boards and crop finance and then import and domestic trade bills took over its remains .
It fell from total outstanding of  36.4million naira recorded in 1967  to absmally low level of 5.1million a year later.However in 1989 about 868.8million naira was recorded  and beween 1990-1995rose to 2219.05million naira recorded in 1990. Francis-2009.
                                                         Repurchase Agreement -Repos .
In a global perspective,  repurchases or repos are segment of what is regarded as shadow banking.They are used by banks to aid and finance investments in treasuries , corporate bonds and mortgaged backed securities -Bloomberg.
The U.S.repos market is a market where banks  and investors borrow and lend treasuries and a host other fixed income securities .According to Bloomberg , the market was down 35 percent from a peak of 7.02 trillion dollars  recorded in the first quarter of 2008 and shrunk to 4.6 trillion dollars on july 2013.Repos now chalk up  on the average daily trading  volume of about 5 trillion dollars  In the U.S. accounting for half of money supply of 9.97 trillion U.S.dollars as September 2005 -Greenspan-The wizard of Bubbleland.

Repos are short term loans lasting for less than 2 weeks and even often for a day .this is arranged by selling securites to an investor ,committed to an aggreement  to repurchase them at a later or fixed date often at a fixed price .to be continued

In the next article -6TH article -while concluding our remainder , we shall also  focus on the Nigerian capital market after treating the subordinate markets noted in the money market .


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