Functions and Role of Regulatory Agencies

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Welcome to class! 

In today’s class, we will be talking about the functions and role of regulatory agencies. Enjoy the class!

Functions and Role of Regulatory Agencies

NIGERIA DEPOSIT INSURANCE CORPORATION

The NDIC role is to administer the deposit insurance system in Nigeria and protect depositors.

The Corporation provides incentives for sound risk management in the Nigeria banking system and promotes as well as contributes to the stability of the financial system.

FUNCTION OF NIGERIA DEPOSIT INSURANCE CORPORATION

Section 2b of the Nigerian Deposit Insurance Corporation Act of 2006 stipulates the function for the corporation as follows:

1. Issuing all deposit liabilities of licensed banks.
2. Giving assistance to insured institutions in the interest of deposit in case of imminent.
3. Guaranteeing payment to the depositor
4. Assistance monetary authorities in formulating and implementing policies to ensure sound banking practising and fair competition.
5. Pursing any other measures necessary to achieve the function of the corporation provided measures.

MONEY MARKET

The money market is a market where short term securities are traded in.  The market consists of institutions or individuals who either have money to lend or wish to borrow on a short-term basis.

INSTRUMENTS USED IN THE MONEY MARKET

1. Treasury bill – This is issued by the Central Bank.  It enables the government to raise capital for ninety days.
2. Treasury Certificate – is also a means by which the government raises short – term loans. Unlike a treasury bill, however, a treasury certificate falls due for repayment in twelve to twenty-four months. Because of its longer maturation, it earns a higher rate of a discount than the treasury bills
3. Bill of Exchange – This is a promissory note where the debtor acknowledges his debt and intend to pay within ninety days (90days).
4. Call money Funds – The surplus is often invested through a special arrangement in which participating institutions invest surplus money for their immediate requirement on an overnight basis with the interest and withdrawal on demand.  This enhances the liquidity of the money market.

INSTITUTIONS INVOLVED IN THE MONEY MARKET

1. Central Bank
2. Commercial Banks
3. Acceptance House
4. Finance House
5. Discount House
6. Insurance companies

FUNCTIONS OF MONEY MARKET

1. Money market helps to provide capital (working capital) for day to day running of the business.
2. Through investing in call money extra income generated.
3. Money market helps to mobilize savings.
4. Money market helps to promote economic growth and development
5. It enhances good saving habit by those having surplus funds
6. Money invested in the money market is very easy to recall 

CAPITAL MARKET

Funds are needed by entrepreneur, government and business firm on a long term basis. Money market cannot provide these needed funds.  Hence Capital Market bridges this gap. Capital Market is a market where long term securities are traded.

INSTRUMENTS USED IN CAPITAL MARKET

Securities such as shares, stocks, development stock, bond, debenture

1. Share- is a unit of capital measured by a sum of money which is an individual portion of the company’s capital owned by a shareholder. It is a means of raising long-term loans for the company through the Stock Exchange Market.
2. Stock- is the bundle of shares or mass capital which can be transferred in fractional amounts. Stocks are always fully paid, for example, stocks can be quoted per N100 nominal value. They are collections of shares into a bundle. Stocks are not issued but converted from share issued.
3. Development Stock- is a debt instrument through which governments get long-term loans or borrowing for a period of up to five years and above.
4. Bond- is an interest-bearing or discounted government or corporate security that obliges the issuers to pay the bondholder a specified sum of money annually at specific intervals and to repay the principal amount of the loan at maturity.
5. Debenture- is an instrument or a loan certificate for raising a long-term loan from the public by a limited company. A debenture is a debt and a debenture holder is not a co-owner of the business but a creditor.

INSTITUTIONS INVOLVED IN CAPITAL MARKET

1. Issuing houses
2. Insurance companies
3. Development Banks
4. Building Societies
5. National Provident Fund (NPF)
6. Stock Exchange

FUNCTIONS OF CAPITAL MARKET

1. The capital market provides long term loan purpose of investment.
2. The capital market serves a forum through which the public sector takes part in running of the economy.
3. The capital market helps to mobilize savings for investment purpose.
4. It provides means through which merchant banks can grow and develop.
5. It gives an opportunity to the general public to participate in the running of the economy of the country.

GENERAL EVALUATION

1. Highlight four objectives of price control.
2. Explain the concept of diminishing marginal utility.
3. What are those factors that can determine the size of a firm?
4. Define Labour as a factor of production.
5. Explain the five characteristics of Labour.

 

In our next class, we will be talking about International Trade.  We hope you enjoyed the class.

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