Money Market

Welcome to today’s class!!

We are thrilled to have you in our class!!

In today’s Store Management class, we will be learning about Money Market 

Money Market 

money market

Money market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded. Money market has become a component of the financial market for buying and selling of securities of short-term maturities, of one year or less, such as treasury bills and commercial papers.

Another thing about Money Market is that, over-the-counter trading is done in the money market and it is a wholesale process. It is used by the participants as a way of borrowing and lending for the short term.

Money market consists of negotiable instruments such as treasury bills, commercial papers. and certificates of deposit. It is used by many participants, including companies, to raise funds by selling commercial papers in the market. Money market is considered a safe place to invest due to the high liquidity of securities.

An example of institutions in the Money Market is the Central Bank of Nigeria and the Nigeria Deposit Insurance Corporation.

central bank of nigeria

Let’s take a brief look at the CBN and the NDIC

The Central Bank of Nigeria is the central bank and highest monetary authority of Nigeria established by the CBN Act of 1958 and commenced operations on 1 July 1959.

The major regulatory objectives of the bank as stated in the CBN Act are to: maintain the external reserves of the country, promote monetary stability and a sound financial environment, and act as a banker of last resort and financial adviser to the federal government. The central bank’s role as lender of last resort and adviser to the federal government has sometimes pushed it into murky regulatory waters. After the end of imperial rule, the desire of the government to become proactive in the development of the economy became visible, especially after the end of the Nigerian civil war, the bank followed the government’s desire and took a determined effort to supplement any show shortfalls, credit allocations to the real sector. The bank became involved in lending directly to consumers, contravening its original intention to work through commercial banks in activities involving consumer lending.

The NDIC-Nigeria Deposit Insurance Corporation, is an independent agency of the Federal Government of Nigeria. The purpose of the deposit insurance system is to protect depositors and guarantee the settlement of insured funds when a deposit-taking financial institution can no longer repay their deposits, thereby helping to maintain financial system stability.

It’s mission is to protect depositors and contribute to the stability of the financial system through effective supervision of insured institutions, provision of financial/technical assistance to eligible insured institutions, prompt payment of guaranteed sums and orderly resolution of failed insured financial institutions.

In summary, it is an organized exchange market where participants can lend and borrow short-term, high-quality debt securities with average maturities of one year or less. 

 

Evaluation

Define Money Market 

 

Reading Assignment

Give two examples of instruments traded in the Money Market.

 

Weekend Assignment

Explain two functions each for these institutions:

  • CBN
  • NDIC

We hope you enjoyed today’s class. In our next class, we will be talking about Instrument of Trade in Money Market.

Let us know your thoughts and questions in the comment section, and we will attend to them as fast as we can.

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