Key Features:
No of Chapters: 5
No of Pages: 75
Methodology: Ordinary Least Square
Introduction:
There are various financial markets which are institutional arrangements that facilitate the intermediation of fund in an economy. The financial market is segmented into two (i) the money market which also deals in short-term fund and (ii) the capital market that is for long-term dealings in loan able fund (Anyanwu 1966). The channeling of fund in an economy is driven by the difference in the size of the fund, maturity and risk attached to the transfer. The basis of distinction between the money market and the capital market lies in the degree of liquidity of instrument bought and sold in each of the market, which can be further sub-divided into the primary and secondary markets. Primary market is concerned with the raising of new funds, while the secondary market is for the sale and purchasing of existing securities, thus, enabling savers who purchased securities when they had surplus to recover their money when they are in need of cash (Afolabi 1991).
Money markets play a key role in bank’s liquidity management and the transmission of monetary policy. In normal times, money markets are among them most liquid in the financial sector. By providing the appropriate instrument and partners for liquidity trading, the money market allows the refinancing of short and medium term position and facilitates the mitigation of your business liquidity risk.
The banking system and the money market represent the exclusive setting monetary policy operates in. a developed, active and efficient inter bank market enhances the efficiency of central bank’s monetary policy, transmitting it impulses into the economy best. Thus, the development of the money market smoothes the progress of financial intermediation and boosts lending to economy, hence improving the country’s economic and social welfare. Therefore, the development of the money market is in all stakeholders.
STATEMENT OF THE PROBLEM
The role of the financial market in the development of the real sector and the economy at large can not be overemphasized. A critical characteristic of the money market is that, it should be deep and broad so as to absorb large volume of transactions without significant effect in security prices and interest. This characteristic requires that there exist many active market participant such that the transaction of an individual investor will have just infinitesimal (very small) effect on security prices and interest rates. The characteristic also requires that there are many varieties of security so as to ensure that there are always alternative investment instruments available to satisfy the respective return-risk desires of investors in the market.
A money market that has depth and breadth will be informational as well as operationally efficient and will contribute significantly to the growth of the economy. Iyiegbuniwe (2005) opines that although the Nigerian money market has experienced significant growth both in the breadth of securities as well as the volume if trading since the liberalization of the financial system in 1986, it still need to be deepened further to achieve the required vibrancy that is expected of a money market. This is not to say that the Nigeria money market is ineffective, much have been said and written about the Nigerian capital market but the reversal is the case for the money market in the country.
Therefore, there is the need to examine the crucial market and evaluate its performance in terms of its contribution to economic development.
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