There are many
instrument traded in the money market of Nigeria. Money market instrument are
those instrument used in the market to mobilize fund in the market from the
surplus sector of the economy to the deficit sector with a giving interest rate
(Noko, 2011). Infact, government trade mainly on three instruments which
include; Treasury bills commercial banks were the first types of banks to
appear on the Nigeria financial scene.
African Banking Corporation, an
expatriate bank from South Africa was first commercial bank to open office in
Nigeria. Its operational problems necessitated the closure and take over by
banks of British West Africa, now first bank, which was established in 1894.
the bank and other financial institution degree (BOFID ) of 1991 defined
commercial banks as any bank in Nigeria whose business includes acceptance of
deposits, which can be drawn by cheque. The function in mobilization of funds,
financial intermediation, credit extension, safe – keeping of depositors and
customers valuable properties, agent of economic development etc.
However, merchant bank which
provides wholesale banking to the public and other bank came into Nigeria with
establishment of Philip Hill Nigeria limited. As wholesale banks they are
mainly concentrated in large cities where economic activities are in high
scale. Other functions of the bank includes; debt factoring, equipment leasing,
investment advisory & brokerage acceptance and negotiable bill of exchange,
portfolio management etc. Development banks on the other hand were set up by
government to facilitate the provision of funds for development purpose to the
general public. Thus, they accelerate economic growth & to facilitate trade
between parties that do not which to expose each other credit risk. It is a
certificate to the bank of the exporter by the bank of importers stating that
the bill on the note will be paid at maturity. Promissory note which is one of
the earliest type of bill. It is a written promise on the part of businessman
to pay another a certain sum of money at an agreed future date. However, niter
bank term market is a market instrument exclusively for commercial banks which
borrow and lend funds for a period of over fourteen days and up to ninety days
without any collateral.
Stabilization securities are special
securities which the CBN sells compulsory to banks at interest rate and such
conditions that it deems fit for mopping up excess liquidity off banks. It is
an instrument reserved for use by the central bank. It was authorized by law
when first used in 1976 and il later phased out; reintroduced in 1993 and
further issue stopped in 1998. All these instrument used in the money market,
although a good number of instrument were not mentioned here.