There are various channels by which monetary policy works. Monetary policy are carried by the central bank of Nigeria to facilitate the regulation and control of the various macroeconomic goals such as full employment, price stability, economic growth, balance of payment equilibrium etc which is mostly facilitated by the activities of the money market.
These controls of the CBN on the money market affect the quantity of fund in the economy, where sales or purchase of Treasury bill reduce or increase the stock of reserve money. On the relevant of money and monetary policy in controlling economic activities, the monetarist view has been divided into weak and strong monetarist thesis. The weak thesis is compared with some aspects of the income – expenditure approach to the determination of national economic activity discount from face value. The amounts of discount are set by the agency and its duration ranges between three months and a year. Like the federal agency discount note, short term municipal security is a note issued by government when they are expecting receipt from tax and other revenue either from sales of bound etc. It is both interest bearing and discount notes. Although interest is a more common feature of the note. Other instrument not traded by government in the market includes Negotiable certificate of deposit, which is tradable instrument issued it is issued in high quantities in 100’s. it has a maturity date of seven and a year.
            On the other hand commercial papers is a short term unsecured promissory notes. It is the second money market instrument in terms of outstanding after treasury bills commercial papers are issued by banks is issued at a discount from face value, which is matured at a specific days. Unlike bankers acceptance which is used to facilitate international trade. It is used munipal notes, federal agency discount notes. Other negotiable note includes Banker’s acceptance, commercial papers, re – purchase agreement etc.
            However, Treasury bill was the first money market instrument to be used in Nigeria. It was issued by the federal government of Nigeria in April 1960 through the central bank of Nigeria. Treasury bill is a debt obligation of the federal government. It is free of default risk, though no stated interest on the bill but is issued at a discount from face value. The returned earned from the bill is the difference a discount issue price and free value paid on the bill at maturity. The maturity date takes between three months, six months and a year.
            Certificates of deposit are issued by commercial banks at a discount on face value. The discount rate is determined by the money market and the maturity is between three to twelve months. They can be transferred from one person to another by endorsement, whoever is the Bonafide holder than receive it at maturity (Agwu, 2006).
            Federal agency discount notes which like Treasury bill in that it is a short term credit, it bear no interest but are rather offered at a discount development in an economy. They provide such service as advisory role to the government, long – term credit facilities to the public, facilitate the development of specific sector such as agricultural sector, industries and trade etc. The first development bank in Nigeria is Nigeria industrial development bank (NIDB) established in 1964 with the support of the international bank for reconstruction and development. Other development bank include; the Nigeria bank for commerce and industry (NBCI), Nigeria agricultural and cooperative bank (NACB), the federal mortgage bank  and the Nigeria export – import bank (NEXIM).
            Other non – banks financial institutions that operate in the financial market includes insurance companies, discount houses, financial house, investment houses, stock broking firms etc.
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