CHAPTER ONE

1.0 INTRODUCTION

The money market in our economy in a very vital sector and its position in the economy cannot be over emphasized. The money market in Nigeria was fashioned along with that of Britain, established and nurtured by the CBN primarily for mobilizing domestic savings for productive investment as well as providing the government with funds to enable it implement its economic programme.

Money market as an intermediary for short term financial assets that are close substitute for money consists of the CBN, Deposit money bank, Discount house, corporate bodies, individuals, finance companies Bureau de change as its major operators and deals on various financial instrument such as bills, certificates, commercial papers, certificate of deposit etc which one transferable and desirable in nature.

Notwithstanding, the recent global economic meltdown which tends to set a disjunction between the surplus and the deficit sectors, the surplus sector appears not  to be interested in lending to the deficit sector, this pose a serious bottleneck to the proper functioning of the money market, thereby reducing the level of investment in the economy. The logic question now is what would be the lot of Nigerian economic and its inhabitants in general.

 1.1 BACKGROUND OF THE STUDY

These are various financial markets which are institutional arrangements that facilitate the intermediation of funds in an economy. They financial market is segmented into two- of is money market, which deals in  short term funds and the other capital market that is for  long term dealing in funds (Anyanwu  1996). The basis of distinction between the money markets and the capital market lies in the degree of liquidity of instruments bought and sold in each of the  market which can   be further sub –divided into primary and secondary markets, while primary market is concerned with the raising of new funds, the secondary market exist for the sale and purchasing of existing centuries that are already in people’s hands thus, enabling savers who purchase securities when they have surplus funds to recover their money when they are in need of cash to  (Afolaki 1991).

Money market plays a key role in banks liquidity management and transmission of monetary policy. In normal times, money markets are among the most liquid in the financial sector. By providing the appropriate instruments and partners for liquidity trading the money market allows the refinancing of short-term and medium term positions and facilitates the mitigations of your business liquidity risk. The banking system and the money market represent the exclusive setting monetary policy operates in a developed active an efficient into banks market enhances the efficient of central bank’s monetary policy, transmitting its impulses into the economy best thus the development of the money market smooth   the progress of financial intermediation and boosts lending to the economy, hence improving the country’s economic and social welfare.

Therefore, the development of the money market is in all stakeholders interest the banking system itself the central banks and the economy on the whole.

1.2 STATEMENT OF THE PROBLEM

The role of the financial market in the development of the real sector and the economy at already cannot be overemphasized.

 A critical characteristics of the money market is that it should deep  and broad so as to absorb large volume of transactions without significant effect on security prices  and interest this characteristics requires that these exist many active market participant such that the transaction of an individual investors will have just infinitesimal  effect on security prices are interest rates the characteristics also requires that there are always alternative investment  instrument available to satisfy the respective return risk desires of investors in markets