The Nigerian money market: issues and challenges.

Abstract

Money markets are integral to the financial infrastructure of industrial countries and are among the largest financial markets in the world. These markets, which serve as channels for the execution and transmission of monetary policy and as trading venues for the short-term instruments, anchor the entire term structure of interest rates. Money markets are central to the allocation of capital, the efficient distribution of liquidity among financial institutions, and the hedging of short-term risks. The markets also play an important role in the credit evaluation process and in the large value payments systems where trades are settled. Generally, the term 'money market' encompasses all forms of short-term lending and deposits, including savings and time deposits with commercial banks, but for the purpose of this paper on the Nigerian money market, it is taken strictly as trading in direct debt instrument, to the exclusion of intermediated debt instruments such as bank loans and deposits.