The need for discount houses in Nigeria

Abstract

The paper deals with the desirability of establishing discount houses in Nigeria and their potential to assist financial institutions manage their idle cash balances by bringing together surplus and deficit units in the market. It argues that the need arises not only because of the necessity to reduce the dominant role played by the Central Bank of Nigeria (CBN) in underwriting the issues of treasury securities, but also the attendant large credit usually made available to government by the CBN as a result. In addition, the paper stresses that the existence of discount houses will also induce banks to take up a larger proportion of treasury securities than they have done hitherto. Another major reason emphasized by the paper is the need to provide conducive financial environment as well as appropriate institutional structures for the shift from direct to indirect monetary control that has recently been tentatively put into operation. The paper concludes with the observation that discount houses face bright prospect in Nigeria especially with the array of instruments available to them in a rapidly expanding economy, provided that they ensure the existence of secondary market and generally be innovative towards the attainment of rapid growth and competitiveness.