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Money Market and Economic Development

In: Business and Management

Submitted By DanteThaMaverick
Words 1201
Pages 5
CHAPTER ONE
INTRODUCTION
1.1 Background To The Study
The financial system is created to move funds from surplus economic units to deficit economic units in order to produce goods and services and to make investment in new equipment and facilities so as to facilitate the growth of the economy and improve the standard of living of its citizens. It is generally recognized that financial system plays a catalytic role in the process of economic development.
The financial system of any nation is a function of the size of its economy. A growing economy places more responsibilities on the financial sector to mobilize the needed capital to facilitate production, generate employment and income. An economy that does not experience growth on sustained basis is likely to have a very passive financial sector as there are no incentives for investment. Through the process of growth, financial system offers a wide range of portfolio options for savers and issuable instruments for investors, a function often referred to as financial intermediation (Oke, 2000).
The Nigerian financial system comprises of various institutions, markets and operations that are in the business of providing financial services. These institutions can be broadly categorized into money and capital markets. While money market is a market in which short term financial instruments are traded, the capital market on the other hand deals with long term transactions.
The major players in the money market are the banks and discount houses. The intermediation role of banks ensures the mobilization of idle funds from the surplus units to the deficit sector. Since independence, the financial sector has been on the increase.
Today, Nigeria has about twenty strong banks and a well-functioning stock market. Other financial institutions like insurance companies, finance companies are growing. Also included are specialized…...

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