Nigerian money market

The historical evolution of the Nigerian money market put at 1894 when the commercial banking activities started out here in the country.

However, the small scope of operation of the Nigerian earlier banks and the negligible impact of the West African currency Board did not provide a proper background for the development of virile Nigerian Money Market.

In year 1959 post the establishment of the Nigerian apex bank also known as the Central bank of Nigeria (CBN). Things changed as a result of the subsequent introduction of the money market instruments such as the Treasury bill, produce bill finance scheme, call money fund scheme, Treasury certificate, bankers unit fund certificate of deposit etc.

Further boost to the Nigerian money market was the promulgation of the Treasury Bill ordinance of 1959 authorizing the Central Bank of Nigeria to issue monthly Treasury Bill in multiple of N2,000 on 91 days maturity and at fixed discounting rate. This was later reduced to fortnightly and then weekly and recently the issuance is not subjected to any fixed time. To accept subscription from the public generally but only through authorization dealers.

To reduce the issue to ten percent (10%) for the original estimation of the Federal Government revenue for the financial year (annual statements). This limit was later increased to 20%, and the to 40% and then 50% etc, however, in 1970, it was finally increased to 150% of federal government share of the estimated revenue including all the state government revenue.

It worthy to note that the major treasury bill holder in Nigeria are the Central Bank of Nigeria (CBN) itself. Commercial banks, Development Banks, Individual saving institutions, statutory corporations, merchant banks, federal, state and Local governments as well as other companies all the above compete for Treasury bills.

The Security And Exchange Commission

The security and exchange commission (SEC) which is the apex institution for the regulation and monitoring of the Nigerian Money Market was established under the securities and exchange commission decree 1979 operating retrospectively from April 1st 1978. Before then two bodies had been responsible for the monitoring of the Nigerian Money Market activities in succession viz the capital issue committee in 1962 to 1972 which was never seen as the superintendent of the capital market because its functions were advisory in nature since it had no force of instruction notwithstanding that it’s function included as well the coordination of the Capital market activities.

This body was succeeded by Capital Issues commission (CIC) march 1973 to march 1978 Capital issues commission has full powers to determine the price, timing and volume of security to be issued but was never seen as the apex of the capital market in that it concerns itself with the public companies along and its activities did not cover the stock exchange and government securities notwithstanding the side powers of Capital issues commission.

However, the Securities Exchange Commission (SEC) enabling act specifics its overriding objectives as investors protection and capital market developing Securities and exchange commission functions were divided into viz regulatory and developmental. Hence securities and exchange commission combines developmental functions with regulatory matters and is seen as being fully established as the apex body of the capital market.

Functions Of Nigerian Money Market 

The functions of the Nigerian Money Market (Securities and exchange commission) among others include the following;

  • To determine the price, amount of money and time at which security of a company are to be sold either through offer for sale or subscription. Companies within the grip of the commission functions are (i) All Public companies (ii) All Enterprises with foreign interest
  • To register, (i) All securities proposal to be offered for sale to or for subscription by the public or offered privately (ii) Stock exchange and it’s branches (iii) Personal/ institutions involved in securities dealing in stock and securities, registers, security broker and their agents, issuing houses, fund managers etc (iv) Securities to be traded or being traded
  • To determine the basis of allotment of security of a public offering to ensure wider spread of share ownership.
  • To monitor the activities of the Nigerian stock exchange trading floors in order to ensure orderly smooth and equitable dealings in securities to forestall deals privileged insiders at the expense of the innocent and often ignorant investors, in essence black market.
  • Through the above to sustain and uplift the integrity and ethical standard of the security market and enhance the public confidence and mass participation in capital market activities.
  • To create the necessary atmosphere for orderly growth and development of the capital market through public enlightenment process, seminars, workshops, publicity etc stimulating ideas, initiating policy and program and innovation for the growth of the security market.
  • To protect investors against misleading or inadequate information fraud, deceit on the part of securities offered for sale enhance acting as watch dog of the public.
  • To remove all bottleneck which may hinder easy transfer off shares.
  • To provide avenue for wider spread in security ownership thus avoiding monopoly tendencies of concentration of shares in few but influential hands

Market Structure (Nigerian Money Market)

The term market structure refers to the amount of competition that exists in the market for a particular product of service. in the case of a foreign exchange market, convertibility of the hoe currency would determine the degree of the competition, for instance for a foreign exchange market to be perfectly competitive, there must be freedom of entry and exit by the actor in the market. Each market unit is linked by arbitrage and the provided by arbitrage influencing the numbers of sellers and buyers. However, where there is exchange control or restriction than the market cannot be said to be competitive. The less the competition, the more un-competitive the price structure will be which might even create oligopolistic if not monopolistic situation. 

General Commerce In The Nigerian Money Market

Generally commerce in Nigeria among others includes buying and selling exchange and distribution both locally and internationally. The contribution of whole sale and retail trade to GDP as at 1984 factors cost was 17.04% about N14.06 billion in the year 1988 and 17.03% about 14.59 billion in the year 1989 while the total imports in the 1970 was N756.4 million. However, in the year 1989 the total exports rose to N57,797.2 million while total imports equally rose to N30, 860.2 million.

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