ABSTRACT
This project work reviewed the role of
the Nigerian money market in the economic development of Nigeria. Based on the
research work carried out we are able to identify the various effect it has in
the economic development of the Nigerian economy.
TABLE
OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background
of the Study
1.2 Research
Problem
1.3 Objectives
of the Study
1.4 Research
Hypothesis
1.5 Significance
of the Study
1.6 Scope
of the Study
1.7 Limitation
of the Study
CHAPTER
TWO: LITERATURE REVIEW
2.1 The
Concept – Money Market
2.2 Money
Market Instruments
2.3 The
Money Market and Economic Development
2.4 Structure
of the Nigerian Money Market
2.5 Performance
of the Nigerian Money Market
2.6 Problems
of the Nigerian Money Market
CHAPTER THREE: METHODOLOGY
3.1 Introduction
3.2 Research
Design
3.3 Sources
of Data
3.4 Model
Specification
3.5 Method
of Analysis
3.6 Limitation
of the Study
CHAPTER FOUR: DATA PRESENTATION AND
ANALYSIS
4.1 Performance
Evaluation of the Nigerian Money Market
4.2 Regression
Analysis
4.3 Hypothesis
Testing
CHAPTER FIVE: SUMMARY OF FINDINGS,
CONCLUSION AND
RECOMMENDATIONS
5.1 Introduction
5.2 Summary
of Findings
5.3 Policy
Recommendations
5.4 Conclusion
BIBLIOGRAPHY
APPENDIX
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The financial system of any financial
company provide the catalyst through financial intermediation for productive
activities to ensure economic growth and development Olowo (2008).
The Nigerian financial sector is
undoubtedly the most important in the political economic system because it
provides the necessary lubricant that keeps the wheel of the economy turning
and it is an engine for economic growth. The sector provides fund for investment
and also allocates these funds for investment and also allocates these funds as
efficiently as possible to those project that offers best returns to fund
owners. The well being of the sector to a very large extent determines a
growing economy. However, if the sector happens to be weak, the economy suffers
for it.
There are various financial market
which are institutional arrangement that facilitates the intermediation of
funds in an economy. The market which deals with sort term funds and the capital
market that is for long term dealings in loanable funds Anyanwu (1996). The
basic of distinction between eh money market and the capital market lies in the
degree of liquidity of instrument bought and sold in each of the market which
can be subdivided into the primary and secondary market is concerned with
raising of new fund, the secondary market exist for the sale and purchasing of
existing securities. Therefore enabling savers who purchased securities when
they had surplus to recover their money when they are in need of cash Afolabi
(1991).
The major concern for the study is the
money market, the money market represent the short end of the financial system
which provide short term investment having a maturity date of less than one
year. Also the money market is an intermediary for short term financial asset
that are close substitute for money in Nigerian money market as established by
the Central Bank of Nigeria primarily for mobilizing domestic savings for
productive investments as well as providing government with funds to enable
implement programmes. Nibeabuchi (2004).
The Nigeria money market offers
opportunity for trading in the short term instrument which are very liquid and
have negligible risk and the money market also provides the basis for implementation
of monetary policy. The types of instrument traded are treasury bill, treasury
certificate, commercial paper, bankers acceptance etc. commercial papers are
the dominant players in the market while the market provides the basis of
operations, manipulation and execution of monetary policy (indirect instrument)
with discount houses intermediary between the Central Bank and other banks
where the former is playing the role of the lender of last resort to the
market. Jhingan (2004).
The role of the money market in the
development of the economy cannot be overemphasized as the money market plays a
key role in banks liquidity management and transmission of money policy by
providing the appropriate instrument and partners for liquidity trading, the
money market allows re-financing of short term positions and facilitates the
mitigation of business liquidity.
However, a developed money market has
different types of near asset in large number such as promissory note, treasury
bill etc. as the number of near money asset increases, the more developed the
money market becomes. The market also attracts adequate funds and easy access
to financial sources from within an outside the country.
Thus the development of the money
market smoothens the progress of financial intermediation and boost lending to
economy which in turn improves the country’s economy and brings about
development in its economic activities.
1.2 RESEARCH PROBLEM
The Nigerian economy is based on the
money which is designed as a means of liquidity adjustment and also a potential
path for development. Therefore the money market needs to be infused with more
liquidity to ensure safety for investors in order to help fund economic
development.
The largest problem with the market is
corruption of the system that even transparency cannot fix, provision of more
regulation will be appropriate.
Iyiegbuniwe (2005) pointed out that
although the Nigerian money market has experienced significant growth, both in
breadth of securities as well as the volume of trading since the liberalization
of the financial system since 1986, it still needs to be deepened further to
achieve the required vibrancy that is expected of a money market. This does not
mean that the money market is inefficient, it goes a long way to explain that
there is serious need to evaluate its performance in relation to its
contribution to economic development of the country.
Therefore, the Nigerian money market
should be deep and broad to be able to absorb large volume of transaction
without substantial effect on security prices and interest. The above defining
feature of the market demands that, there exist many active market
participation such that the transaction of an individual investor will have
just little impact on security prices and interest rate. It also requires that
there are different varieties of securities to ensure that there is always
alternative (other options) investment instrument available to be able to
satisfy the respective return and risk of investors.
Therefore, a deep and broad market
which is very efficient in information and operations including an adequate
regulation and more liquidity will contribute to the development of the
Nigerian economy.
1.3 OBJECTIVES OF THE STUDY
The main objective of this study is to
examine the role of the money market in the economic development of Nigeria.
Some other objectives are written below:
1. To examine if the Nigerian money market
has developed.
2. To examine the relationship between the
money market and the economic development in Nigeria.
1.4 RESEARCH HYPOTHESIS
1. H0: The Nigerian money market has not developed
2. H1: The Nigerian money market does not contribute to the economic
development of the Nigerian economy.
1.5 SIGNIFICANCE OF THE STUDY
1. The study will explore the
effectiveness and usefulness of the money market to the economy.
2. The study will be a reference material
for further study on the market and the economic development of Nigeria.
3. The result of the study will contribute
to practical knowledge, the existing body knowledge advancement and stability
of the Nigerian economy.
4. The bank and other financial sectors of
the economy will be well guided in the effect of the money market to the
development of the Nigeria economy.
5. It will provide various policy recommendations
to policy makers on ways to use money market instrument more effectively in the
developing Nigerian economy.
1.6 SCOPE OF THE STUDY
The study cannot cover all the areas of
the financial sector, it is therefore limited to the money market, its
instruments and policies and regulation used by the government to stabilize its
road to economic development.
The empirical investigation of the role
of money market in the development of the Nigerian economy shall be restricted
to the period from 1980-2009.
1.7 LIMITATION OF THE STUDY
1. Time constraint
2. Another limitation shall be based on
data collection and methodology, which have various impacts. The data to be
used for the regression are annual data sourced from different authorized
bodies such as the Central Bank of Nigeria etc. the unavailability of the data
for some variables using previous years act as a hindrance in the range of
data. The accuracy of the data is subject to sincerity and dedication of the
officials involved in the collection and collation of data.
3. All the above may not be achieved due
to time constraint.