What are the functions and duties of money markets in Nigeria?

Answer 1

The money market allows money available for short periods to be directed to those who can use it. The functions fulfilled by the money market are the following:

• Provides a mechanism such that institutions in a deficit position can borrow funds temporarily and institutions in a surplus position can invest the funds temporarily.
• The money market allows institutions to hold a proportion of their funds in liquid assets that will enable them realise cash quickly should the need arise.
• Enables the imbalances in the supply of money between the financial system as a whole and the government to be smoothed out. Through the conduct of Open Market Operation, the Central Bank will, through MMDs, daily offer to buy/sell money market instruments to the public in order to influence the money supply level. Where the intention is to decrease money supply (i.e. mop up liquidity), the CBN will sell instruments to the market. Conversely, where one intends to increase the money supply level (provide liquidity), the CBN will offers to buy instruments from the market.