Money market in Nigeria

In Nigeria, the money market includes financial institutions, the apex bank, and economic agents. These players are involved in short term market instruments. That's instruments available within three months and one year. Some instruments such as a savings deposit can be within a month. 

1. What's money market

The money market is the market that brings in surplus and deficit economic agents together to trade short term securities. It is also seen as a financial market for short term instruments. By short term we mean market securities that are available for three months to one year and are highly liquid. 

In this market, the time it takes to convert the instruments to cash usually takes little time, at most three months. Economic agents with surplus funds buy the securities. While those with deficit funds sell them. In some cases, they are converted to what deficit players can buy. For example, savings deposits are converted to loans and sold to deficit economic agents.

The middlemen involved in the money market are commercial, merchant, non-interest, and microfinance banks. The primary regulator is the central bank of Nigeria. While the instruments used in Nigeria are savings deposit, fixed deposits, current accounts, treasury bills, loans, commercial papers, local purchase order and certificates of deposits. 

Financial technology companies involved in this market have a mixture of mutual funds and other money market funds that helps surplus fund owners to grow their money while the fund is used to support deficit economic agents. For example, OPay has several savings products that help individuals save their money within a specified period. 

2. Importance of money market in Nigeria

2.1 Connecting economic agents

One importance of the money market in Nigeria is that it provides an avenue for surplus and deficit agents to connect. 

2.2 Market place

It provides a place through which middlemen such as commercial and microfinance banks can carry out business activities.

2.3 Employment

Professionals here can get jobs at the financial intermediaries of the money market. This will therefore provide them with a means of livelihood.

2.4 Encourages savings

One importance of the money market is that it encourages people to save. Thereby, booster economic growth of a country.

2.5 Passive Income

Money market can serve as a source of passive income to surplus economic agents.

3. Conclusion

In final words, the money market remains a very important financial market in a nation's economy. It encourages economic growth and may serve as a source of passive income to surplus economic agents while providing funds for deficit agents.

Read: Capital market in Nigeria