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SS3: COMMERCE - 2ND TERM

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Meaning of Money market

Money market can be defined as a market for a short-term loan. The market consists of institutions or individuals who either have money to lend or wish to borrow on a short-term basis.

The instruments traded in the money market are;

1. Treasury Bills: These are instruments which the Federal Government of Nigeria uses to borrow money for a short-term period of 3-Months. The maturity date of treasury bills is 91 days.

2. Treasury Certificate: These are instruments used to bridge the gap between the treasury bills and long-term government securities. They are issued by the central bank of Nigeria.

Advantages of Money Market

The advantages of money market are;

  1. Provision of finance
  2. Creation of extra income
  3. Promotion of economic development
  4. Ability to recall invested funds
  5. It enhances savings

Institutions Involved in the Money Market include;

  1. Central bank
  2. Commercial banks
  3. Acceptance houses
  4. Finance houses
  5. Discount houses
  6. Insurance companies

Functions of Money Market

Money market performs the following functions

  1. Provision of short-term loans
  2. It encourages investments
  3. Effectiveness and efficiency of monetary policies
  4. Facilitates transfer of funds
  5. Use of surplus funds
  6. Promotes liquidity and safety of financial assets

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