Economics » Financial Institutions » Money and Capital Markets

The Money Market

Money and Capital Markets

The money and capital markets are financial markets created and nurtured by a country`s monetary authorities to mobilize savings for economic growth.

The Money Market

The money market is a market for short-term loans. It consists of financial institutions having surplus funds to lend on a short-term basis, and those wishing to borrow. The market allocates savings into investment thereby promoting rational allocation of resources. It also encourages savings and investment habits by promoting liquidity and safety of financial assets.

Institutions that operate in the market include the Central Bank, commercial banks, and discount houses. The major short-term instruments associated with the Nigerian money market include treasury securities, commercial papers, call money, Bankers Unit Fund, Bankers’ Acceptances, etc.

The Capital Market

The capital market is a market for mobilising medium and long-term funds. It is a market for new issues of securities as well as for trading in existing securities. The major instruments for raising funds in the capital market include equities, debentures, bonds, and stocks. The main institutions in the market are the stock exchange, the issuing houses, and the stock broking firms.

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