Accounting technicians scheme west africa
D.5.2 Common Money Market Instruments
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- Treasury certificates
- Commercial bill
- Call money
| D.5.2 Common Money Market Instruments The followings are common money market instruments ab Treasury bills – These are short-term debt obligations of a national government that are issued to mature in three to twelvemonths. In other words, treasury bills are money market (short- term) securities issued by the federal government. They are sold at a discount (rather than paying coupon interest) and mature within 91 days of the day of issue and are default- free. b) Treasury certificates- These are similar to treasury bills. Treasury certificate which was introduced to replace commercial bill has a maturity between one and two years. The amount paid on the purchase of the certificate is usually less than the discount on the bill but the actual amount is repaid by the Central Bank at maturity. c) Commercial bill- This was used by commodity board and it is re-discountable by the Central Bank. It was, however, abolished in 1968 when banks refused to continue with their participation in the World Cocoa Market. db Certificate of deposit – It is a time deposit, commonly offered to consumers by banks, thrift institutions, and credit unions. It was introduced in Nigeria into channel commercial banks surplus funds into merchant banks issued in multiple of N and re-discountable by the CBN in case the issuing bank cannot redeem them at maturity. The maturity period ranges between 3 and 36 months. e) Call money- This instrument guarantees the payment of money on demand to the issuing bank. This also allows commercial banks and non-banking financial institutions to keep their temporary surplus cash with the Central Bank who in turn invest the fund. D.5.3 Role of participants in the money market. Participants in the money markets are financial institutions which can be broadly classified into two (i) banks or bank financial institutions in the banking sector, and (ii) non- bank financial institutions. i) Banks or bank financial institutions a) Central Bank b) Commercial banks 267 c) Merchant bank d) Development bank ii) Non- bank financial institutions. a) Insurance companies b) Building societies c) Hire purchase companies d) Pension funds, and e) Investment trusts Download 3.37 Mb. Share with your friends:
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