Reasons/Functions for the Establishment of the Nigerian Money Market

1. To provide the machinery needed for government short-term financing requirements. 
2. As an essential step on the path to independent nationhood, hence it was part of a modern financial and monetary system, which was to enable the nation to establish the monetary autonomy which is part and parcel of the working of an independent, modern state. 
3. To Nigerianise the credit base by providing local investment outlets for the retention of funds in Nigeria and for the investment of funds repatriated from abroad as a result of government persuasions to that effects. 
4. To perform for the country all the functions which money market traditionally performs, such as the provisions of the basis for operating and executing an effective monetary policy. 
5. To effectively mobilise resource for investment purpose. 

Functions of the Nigerian Money Market

1. It provides the basis for operating and executing an effective monetary. 
2. To provide an orderly flow of short-term funds 
3. To ensure supply of the necessary means of expanding and contracting credit. 
4. It is a Central Pool of liquid financial resources upon which the banking system can draw upon when it is in need of additional funds and into which it can make payments when it holds funds surplus to its needs. 
5. It provides the mechanism through which the liquidity of the banking is maintained at the desired level. 
6. To provide banks the basic financial instruments for effective management of their resources. It thus helps them to diversify their assets holding by providing them with a forum for investment of their surplus cash. 
7. To provide the machinery needed for the government short-term financial requirement – hence achiev- ing even seasonal variation in the normal flow of revenue. 
8. Mobilisation of funds from savers (lenders) and the transmission of such funds to borrowers (Investor). 
9. It provides a channel for the injection of Central Bank cash into the system or the economy. 
10.  To maintain stable cash and liquidity ratios as a base for the operation of the open market operation.

 Students Assessment Exercise 

• Why is a Money Market necessary in Nigeria?