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Money and Capital Markets

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 The money market is a component of the financial market for assets being used for short-term borrowing of funds by government and corporate entities. This means that the money market is used for buying and selling of financial instruments with original maturities with a period of one year.
The transaction  in money market is carried out over the counter and is on wholesale basis.

INSTRUMENTS USED IN MONEY MARKET
  1. Treasury bills.
  2. Treasury certificates.
  3. Commercial papers.
  4. Banker`s acceptance.
  5. Bill of exchanges.
  6. Certificates of deposit.
  7. Federal funds.
  8. Purchases agreement.
  9. Short lived mortgage.
  10. Asset backed securities.
PARTICIPANTS IN MONEY MARKET
 There are many participants in the money market such as: Central bank commercial banks, investment banks, merchant banks, insurance company, corporate entities, discount houses and pension funds institution.

FUNCTIONS OF MONEY MARKET
Money market has many functions such as:
  1. It allows government to raise funds to meet current expenditure in their operation.
  2. It provides facilities for discounting of financial instruments.
  3. The market facilities operations of the financial system.
  4. Transfer of funds within the economy for short term use.
  5. It helps the corporate entities to raise funds between parties to raise funds with which to enhance their working capital.
  6. It facilitates transactions between parties with surplus funds and parties with a deficit.
  7. It allows corporate entities to hedge against failure in meeting requirements of their operational activities.
  8. It helps the government to initiate monetary policies through the open market operation.
  9. Operations in the money market help determine the short-term interest rate in the economy.

Read also: Money and Banking 
CAPITAL MARKET
Capital market is a market where the financial instructions mobilize the savings of the people and lend them for long term period for raising new capital in a country.
Capital market also refers to the long term borrowing and lending of capital funds. In another perspective, capital market is a market in which financial securities such as stocks, bonds and government loan instrument are bought and sold.

 DIVISIONS OF CAPITAL MARKET
The Nigerian capital market is divided into two segments- the primary and secondary market; while the primary market provides the vehicle for raising fresh capital by government and corporate bodies; the secondary market provides a mechanism for investors to buy or sell existing securities.

 Functions Of Capital Market:
  1.  The capital market offers access to a variety of financial instruments that enable economic agents to pool, price and exchange risk.
  2. Capital formation: By marshalling savings and making them available to companies and public authorities and interested users that need them.
  3. It encourages saving in financial form - Through assets with attractive yields, liquidity and risk characteristics.
  4. The capital market play a major role in mobilizing funds and resources needed for development and offers the forum for implementing its policies relating to monetary controls, stabilization and regulation of the banking system.
  5. Through the stock exchange, the market gives long term leaders the opportunity to convert their holding into cash. It also offers companies which have securities the opportunity to obtain cash without reducing their liquidity.
 OBJECTIVES OF CAPITAL MARKET
The prime objectives of capital market regulation is investor protection, creative accounting, insider dealings and misuse of client money are some of the vices that investors need to be protected from. Capital market regulation has its core objectives the following:
  • The reduction of systemic risk.
  • Protection of investors.
  • Ensuring that the markets are fair, transparent and efficient.
 In summary, the regulation of the capital market is meant to protect public interest which operates on the need to promote economic development and confidence which in turn should bolster inward investments.

 REQUIREMENTS FOR ENLISTING IN CAPITAL MARKET 
Nigeria stock exchange listing requirements
First tier security market:
  1. Company must be registered as public limited liability company under the provisions of the companies and Allied matters decree 1990.
  2. Must submit a business record of past five years.
  3. Date of last audited accounts must not be more than 9 months.
  4. Amount of money that can be raised is unlimited depending.
  5. Annual quotation fees based on market capitalization.
  6. At least 25% of share capital must be offered to the public.
  7. Its number of shareholders must not be less than 300.
  8. After listing, company must submit quarterly, half yearly and annual accounts.
  9. Securities must be fully paid up at a time of allotment.
  10. Un-alloted securities must be sold on Nigeria Security Exchange Trading Floors.
  11. Provision for issue of managers, acquisitions, unit trust and mutual funds.
Second Tier Security Market:
  1. Companies must be registered as a public limited liability company under the provisions of the companies and Allied matters decree 1990.
  2. Must submit a business record of past three years.
  3.  Date of last audited accounts must not be more than 9 months.
  4.  Amount of money that can be raised may not exceed #100 million.
  5.  Annual quotation fees is a flat rate of #30,000.
 Third Tier Security Market:
  1. Companies must be wholly indigenous, promoted and registered as a public limited liability company under the provisions of the companies and Allied matters decree 1990.
  2. Must submit a business record of past two years.
  3. Date of last audited accounts must not be more than 9 months.
  4. Amount of money that can be raised may not exceed #100 million.
  5. Annual quotation fees based on market capitalization.
  6. At least 15% of share capital must be offered to the public.
  7. Its number of shareholders must not be less than 50.
  8. After listing, company must submit quarterly, half yearly and annual accounts.
  9. Securities must be fully paid up at a time of allotment.
  10. Un-alloted securities must be sold on Nigeria Security Exchange Trading Floors.
  11. Full listing of emerging market must be within six to eighteen months.
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REGULATIONS OF CAPITAL MARKET
Financial market regulation is the framework of rules, laws and principles which guide the operation of these markets as well as the institutions and individuals that conduct business in them.
Government actually have certain stated financial and economic objectives and to ensure that they are achieved, proper regulatory framework has to be laid in place to prevent individuals and institutions from engaging in acts which are capable of hampering the realizations of the objectives. 

 REASONS FOR REGULATION OF CAPITAL MARKET
There are many reasons that necessitate the regulation of capital market such as: Financial stability, economic and political development, investor protection, promotion of market confidence.

Types of Regulations: There are two types of regulations; Statutory and Non-statutory.
Statutory regulations are laws created by a legislative enactment. In Non-statutory regulations, the Nigeria`s stock exchange regulates their members for the purpose of meeting the aspirations of the financial markets in Nigeria.They draw up rules and regulations that govern the conduct of the market that are under their supervisors and their operators.




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