Eco. 324–Financial Markets and Institutions (Discussion 1–26-3-2021)

REG NO: 2017/249521
DEPT: ECONOMICS

What Are Financial Markets?
Financial markets refer broadly to any marketplace where the trading of securities occurs, including the stock market, bond market, forex market, and derivatives market, among others. Financial markets are vital to the smooth operation of capitalist economies.

Understanding the Financial Markets:

Financial markets play a vital role in facilitating the smooth operation of capitalist economies by allocating resources and creating liquidity for businesses and entrepreneurs. The markets make it easy for buyers and sellers to trade their financial holdings. Financial markets create securities products that provide a return for those who have excess funds (Investors/lenders) and make these funds available to those who need additional money (borrowers).

The stock market is just one type of financial market. Financial markets are made by buying and selling numerous types of financial instruments including equities, bonds, currencies, and derivatives. Financial markets rely heavily on informational transparency to ensure that the markets set prices that are efficient and appropriate. The market prices of securities may not be indicative of their intrinsic value because of macroeconomic forces like taxes.

Some financial markets are small with little activity, and others, like the New York Stock Exchange (NYSE), trade trillions of dollars of securities daily. The equities (stock) market is a financial market that enables investors to buy and sell shares of publicly traded companies. The primary stock market is where new issues of stocks, called initial public offerings (IPOs), are sold. Any subsequent trading of stocks occurs in the secondary market, where investors buy and sell securities that they already own.

Prices of securities traded in the financial markets may not necessarily reflect their true intrinsic value.
Types of Financial Markets
Stock Markets
Perhaps the most ubiquitous of financial markets are stock markets. These are venues where companies list their shares and they are bought and sold by traders and investors. Stock markets, or equities markets, are used by companies to raise capital via an initial public offering (IPO), with shares subsequently traded among various buyers and sellers in what is known as a secondary market.

Stocks may be traded on listed exchanges, such as the New York Stock Exchange (NYSE) or Nasdaq, or else over-the-counter (OTC). Most trading in stocks is done via regulated exchanges, and these play an important role in the economy as both a gauge of the overall health in the economy as well as providing capital gains and dividend income to investors, including those with retirement accounts such as IRAs and 401(k) plans.

Typical participants in a stock market include (both retail and institutional) investors and traders, as well as market makers (MMs) and specialists who maintain liquidity and provide two-sided markets. Brokers are third parties that facilitate trades between buyers and sellers but who do not take an actual position in a stock.

Over-the-Counter Markets
An over-the-counter (OTC) market is a decentralized market—meaning it does not have physical locations, and trading is conducted electronically—in which market participants trade securities directly between two parties without a broker. While OTC markets may handle trading in certain stocks (e.g., smaller or riskier companies that do not meet the listing criteria of exchanges), most stock trading is done via exchanges. Certain derivatives markets, however, are exclusively OTC, and so make up an important segment of the financial markets. Broadly speaking, OTC markets and the transactions that occur on them are far less regulated, less liquid, and more opaque.

Bond Markets
A bond is a security in which an investor loans money for a defined period at a pre-established interest rate. You may think of a bond as an agreement between the lender and borrower that contains the details of the loan and its payments. Bonds are issued by corporations as well as by municipalities, states, and sovereign governments to finance projects and operations. The bond market sells securities such as notes and bills issued by the United States Treasury, for example. The bond market also is called the debt, credit, or fixed-income market.

Money Markets
Typically the money markets trade in products with highly liquid short-term maturities (of less than one year) and are characterized by a high degree of safety and a relatively low return in interest. At the wholesale level, the money markets involve large-volume trades between institutions and traders. At the retail level, they include money market mutual funds bought by individual investors and money market accounts opened by bank customers. Individuals may also invest in the money markets by buying short-term certificates of deposit (CDs), municipal notes, or U.S. Treasury bills, among other examples.

Derivatives Markets
A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset (like a security) or set of assets (like an index). Derivatives are secondary securities whose value is solely derived from the value of the primary security that they are linked to. In and of itself a derivative is worthless. Rather than trading stocks directly, a derivatives market trades in futures and options contracts, and other advanced financial products, that derive their value from underlying instruments like bonds, commodities, currencies, interest rates, market indexes, and stocks.

Futures markets are where futures contracts are listed and traded. Unlike forwards, which trade OTC, futures markets utilize standardized contract specifications, are well-regulated, and utilize clearinghouses to settle and confirm trades. Options markets, such as the Chicago Board Options Exchange (CBOE), similarly list and regulate options contracts. Both futures and options exchanges may list contracts on various asset classes, such as equities, fixed-income securities, commodities, and so on.

Forex Market
The forex (foreign exchange) market is the market in which participants can buy, sell, hedge, and speculate on the exchange rates between currency pairs. The forex market is the most liquid market in the world, as cash is the most liquid of assets. The currency market handles more than $5 trillion in daily transactions, which is more than the futures and equity markets combined. As with the OTC markets, the forex market is also decentralized and consists of a global network of computers and brokers from around the world. The forex market is made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.

Commodities Markets
Commodities markets are venues where producers and consumers meet to exchange physical commodities such as agricultural products (e.g., corn, livestock, soybeans), energy products (oil, gas, carbon credits), precious metals (gold, silver, platinum), or “soft” commodities (such as cotton, coffee, and sugar). These are known as spot commodity markets, where physical goods are exchanged for money.

The bulk of trading in these commodities, however, takes place on derivatives markets that utilize spot commodities as the underlying assets. Forwards, futures, and options on commodities are exchanged both OTC and on listed exchanges around the world such as the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE).

Cryptocurrency Markets
The past several years have seen the introduction and rise of cryptocurrencies such as Bitcoin and Ethereum, decentralized digital assets that are based on blockchain technology. Today, hundreds of cryptocurrency tokens are available and trade globally across a patchwork of independent online crypto exchanges. These exchanges host digital wallets for traders to swap one cryptocurrency for another, or for fiat monies such as dollars or euros.

Because the majority of crypto exchanges are centralized platforms, users are susceptible to hacks or fraud. Decentralized exchanges are also available that operate without any central authority. These exchanges allow direct peer-to-peer (P2P) trading of digital currencies without the need for an actual exchange authority to facilitate the transactions. Futures and options trading are also available on major cryptocurrencies.

Examples of Financial Markets
The above sections make clear that the “financial markets” are broad in scope and scale. To give two more concrete examples, we will consider the role of stock markets in bringing a company to IPO, and the role of the OTC derivatives market in the 2008-09 financial crisis.

Stock Markets and IPOs
When a company establishes itself, it will need access to capital from investors. As the company grows it often finds itself in need of access to much larger amounts of capital than it can get from ongoing operations or a traditional bank loan. Firms can raise this size of capital by selling shares to the public through an initial public offering (IPO). This changes the status of the company from a “private” firm whose shares are held by a few shareholders to a publicly-traded company whose shares will be subsequently held by numerous members of the general public.

The IPO also offers early investors in the company an opportunity to cash out part of their stake, often reaping very handsome rewards in the process. Initially, the price of the IPO is usually set by the underwriters through their pre-marketing process.

Once the company’s shares are listed on a stock exchange and trading in it commences, the price of these shares will fluctuate as investors and traders assess and reassess their intrinsic value and the supply and demand for those shares at any moment in time.

How Do Financial Markets Work?
Despite covering many different asset classes and having various structures and regulations, all financial markets work essentially by bringing together buyers and sellers in some asset or contract and allowing them to trade with one another. This is often done through an auction or price-discovery mechanism.

What Are the Main Functions of Financial Markets?
Financial markets exist for several reasons, but the most fundamental function is to allow for the efficient allocation of capital and assets in a financial economy. By allowing a free market for the flow of capital, financial obligations, and money the financial markets make the global economy run more smoothly while also allowing investors to participate in capital gains over time.

Why Are Financial Markets Important?

Without financial markets, capital could not be allocated efficiently, and economic activity such as commerce & trade, investment, and growth opportunities would be greatly diminished.

Who Are the Main Participants in Financial Markets?
Firms use stock and bond markets to raise capital from investors; speculators look to various asset classes to make directional bets on future prices; hedgers use derivatives markets to mitigate various risks, and arbitrageurs seek to take advantage of mispricings or anomalies observed across various markets. Brokers often act as mediators that bring buyers and sellers together, earning a commission or fee for their services.

Name: Edochie Praise Ifeoma
Reg no: 2017/249492
Email address: Edochie80@gmail.com

The different parts of the financial system interact together to move the economy forward. This financial participants ensure that excess funds are channelled from the people with excess money( savers) to those in need of this money ( net borrowers) this function carried out is called financial intermediation.
Now without financial institutions it will be very difficult to channel these funds for various reasons like lack of trust between borrowers and lenders, borrowers may not even know net savers and a single saver may not be able to supply all the funds needed. However the parts of the financial system make it possible to access large funds.
When savers put their excess funds in financial institutions they don’t remain idle funds instead these institutions channel it to investors for productive activities and not only that they charge interest on loans. Note that part of this interest are remitted to those savers to encourage them to save more funds that will be channelled to investment thereby boosting economic growth and development.
Financial institutions also give loans for productive ventures only and issue project specific loans to boost development. If the government of a country wants to boost growth and development it can also use financial institutions to do that by issuing specific loans to boost agriculture, industries, service sectors etc. The importance of financial institutions in economic growth and development cannot be overstated.

Okaome Esther Chioma
2017/249554
estherokaome@gmail.com
Good day Mr President and honourable members of the house
If a financial institutions enters Into a bankruptcy such as when the value of the banks assest falls below the market value of the bank liabilities because of the controversial practices by the financial institution, this would definitely leasd to a wide spread of economic disability and also after panic as people who have their money and valuables in the bank would begin to doubt the safety of their finances( money and other valuables) that are been kept in the financial markets.
This will obviously lead to or cause a negative externalies in the sense that the individual s would likely withdraw their money and other valuables they have in the bank , doing so this will now lead to loss of customers for that financial institution and it will not definitely affect the financial operations of the financial institution and would therefore affect the economy as a whole.

Some of the challenges of the financial institutions are:cost, lack of awareness and regulatory requirements, lack of robust technlogy.

NAME: OKOYE AMBLESSED AMARACHI

REG NO: 2017/249560

DEPT:ECONOMICS

FINANCIAL MARKETS AND INSTITUTIONS

A financial market is a trade center where financial securities(such as stocks and bonds) and other valuables can be bought and sold.
They are targeted at raising capital, transferring risks, facilitating global transactions as well as enabling the transfer of liquidity. The financial market bridges the gap between those who want capital and those who have this capital.
Its made up of the primary and secondary markets.
A financial institution is an entity that oversees financial transactions such as investment loans and deposits. They are but not limited to commercial banks, trust companies as well as investment dealers. These financial institutions are regulated by a number officials; they include: CBN, SEC, NDIC etc.

Name: ASOGWA Arinze GODWIN
Reg no: 2016/235173
Department: Economics
Financial system The structure of the Nigerian financial system could be viewed from the side of institutions and structures planted for the realization of basic goals of financial intermediation. The institutions in question operate in the financial market. Here their ultimate role is to facilitate the mobilization of funds from the surplus units (savers) to the deficit units (investors). The sweetener is interest income that makes the surplus units (savers) to transfer their purchasing power to the deficit units (investors).This what is called actual resources flow from lenders to borrowers Through this the production of goods and services is improved which also reflects on the aggregate output of our Nation. The institutions in the Nigerian financial system are as shown below:
1. The monetary authorities or regulators
2. The Presidency
3. Federal Ministry of Finance
4. The Central Bank of Nigeria (CBN) as the apex regulatory body in the financial system.
5. Institutions that provide long term funds or capital market operators,
6. Securities and Exchange Commission as the apex regulatory body
7. The stock exchange as the facilitator of trading in various listed securities
8. Development or Specialized financial institutions: they include: Bank of Industry, Nigerian Agricultural and cooperative Bank, Nigerian Bank for Commerce and Industry, Federal Mortgage Bank of Nigeria.
The financial system consists of various financial institutions, operators and Instruments that gives the system its character and uniqueness. According to the Central Bank of Nigeria research series (1993) the Nigerian financial system refers to a set of rules and regulations and the aggregation of financial arrangements, institutions, agents, that interact with each other and the rest of the world to foster economic growth and development of a nation. A national financial system differs from the Global Financial System (GFS). The Global Financial System (GFS) is a financial system consisting of institutions and regulations that act on the international level, as opposed to those that act on a national or regional level. The main players are the global Institutions, such as International Monetary Fund and Bank for International etc. The financial system is a prime mover of economic development. It achieves this through the intermediation process, which entails providing a medium of exchange necessary for specialization and the mobilization of savings from surplus units to deficit units.
Basic characteristics of the financial system
1. A high level of confidence must be in place in the system.
2. An efficient financial system must be able to sustain the intermediation process.
3. An efficient financial system must have in place a large number of intermediaries and participants who must stand ready to engage in healthy competition amongst themselves and within confines and boundaries specified by law and the various professional standards in place for the participants.
4. There should be a high degree of flexibility in the market. Also, the instruments (financial assets) employed and the methods of operation should be market based, so that the market can respond and adapt to changes in the economic and financial structure, no matter how small the change may be.
5. An efficient financial system must allow for balance in operations of the market. It requires that there should be an optimal mix of various types of financial institutions with respect to both the transfer of current savings and the stock the past savings.
The financial system plays the vital role of improvement and sustains the efficient mobilization and allocation of financial resources in an economy. The Financial system also provides structures for the management of liquidity for financial assets and instruments The Report on the Nigeria system (1976) succinctly articulated the functions of the financial system.

Name: Ugochukwu Onyinyechi Marycynthia
Reg no: 2017/249580
Department: Economics
FINANCIAL SYSTEM- The financial system consists of various financial institutions, operators and Instruments that gives the system its character and uniqueness. According to the Central Bank of Nigeria research series (1993) the Nigerian financial system refers to a set of rules and regulations and the aggregation of financial arrangements, institutions, agents, that interact with each other and the rest of the world to foster economic growth and development of a nation. A national financial system differs from the Global Financial System (GFS). The Global Financial System (GFS) is a financial system consisting of institutions and regulations that act on the international level, as opposed to those that act on a national or regional level. The main players are the global Institutions, such as International Monetary Fund and Bank for International etc. The financial system is a prime mover of economic development. It achieves this through the intermediation process, which entails providing a medium of exchange necessary for specialization and the mobilization of savings from surplus units to deficit units. Through this process, there is an enhanced productive activity and thus positively influences aggregate output and economic growth. It means the system ensures the efficient transfer of savings from those who generate them (savers) to those who ultimately use them (investors) for investment or consumption. Well-functioning financial markets are an essential part of any modern healthy economy. It is through these markets that funds are offered by the lenders/savers who have excess funds and purchased by the borrowers/spenders who need those funds. The financial system also provides avenue for organizing and managing the payments system, mechanisms for the collection and transfer of savings by banks and other depository institutions; arrangements covering the activities of capital markets with respect to the issue and trading of long term securities, arrangement covering the workings of the money market in respect of short-term financial instruments; and arrangements covering the activities of financial markets complementary to the money and capital markets for example the foreign exchange market, the arrangements for risk insurance; the futures market etc. Nzotta (1999)

Empirical evidence shows that the level of financial system development in any nation is the best indicator of general economic development potential. Goldsmith (1969), for instance posits that financial system development is of prime importance because the financial superstructure, in the form of both primary and secondary securities, accelerates economic growth and improves economic performance, to the extent that it facilitates the migration of funds to the best user i.e. to the place in the economic system where the funds will yield the highest social return. The implication here is that the financial system will discriminate against inefficient funds users. In helping as a vehicle to economic development, the financial system tries to achieve the basic function of resource intermediation. Here, through various institutional structures, they vigorously seek out and attract the reservoir of idle funds and allocate same to entrepreneurs, businesses, households and governments, for investments and use in various projects and purposes, with a view of returns. Alternatively, they may listlessly exploit their quasi-monopolistic position and fritter away investment possibilities with unproductive loans (investments).Cameroon et al (1969). It is therefore an axiom that without financial wherewithal, no business enterprise (small, medium, or big) or government can perform its productive functions effectively and efficiently. Consequently, financial resources affect business development.

FUNCTION OF FINANCIAL SYSTEM
1. Facilitate effective management of the economy;
2. Provide non inflationary support to the economy;
3. Achieve greater mobilization of savings and its efficient and effective channelling;
4. Ensure that no viable project is frustrated simple for lack of funds;
5. Insulate the economy as much as possible and as much as desirable from the vicissitudes of international economic scenes; effectively sustain the indigenization (ownership, control and management) of the economy; assist in achieving significant transformation of the rural sector; and assist in achieving a greater integration and linkages in agriculture, commerce and industry.

A financial institution (FI) is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. … Virtually everyone living in a developed economy has an ongoing or at least periodic need for the services of financial institutions.
Financial Institutions are referred to as a company that deals in all types of finance-related businesses. They are different from banks and play a very important part in broadening the financial services in the country. They provide a very attractive rate of returns to the customers in comparison to any government-centric banks. It deals in loans and advances and also specializes in some specified sectors like hire purchases and leasing etc.

Explanation
The financial institution deals with finance-related services. These are gaining popularity day by day nowadays. The attractive rate of returns on the customer’s investment is very demanding. It also provides specialized services like hire purchase and leasing, etc. The simple and organized procedure of the institutions is becoming very complementary. It provide a broad range of business opportunities. There are different types of financial institutions. The goal of all the institutions is different and they provide different services and have different levels of risk associated with it. All the financial institutions have unique features and it works in a specialized way. The financial institution is gaining immense popularity in broadening the finance-related services in the country.

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Role of Financial Institutions
The financial institution provides varied kinds of financial services to the customers.
The financial institution provides an attractive rate of return to the customers.
Promotes the direct investment by the customers and making them understand the risk associated with that as well.
It helps in forming the liquidity of the stock in case of an emergency in the financial markets.
Features
It provides a high rate of return to the customers who have invested in the financial institution.
It reduces the cost of financial services provided.
It is considered very important for the development of financial services in the country.
It also advises the customers on how to deal with the equity and the other securities bought and sold in the market.
It helps to improvise decision making because it follows a systematic approach to calculate all the risks and rewards.
How does it work?
Financial institutions work like banks in some ways. They give loans and advances to the customers and also set a platform for the customers to do some investments. The customers get exciting offers and returns from them and therefore these institutions are gaining popularity. It also provide consultancy services to the clients on their investments related to the financial markets where the huge amount of risk is involved. Moreover, the customers who are handing over their hard-earned monies to such institutions should check for the history and origin of this financial institution.

Types of Financial Institutions
Investment Banks
Commercial Banks
Internet Banks
Retail Banking
Insurance companies
Mortgage companies.
Functions
The financial institutions provide loans and advances to the customers.
The rate of return is very high in case of investment made in this type of institution.
It also gives a high rated consultancy to the customers for their beneficial investments.
It also serve as a depository for their customers.
It can also make an effort to minimize the monitoring cost of the company.
All the finance related work is done by the financial institution or on behalf of the customers.
Financial Institutions vs Banks
The functions of payments of various services are done by the bank but the financial i nstitutions will not be able to do so.
It cannot accept the demand deposit whereas the banks can accept the demand deposit by the customers.
Banks provide the guarantee of repayment of the deposit whereas the financial institutions may fail to do so.
Advantages and Disadvantages
Below are the advantages and disadvantages:

Advantages

The financial institutions help in the upliftment of the economies of our country.
It has been proved to be more successful in terms of return earned by the customers since the rate of return is higher compared to any other place.
It is also a smart way to invest money and keep the money rotated in the finance market.
It provides financial services to the customers.
The repayment facility is also very well managed in the financial institutions.
It also provide underwriting facilities.
Disadvantages

The process is very complex for some customers because they try to indulge in various businesses and end up making confusion for themselves.
In case of default done by the management of the financial institutions, the customers will have to face major worse circumstances. The money which they have invested may not be recovered. Sometimes the principal amount is not assured to be recovered because the government in case of default announces a certain sum of money which will be repaid and most of the time the amount of government declare to be repaid is very less in comparison to the principal amount of the investment made.

NAME: OKOYE OBINNA CHIDIEBERE
REG NO: 2014/191864

The Financial System

A financial system is a system put in place to bridge the gap between lenders and borrower. It is a densely interconnected network of intermediaries, facilitators, and markets that serves three major purposes: allocating capital, sharing risks, and facilitating all types of trade, including intertemporal exchange. The Financial System is made up of three units and they are: Financial Institutions (the banks and other), Financial Markets (the money and capital markets), and Financial Instruments (Cash instruments as well as securities). Some scholars may believe that the financial system supports the life-blood of the economy because it allows for the movement of money from areas of surplus funds to areas of deficit, thus allowing for the financing of investments that lead to the overall economic development of the economy.

ROLES OF FINANCIAL INSTITUTIONS

1. The financial systems offer a very convenient mode of payment for goods and services. The check system, credit card systems and others are the easiest methods of payment in the economy; they also drastically reduce the cost and rime of transactions.

2. Most governments intervene in the financial system to influence macroeconomic variables like interest rates or inflation. For example, the federal bank or a central bank does indulge in several cuts in CRR and try to force the interest rates down and increase the availability of credit-at cheaper rates to the corporates.

3. As already stated, public savings find their way into the hands of those in production through the financial system. Financial claims are issued in the money and capital markets, which promise future income flows. The funds, in the hands of the producers, resulting in the production of better goods and services and an increase in society’s living standards. When savings flow decline, however, the growth of investment and living standards begins to fall.

4. Money in the form of deposits offers the least risk of all financial instruments. But its value mostly eroded by inflation. That is why one always prefers to store funds in financial instruments like stocks, bonds, debentures, etc. However, in such investments a greater level of risk is involved, and the degree of liquidity (i.e., conversion of the claims into money) is less. The financial markets provide the investor with the opportunity to liquidate the investments.

The successful expansion of any Economy is dependent on the strength of it’s financial system. This implies that the stronger the financial system, the bigger and better the Economy and vice versa. The financial system through the link it creates between savings and investment, boosts the creation of wealth in the country. It also assists in the supply of necessary financial inputs for the production of goods and services, in turn, promote the well-being and standard of living of people in the country.

However, the financial system through the role it performs can go a long way to promote Economic growth and development. It can do this by acting as an intermediary between lenders and borrowers, thus the various sectors in the Economy most especially the businesses and industries, will get the finances they need, this will automatically lead to increased productivity, increase in the level of employment, enhanced domestic trade and increase in economic activities and so on.

Thus they enhance the efficiency of investment and this leads to higher Economic growth and development. Moreover, they also raise funds for both short-term and long-term money requirements. They help the government create policies that will stabilize the Economy in case there was an Economic disequilibrium. All these help to create Economic development.

Agbo Jennifer Amarachi
2017/249476
jenniferamarachi.agbo@gmail.com
https://agbojenniferamarachi.blogspot.com/?m=1

The successful expansion of any Economy is dependent on the strength of it’s financial system. This implies that the stronger the financial system, the bigger and better the Economy and vice versa. The financial system through the link it creates between savings and investment, boosts the creation of wealth in the country. It also assists in the supply of necessary financial inputs for the production of goods and services, in turn, promote the well-being and standard of living of people in the country.

However, the financial system through the role it performs can go a long way to promote Economic growth and development. It can do this by acting as an intermediary between lenders and borrowers, thus the various sectors in the Economy most especially the businesses and industries, will get the finances they need, this will automatically lead to increased productivity, increase in the level of employment, enhanced domestic trade and increase in economic activities and so on.

Thus they enhance the efficiency of investment and this leads to higher Economic growth and development. Moreover, they also raise funds for both short-term and long-term money requirements. They help the government create policies that will stabilize the Economy in case there was an Economic disequilibrium. All these help to create Economic development.

Udeh Rita Ezinne
2017/249578
ritaudeh563@gmail.com
A country can be said to be a country when there is an existence of financial system
The financial system includes all financial intermediaries that operate in the financial sector in the economy. It is termed as financial intermediaries because they act as middlemen between the savers and borrowers.
It is anchored on the belief that economic agents are categorized into surplus and deficit spending units. The surplus spending units are individuals, groups or organizations operating within the economy that have excess funds above their immediate needs. They constitute suppliers of surplus funds to the financial system. The deficit spending units are those that have a shortage of funds and thus require borrowing to fund their operations. They are the users of the excess funds supplied by the surplus spending units in the financial system.With intermediation, savers lend to intermediaries, who in turn lend firms and other fund using units. The saver holds claim against the intermediaries, in form of deposits rather than against the firm. These institutions provide a useful service by reducing the cost to individuals, of negotiating transactions, providing information, achieving
There are mainly four components of the financial system:
1. Financial markets – the market place where buyers and sellers interact with each other and participate in the trading of bonds, shares and other assets are called financial markets.
2. Financial assets – the products which are traded in the financial markets are called financial assets. Based on different requirements and credit seekers, the securities in the market also differ from each others.
3. Financial institutions – financial institutions are acting as a mediator between the investors and borrowers. The investor’s savings are mobilized either directly or indirectly via the financial markets. They offer services to organisations who want to raise funds from markets and take care of financial assets (deposits, securities, loan, etc).
4. Financial services – services provided by assets management and liabilities management companies. They help to get the required funds and also make sure that they are efficiently invested. (eg. Banking services, insurance services and investment services)
Conclusion
The financial system provides an enabling environment for economic Growth and development, productive activity, financial Intermediation, capital formation and management of the payments System.

Name: Ani Gabriel ogbonna
Reg. Number: 2017/249483
Department: Economics
Email: anigabriel05@gmail.com

FINANCIAL SYSTEM
A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals. Financial systems can be organized using market principles, central planning, or a hybrid of both. Institutions within a financial system include everything from banks to stock exchanges and government treasuries.
The Financial system is one of the most important inventories of modern society. The phenomenon of imbalance in the distribution of capital or funds exists in every economic system. There are areas or people with surplus funds, while other areas or people are facing a deficit. A financial system functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. It is a composition of various institutions, markets, regulations and laws, practices, money managers, analysts, transactions, and claims & liabilities.
The financial system helps determine both the cost and the volume of credit. This system can affect a rise in the cost of funds, thus adversely affecting the consumption, production, employment, and growth of the economy. Vice-versa, lowering the cost of credit can have a positive effect and enhance all the above factors. Clearly, a financial system has an impact on the basic existence of an economy and its citizens.

Financial system perform different function in the society. This function aid in development of Economy.

1. The Savings Function:
As already stated, public savings find their way into the hands of those in production through the financial system. Financial claims are issued in the money and capital markets, which promise future income flows. The funds, in the hands of the producers, resulting in the production of better goods and services and an increase in society’s living standards. When savings flow decline, however, the growth of investment and living standards begins to fall.

2. Liquidity Function:
Money in the form of deposits offers the least risk of all financial instruments. But its value mostly eroded by inflation. That is why one always prefers to store funds in financial instruments like stocks, bonds, debentures, etc. However, in such investments (i) a greater level of risk is involved, (ii) and the degree of liquidity (i.e., conversion of the claims into money) is less. The financial markets provide the investor with the opportunity to liquidate the investments.

3. Payment Function.
The financial systems offer a very convenient mode of payment for goods and services. The check system, credit card systems et al are the easiest methods of payment in the economy; they also drastically reduce the cost and rime of transactions.

4. Risk Function:
The financial markets provide protection against life, health, and income risks. These are accomplished through the sale of life, health, and property insurance policies. Overall, they provide immense opportunities for the investor to hedge himself/herself against or reduce the possible risk involved in various instruments.

5. Policy Function:
Most governments intervene in the financial system to influence macroeconomic variables like interest rates or inflation. For example, the federal bank or a central bank does indulge in several cuts in CRR and try to force the interest rates down and increase the availability of credit-at cheaper rates to the corporates.

Conclusion:
Modern-day economies require huge sums of money for investment in capital assets (land, types of equipment, factory, etc.), which are then used for providing goods and services. The funds required are so huge that it’s not possible for a single government/firm to meet the requirement. By selling financial claims like stocks, bonds, etc., the required funds can be quickly raised from a variety of investors. The business firm/government issuing such a financial claim then hopes to return the borrowed funds from expected future inflows. Indeed, we see that the financial markets within the financial system have made possible the exchange of current income for future income and transformation of savings into investments so that production and income keep growing and there by bringing economic development.

Name : Oroke Charity Nnedimma
Reg No: 2017/243816
Department: Economics
Course code: 324
Financial markets involve various players, including borrowers, lenders, and investors that negotiate loans for investment purposes. The borrowers and lenders tend to trade money in exchange for a return on the investment at some future date. Derivative instruments are also traded in the financial markets as well, which are contracts that are determined based on an underlying asset’s performance.
Financial system in Nigeria is regulatory based and has been described as a complicated sectors since it handles the economy, cash flow, financial commitment as well as other finance releated subject. The operators of nigeria financial system are the major players in the industry, the financial system in Nigeria is controlled by various department and agencies of the federal government which are empowered to regulate the formation and operations of financial intermediaries and other operators in the system.
The structure of financial system in Nigeria was designed in a way that the control agencies also determine which financial instruments could be traded and at what rates. They help to monitor the entire system. The Nigerian financial system regulators has the task of controlling and managing the system rests primarily on the federal ministry of finance. The ministry plays a dual role.
Nigeria has enabled the operators of Nigeria financial system to be the financial managers and also the controllers whose function is operationally carried out by the central bank of Nigeria (CBN). Until recently, the bank was under the ministry but has now gained a large measure of autonomy and has been placed directly under the presidency. The central bank exerts a lot of influence on the financial system. Its influence is most pervasive on the banking subsector. It acts as the controller and regulator of the financial system. One medium through which the central bank of Nigeria exercise its control is the monetary policy circulars (MPC) issued from time to time by the bank.
Components of Financial System
Financial Institutions
Financial Markets
Financial Instruments (Assets or Securities)
Financial Services
Money
Financial institutions facilitate smooth working of the financial system by making investors and borrowers meet. They mobilize the savings of investors either directly or indirectly via financial markets, by making use of different financial instruments as well as in the process using the services of numerous financial services providers
Financial Markets
A financial market is the place where financial assets are created or transferred. It can be broadly categorized into money markets and capital markets. Money market handles short-term financial assets (less than a year) whereas capital markets take care of those financial assets that have maturity period of more than a year. The key functions are:
1. Assist in creation and allocation of credit and liquidity.
2. Serve as intermediaries for mobilization of savings.
3. Help achieve balanced economic growth.
4. Offer financial convenience
Financial Instruments
This is an important component of financial system. The products which are traded in a financial market are financial assets, securities or other type of financial instruments. There is a wide range of securities in the markets since the needs of investors and credit seekers are different. They indicate a claim on the settlement of principal down the road or payment of a regular amount by means of interest or dividend. Equity shares, debentures, bonds, etc are some examples.
Financial Services
Financial services consist of services provided by Asset Management and Liability Management Companies. They help to get the necessary funds and also make sure that they are efficiently deployed.
Money
Money is understood to be anything that is accepted for payment of products and services or for the repayment of debt. It is a medium of exchange and acts as a store of value.
Meaning of Financial Assets
Financial assets are not existed in physical form.
These assets represent the ownership right in a piece of paper.
Characteristics of financial Asset

Divisibility & Denomination
The financial assets are usually made out in denominations depending on the face value that the corporate organizations and institutions that are using them to raise funds from the financial markets. The divisibility of such near money refers to the minimum monetary value in which a financial asst can be liquidated or exchanged for money by the holder. Where physical Asset are divisible financial asset can be divided
Maturity Period
In financial parlance, the maturity period refers to the length of time within which the corporate entity or institution that employs a financial instrument to raise funds will use the funds before its payment back to the holders of such instrument. For instance, a bond can be held by a corporate entity for a period of thirty (30) years while that of government can extend to a period of ninety-nine (99) years before their repayment to the holders.
Liquidity: money is the most liquid asset . Liquidity here means the eas with which asset can be traded
Moneyness
The moneyness of the financial assets implies that they are easily convertible to cash within a defined time and determinable value. The cost of transactions involved in securing funds from them before the maturity date can be likened to agency cost besides the cost of discounting some of them, which reduces their face value. Therefore, these financial instruments are regarded as near money because of the ease with which they can be traded for cash. Examples are Treasury bills, Treasury certificates, Trade bills, Commercial papers, and Certificate of Deposits, among others.

Name: Ojigwe Shalom Chinaza
Reg No : 2017/249549
Department: Economics
To understand the full impact of the various financial institutions and instructions in a financial system, we would have to understand fully the concept of “financial system”. A ‘Financial system’ is a system that allows the exchange of funds between financial markets participants such as lenders, investors, and borrowers. Financial systems operate at national and global levels. Financial Institutions consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.

In other words, financial systems can be known wherever there exists the exchange of a financial medium (money) while there is a reallocation of funds into needy areas (financial markets, business firms, banks) to utilize the potential of ideal money and place it in use to get benefits out of it. This whole mechanism is known as a financial system.

Money , credit and finance are used as media of exchange in financial systems. They serve as a medium of known value for which goods and services can be exchanged as an alternative to bartering. A modern financial system may include banks(public sector or private sector), financial markets, financial instruments, and financial services. Financial systems allow funds to be allocated, invested, or moved between economic sectors, and they enable individuals and companies to share the associated risks. Financial systems allow a level of equality and proper distribution of finances in an economy.
The truth is, “without financial systems, there would not be a systematic inflow and outflow of finances from one sector to another”
Financial systems and it’s components are at the base of all transactions that happen in a country.

Financial institutions provide financial services for members and clients. It is also termed as financial intermediaries because they act as middlemen between the savers and borrowers. There are mainly four components of the financial system:

Financial markets
Financial assets
Financial institutions
Financial services
1. Financial markets – the market place where buyers and sellers interact with each other and participate in the trading of bonds, shares and other assets are called financial markets.

2. Financial assets – the products which are traded in the financial markets are called financial assets. Based on different requirements and credit seekers, the securities in the market also differ from each others.

3. Financial institutions – financial institutions are acting as a mediator between the investors and borrowers. The investor’s savings are mobilized either directly or indirectly via the financial markets. They offer services to organisations who want to raise funds from markets and take care of financial assets (deposits, securities, loan, etc).

4. Financial services – services provided by assets management and liabilities management companies. They help to get the required funds and also make sure that they are efficiently invested. (eg. banking services, insurance services and investment

The primary role of financial institutions is to provide liquidity to the economy and permit a higher level of economic activity than would otherwise be possible. Without financial institutions, people wouldn’t be able to take advantage of rising and falling interest rates and there would be no saving of money, other than the stacks you stuff under your mattress.

Financial systems provide services to their customers to help them with their monetary needs. A public function of the financial system is to aid the payment system . Financial systems through the aid of institutions help keep the payment system in motion. They enable the citizens to handle their daily financial transactions
Financial institutions help individuals and corporations with resources and capital management by extending credit to those who can pay it back. Banks and other institutions can pool resources together to allow others to borrow money. Loans which could be in form of credit and mortgages
allow families and companies to borrow funds and pay them back on a regular schedule. Acquiring capital for a new or existing business or personal project can be difficult, so financial institutions allow people and businesses to have access to the capital they need to be successful.
Another important function of financial institutions is the moving of resources around from place to place. These institutions assist with larger transfers of funds like corporate investments, purchases of real estate, and construction loans, as well as other larger transactions, such as paying annuities.

Financial institutions can transfer resources from one party to another more easily and with more flexibility than individuals or corporations can, which makes this function so crucial.
The well developed and smoothly operated financial market plays a major important role in the growth and efficiency of a country. It helps in the efficient direct flow of savings and investments in the economy which facilitates the accumulation of capital and contribution in the production of goods and services.

The blend of well developed financial market and the diverse range of financial products and instruments best suits the demand for borrowers and lenders as well as the whole economy. the financial market provides corporate, industrialists and the governmental entities access to capital. The prospect of a financial market is to set prices for global trade, raise capital, and transfer liquidity and risk.

Most of the general people imagine that the financial market is all about the stock market, though it combines with banking services, securities, bonds, and real estate also. They are also deals in raising finance by various institutions and issuing securities. Thus, Financial market bridges the gap between those who have the excess of money with those who are in need of money. So, through financial market funds flow from suppliers to who face the deficit of money through the use of financial instruments. the different
A financial works efficiently because of efficient financial institutions.financial institution is basically an establishment that conducts financial transactions such as investments, loans and deposits.
There are five main types of financial institutions.
1.Commercial banks
2. Investment Banks
3. Insurance Company
4. Brokerage
5. Investment Company
The primary role of financial institutions is to provide liquidity to the economy and permit a higher level of economic activity than would otherwise be possible.
Without financial institutions, people wouldn’t be able to take advantage of rising and falling interest rates and there would be no saving of money, other than the stacks you stuff under your mattress and savings boxes, which are not efficient.

NAME: SUNDAY EMEM MFON
REG NO: 2017/242429
DEPARTMENT: ECONOMICS
EMAIL: ememsunday2001@gmail.com

FINANCIAL SYSTEM
Financial system links savers and investors. It helps to mobilize and allocate savings effectively and efficiently. It motivated people to save more by reducing transaction cost and increasing returns. Financial system also helps in increasing financial assets as a percentage of GDP and also builds an increasing number and variety of participants and instruments. In summary, financial system contributes to growth through technical process.

Financial system contributes to economic development of a country when businesses and industries are financed by the financial systems which lead to growth in employment and in turn increase economic activity and domestic trade.
The Financial system helps efficiently direct the flow of savings and investments in the economy, (here, financial institutions like banks play a major role).
Various business entities use the financial system to raise funds for both short term and long term money requirements. The financial system helps provide funds to the growing business houses and industries, which results in an increase in production which in turn generates more employment opportunity for citizens in a country (Increase in business and industrial activity leads to various employment opportunities).

NAME: MADUAGUM MADONNA CHIOMA
REG. NO: 2017/241456
EMAIL: cmaduagum@gmail.com
ECO 324

Financial systems are institutions and markets that serve as an intermediary for exchange of funds for investment, providing facilities like payment systems for financing of commercial activities and facilitating finds from areas of surplus to areas of deficit. Examples of financial systems include Banks, Insurance companies, stock exchanges, non-banking financial companies, credit and loan companies etc. The financial systems play an important role as mediator between those in need of finance (borrowers) and those who have excess funds (lenders). The financial system also plays a role in the allocation of resources in any economy since it helps in the channeling of money from the saving portion of the population to the corporate sector. Again, It assists in the allocation of investment funds among companies and enables the sharing of risks between firms and the household sector.
In ensuring economic growth and development, the parts of the financial system play the following roles:
1. Financial Institutions: As financial intermediaries, financial institutions channel funds from savers to borrowers, providing customers with the liquidity they need for investment in productive, profitable enterprises. By stimulating savings and investment, the nation’s banks effectively reduce the loss of capital and boost economic growth. they have helped in reducing regional disparities by inducing widespread industrial and economic development.
2. Financial Markets: Financial markets flow money to where it is needed most, fund businesses and companies, contributing to job growth and, in turn, growing economic development and trade. In developing countries, developing economies look at financial markets to finance its balance of payments accelerating its development agenda for economic stability. Hence, it acts as a mirror reflecting the economic status of the country.
3. Financial instruments: It forms a contract between parties that obliges one party to transfer money or shares in a company to another party in the future in exchange for something of value. Financial instruments support economic growth and development by ensuring efficient flow and transfer of capital through world investors.
4. Financial Services: This involves offering loans to individuals and companies, providing interest on deposits, enabling the transfer of funds between the same or different banks, exchange of foreign currency, safe internet banking facilities to make banking easily accessible at all times, buying and investing funds from investors into other stocks, bonds or securities, etc
Hence, we see that as the financial sector develops, it in turn accelerates the economic growth of a nation in terms of capital formulation, employment, development of trade, balanced growth and other sectors of the economy.

Name: Eze Udoka Chidiebube
Reg no: 2017/242428
Dept: Economics
Email: ezeudoka99@gmail.com
A financial system can be perceived on a company, regional, or global scale, which facilitates the practice of exchanging funds between one entity to another. It involves various players such as insurance companies, stock exchanges, investment banks, and more. Financial systems are regulated, as their processes influence and contribute to the growth of many assets.
Financial institutions provide financial services for members and clients. It is also termed as financial intermediaries because they act as middlemen between the savers and borrowers. There are mainly four components of the financial system:
Financial market
Financial assets
Financial institutions
Financial services
1. Financial markets – the market place where buyers and sellers interact with each other and participate in the trading of bonds, shares and other assets are called financial markets.
2. Financial assets – the products which are traded in the financial markets are called financial assets. Based on different requirements and credit seekers, the securities in the market also differ from each others.
3. Financial institutions – financial institutions are acting as a mediator between the investors and borrowers. The investor’s savings are mobilized either directly or indirectly via the financial markets. They offer services to organisations who want to raise funds from markets and take care of financial assets (deposits, securities, loan, etc).
4. Financial services – services provided by assets management and liabilities management companies. They help to get the required funds and also make sure that they are efficiently invested. (eg. banking services, insurance services and investment services)
Banks are financial intermediaries that lend money to borrowers to generate revenue and accept deposits . They are typically regulated heavily, as they provide market stability and consumer protection. Banks include : Public banks, Commercial banks, Central banks, Cooperative banks, State-managed cooperative banks, State-managed land development banks.
Non-bank financial institutions
Non-bank financial institutions facilitate financial services like investment, risk pooling, and market brokering. They generally do not have full banking licenses.[5] Non-bank financial institutions include, Finance and loan companies, Insurance companies, Mutual funds.
Financial markets
Financial markets are markets in which securities, commodities, and fungible items are traded at prices representing supply and demand. The term “market” typically means the institution of aggregate exchanges of possible buyers and sellers of such items.
Primary markets: The primary market (or initial market) generally refers to new issues of stocks, bonds, or other financial instruments. The primary market is divided in two segment, the money market and the capital market.
Secondary markets: The secondary market refers to transactions in financial instruments that were previously issued.
Financial instruments: Financial instruments are tradable financial assets of any kind. They include money, evidence of ownership interest in an entity, and contracts.
Cash instruments: A cash instrument’s value is determined directly by markets. They may include securities, loans, and deposits.
Derivative instrument: A derivative instrument is a contract that derives its value from one or more underlying entities (including an asset, index, or interest rate).

Financial services.
Financial services are offered by a large number of businesses that encompass the finance industry. These include credit unions, banks, credit card companies, insurance companies, stock brokerages, and investment funds.
A financial system can be perceived on a company, regional, or global scale, which facilitates the practice of exchanging funds between one entity to another.It involves various players such as insurance companies, stock exchanges, investment banks, and more.Financial systems are regulated, as their processes influence and contribute to the growth of many assets.

Name: Fidelis Emmanuel Oluebubechukwu
Reg no. 2017/241440
Emmanuel.fidelis.241440@unn.edu.ng

A financial system consist of institutional units and markets that interact, typically in a complex manner for the purpose of mobilising funds for investment and providing facilities including payment systems for the financing of commercial activities. It is made up of financial institutions, financial markets, financial instruments and financial services.
1. Financial institutions: financial institutions can be defined as an organizations that processes financial transactions such as loans, deposits and investments. Example of financial institutions include commercial banks, insurance companies, investment banks etc
2. Financial markets: financial markets refers to a marketplace, where creation and trading of financial assets such as shares, bonds, derivatives, currencies etc. take place. It plays a crucial role in allocating limited resources in the country’s economy.
3. Financial instruments: this is a contract that gives rise to a financial asset of on entity and a financial liability or equity instrument of another entity. It may be evidence of ownership of part of something as in stock and shares.
These parts or economic units help the transfer of funds from the surplus economic units (lenders) to the deficit economic units (borrowers) of the economy. Financial system helps the circulation of money into different sectors of the economy, this improves economic growth and economic development, in the sense that borrowers or investors who intend to startup a new business or expand an existing business but do not have the financial capacity can borrow from the financial institutions. The financial institutions provide loans for investors and borrowers. Financial system act as intermediaries between the lenders and the borrower.

Name:Meteke Joy Orimusue
Reg.no:2017/242430
Department:Economics
Website: metekejoy01.blogspot.com
Email:joymetex2000@gmai.com

FINANCIAL SYSTEM
DEFINITION: A financial system is a densely interconnected network of intermediaries, facilitators, and markets that serves three major purposes: allocating capital, sharing risks, and facilitating all types of trade, including intertemporal exchange. That sounds mundane, even boring, but it isn’t once you understand how important it is to human welfare. A financial system consists of institutional units and markets that interact, typically in a complex manner, for the purpose of mobilizing funds for investment, and providing facilities, including payment systems, for the financing of commercial activity.financial system provides channels to transfer funds from individuals and groups who have saved money to individuals and group who want to borrow money. Saver (refer to the lender) are suppliers of funds to borrowers in return with promises of repayment of even more funds in the future.
ROLES OF THE FINANCIAL SYSTEM
1.Insurance Services
Financial institutions, like insurance companies, help to mobilize savings and investment in productive activities. In return, they provide assurance to investors against their life or some particular asset at the time of need. In other words, they transfer their customer’s risk of loss to themselves.
2. Pension Fund Services
Financial institutions, through their various kinds of investment plans, help the individual in planning their retirement. One such investment options is a pension fund, where the individual contributes to the pool of investment set up by employers, banks, or other organizations and get the lump sum or monthly income after retirement.
3. Act as A Government Agent for Economic Growth
Financial institutions are regulated by the government on a national level. They act as a government agent and help in the growth of the nation’s economy as a whole.

4.Banking Services
Financial institutions, like commercial banks, help their customers by providing savings and deposit services. They provide credit facilities like overdraft facilities to the customers for catering to the need for short-term funds.
5. Regulation of Monetary Supply
Financial institutions like the central bank help in regulating the money supply in the economy. They do it to maintain stability and control inflation.
DIVISIONS OF THE FINANCIAL SYSTEM
The financial system is divided into;
1. FINANCIAL INSTITUTION:An organization, which may be either for-profit or non-profit, that takes money from clients and places it in any of a variety of investment vehicles for the benefit of both the client and the organization. financial institution (FI) is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. It is also referred to as banking institution. Financial institution is divided into two;
a. Banking institution:A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes. banking institution’s financing activities generally involve various types of lending, such as corporate finance, housing, project finance, retail, short-term finance, small-medium enterprises, trade, and others. Alternatively, the focus of a banking institution may be only on specific transactions with clients that meet certain requirements and within certain industry sectors. Banking institutions may also provide financial products with a focus on environmental business opportunities.Banking institution is made up of commercial bank,cooperative bank,foreign bank, regional rural banks.
*Commercial Banks:Commercial banks are those banks which perform all kinds of banking functions such as accepting deposits, advancing loans, credit creation, and agency functions. They are also called joint stock banks because they are organised in the same manner as joint stock companies.They usually advance short-term loans to customers. The commercial Bank is made up of the public and private bank; public bank refers to a financial institution that is owned by a government agency and operated in the public interest. A public bank may be created by any government agency that is willing to comply with local banking requirements.It is also known as state-owned banks eg Central Bank of Nigeria ;also called the apex Bank while private bank are banks owned by either an individual or a general partner with limited partner. Private banks are not incorporated. In any such case, the creditors can look to both the “entirety of the bank’s assets” as well as the entirety of the sole-proprietor’s/general-partners’ assets. Examples in Nigeria are zenith bank,fidelity bank etc.

*Cooperative Bank:Co-operative banks are financial entities established on a co-operative basis and belonging to their members. This means that the customers of a co-operative bank are also its owners. These banks provide a wide range of regular banking and financial services. In this type of bank ,members pool their resources together in order to attain a financial objective.
*Foreign Bank:foreign bank is a type of International Bank that is obligated to follow the regulations of both the home and host countries. Because the foreign banks loan limits are based on the parent bank’s capital, foreign banks can provide more loans than subsidiary banks. Foreign Banks are present in India either as representative offices or as branches.
*Regional Rural Bank:Rural banks are private, unit banking institutions based in the rural areas which mobilise financial resources and control and extend credits to farmers, cottage industrialists and other rural-based economic operators in their defined area of operation. They have no branches but work through a network of agencies and mobilization centres.The major functions of RRB are ;#Granting of loans and advances to small and marginal farmers and agricultural labourers, whether individually or in groups, and to co-operative societies, agricultural processing societies, co-operative farming societies, primarily for agricultural purposes or for agricultural operations and other related purposes;
#Granting of loans and advances to artisans, small entrepreneurs and persons of small means engaged in trade, commerce and industry or other productive activities within its area of co-operation; and
#Accepting deposits.
b.Non Banking institution:non-bank financial institution refers to companies that offer financial services, but do not hold banking licenses and cannot accept deposits. Insurance companies, brokerage firms, and companies offering microloans are examples of non-bank financial institutions.
2. Financial Market:A financial market is a market in which people and entities can trade financial securities, commodities and other fungible assets at prices that are determined by pure supply and demand principles.Financial markets may be viewed as channels through which flow loanable funds directed from a supplier who has an excess of assets toward a demander who experiences a deficit of funds.Financial market is divided into unorganized and organized financial market.The organised sector is mainly composed of the commercial banks, cooperative banks and discount houses, acceptance houses and land mortgage banks. The unorganised sector is largely outside the control of the Central Bank and is characterised by lack of uniformity in their business dealings. In India, the indigenous bankers and money lenders, traders, are important segment of unorganised money market.The organized financial market is divided into capital and money market.
a.Capital Market:Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions.Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use. Generally, this market trades mostly in long-term securities.It is divided into;
* Primary Market:The primary market is where securities are created. It’s in this market that firms float new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market.
*Secondary Market:The secondary market is commonly referred to as the stock market. The securities are firstly offered in the primary market to the general public for the subscription where a company receives money from the investors and the investors get the securities; thereafter they are listed on the stock exchange for the purpose of trading.
b. Money Market:Money market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded. Money market has become a component of the financial market for buying and selling of securities of short-term maturities, of one year or less, such as treasury bills and commercial papers.Examples of instruments sold in the money market are ;
*Treasury bills
*Certificate of deposit
*Banker’s Acceptance
*Commercial papers
3. Financial Instruments:A financial instrument is defined as a contract between individuals/parties that holds a monetary value. They can either be created, traded, settled, or modified as per the involved parties’ requirement. In simple words, any asset which holds capital and can be traded in the market is referred to as a financial instrument.Some examples of financial instruments are cheques, shares, stocks, bonds, futures, and options contracts.
4.Financial Services:Financial Services is a term used to refer to the services provided by the finance market. Financial Services is also the term used to describe organizations that deal with the management of money.Financial services are divided into;
*fund based services ; leasing, hire purchase,consumer credit, discounting etc
*fee based services;merchant banking,issue management etc.

ANENE VICTORIA CHIOMA
2017/242435
Victoria.anene.242435@unn.edu.ng
ECONOMICS DEPARTMENT
toria20@simplesite.com

In view of economic standards, it is notable that, there are two primary macroeconomic approaches (fiscal policy and monetary policy) that can be utilized to deal with the strength of an economy (Gross Domestic Product). These policies are adopted in achieving macroeconomic goals of a nation, such as high level of inclusive and Sustainable growth, full employment, favorable balance of payment, price stability. The monetary and fiscal policies are used collectively by Nigeria to attain continuous growth of economy and reduce the instability in the economy. The monetary policy is used to control the supply of money within the Nigeria, while fiscal policy is used to control total demand and supply and fulfil government spending with the use of money raised by taxes.

Fiscal policy
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. The fiscal policy is an integral part of the growth Of an economy because it ensures the power of the government to run the affairs of the country, Control of the government on taxes, the income of its inhabitants, and overall business Environment. Using governmental expenditure and taxes for the purpose of growing economy is part of budgetary plan fiscal policy of Nigeria aims to stimulate Economic growth, reduce poverty, enhance the growth rate of GDP, decrease inflation, improve the balance of payment, accumulate saving, and reserves, and improve the exchange rate of Nigerian Naira. The central government of Nigeria operates the fiscal policy by the budget office, Governmental institutions, politicians, and governmental agencies, which are backed by Nigerian Legislations.

Monetary policy
A major factor in a nation’s economy is its monetary policy, which determines the amount of money flowing through the economy. Set by the Federal Reserve in the United States, monetary policy influences economic activity by controlling the country’s money supply and credit. The Federal Reserve can control monetary policy by altering rates of interest and changing the amount of money banks must have in their reserves. It can also be defined as activities intended to affect the behavior of the monetary sector by using instruments directly and indirectly used by regulatory bodies to get the economic stability of the country. Central Bank of Nigeria operates monetary policy, which was established in 1958,the monitory policy has affected the money supply of Nigeria by adjusting interest rate, the requirement of the central bank for financial reserves, trade of governmental securities, and management of foreign exchange.
The economy of Nigeria has transferred from the agrarian-based economy to oil production after the 1970s. The Nigerian government benefited from this transition at the initial level but it caused many problems for the country, such as the decrease in exports of agricultural products, unemployment, and increase in imports, corruption, and high debts for the country. Nigeria follows three policies, i.e. monetary policy, fiscal policy, and income policy. The main focus on monetary policy is to control money supply, whereas, the fiscal policy deals with government expenditures and revenue. The economic growth of any country is backed by theoretical concepts such as Classical, Neoclassical, Keynesian, Endogenous, and Mercantile theories. The empirical review of the researches exposed significant impact on economic growth for the short run, while fiscal policy has positive relation in the end.

NAME: Emmanuel Treasure Adanne
Department: Economics
Reg No: 2017/242436
Email address: http://www.treasureadaemmanuel@gmail.com
Website: treshvinaemman54.blogspot.com
Answer:
Financial System can be explained as a set of institutions which allows the exchange of funds between lenders, borrowers and investors. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals. We are going to look financial system in four parts and they are financial institutions, financial markets, financial assets and instruments and financial services.
Financial institutions exists to provide a wide variety of deposit, lending and investment products to individuals, businesses or both. While some financial institutions focus on providing services and accounts for the general public, others are more likely to serve only certain consumers with more specialized offerings. Financial institutions are typical in two parts they are; banking institutions and non banking institutions. Under the baking institutions we have the Central bank, commercial banks, foreign banks, mortgage banks, investment banks, etc. Under the non banking institutions we have; Insurrance companies, stock exchange markets, commodities markets, finance and lending companies, etc. Banking institutions cam either be privately or publicly owned.
The next part of financial system is the financial markets. Financial Market refers to a marketplace, where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a crucial role in allocating limited resources, in the country’s economy. Finanicial markets are organized into:
. Capital markets which consist of: Stock markets, which provide financing through the issuance of shares or common stock , and enable the subsequent trading thereof. And Bond markets, which provide financing through the issuance of bonds, and enable the subsequent trading thereof.
. Commodity markets, which facilitate the trading of commodities.
. Money markets, which provide short term debt financing and investment.
We next have Financial assets and instruments. These are basically items traded in financial markets. Items used in financial institutions. financial instrument is a real or virtual document representing a legal agreement involving any kind of monetary value. Financial instruments may be divided into two types: cash instruments and derivative instruments. Cash Instruments are instruments directly influenced and determined by the markets. These can be securities that are easily transferable. Cash instruments may also be deposits and loans agreed upon by borrowers and lenders. Derivative instruments are based on the vehicle’s underlying components, such as assets, interest rates, or indices. An equity options contract, for example, is a derivative because it derives its value from the underlying stock. The option gives the right, but not the obligation, to buy or sell the stock at a specified price and by a certain date. As the price of the stock rises and falls, so too does the value of the option although not necessarily by the same percentage.
Lastly we have financial services. Financial service is part of financial system that provides different types of finance through various credit instruments, financial products and services. financial services enable the user to obtain any asset on credit, according to his convenience and at a reasonable interest rate. Financial services can be divided into fund and fee based services. The fund based services includes leasing, hire purchasing, consumer credit, bills discounts, etc. The fee based services involves issue management, merchant banking, credit banking, debt restructure, stock broking, etc.
Conclusions
On a regional scale, the financial system is the system that enables lenders and borrowers to exchange funds. Regional financial systems include banks and other institutions, such as securities exchanges and financial clearinghouses.
The global financial system is basically a broader regional system that encompasses all financial institutions, borrowers, and lenders within the global economy. In a global view, financial systems include the International Monetary Fund, central banks, government treasuries and monetary authorities, the World Bank, and major private international banks.

NAME: OBODO CHISOM JESSICA
REG NO: 2017/249538
EMAIL: chisom.obodo.249538@unn.edu.ng

A ‘Financial system’ is a system that allows the exchange of funds between financial market participants such as lenders, investors, and borrowers. Financial systems operate at national and global levels. Financial Institutions consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.
In other words, financial systems can be known wherever there exists the exchange of a financial medium (money) while there is a reallocation of funds into needy areas (financial markets, business firms, banks) to utilize the potential of ideal money and place it in use to get benefits out of it. This whole mechanism is known as a financial system.
Money, credit, and finance are used as media of exchange in financial systems. They serve as a medium of known value for which goods and services can be exchanged as an alternative to bartering.
A modern financial system may include banks (public sector or private sector), financial markets, financial instruments, and financial services. Financial systems allow funds to be allocated, invested, or moved between economic sectors, and they enable individuals and companies to share the associated risk.
The financial system is composed of many components depending on the level. From a company’s perspective, its financial system includes procedures that follow its financial activities. It would include aspects such as finances, accounting, revenue, expenses, wages, and more.
From a regional standpoint, the financial system, as mentioned above, facilitates the exchange of funds between borrowers and lenders. Players on a regional level would include banks and other financial institutions such as clearinghouses.
On a global scale, the financial system includes the interactions between financial institutions, investors, central banks, government authorities, the World Bank, and more.

TYPES OF FINANCIAL SYSTEM
There are mainly four components of the financial system:

Financial markets

Financial assets

Financial institutions

Financial services

1. Financial markets – the market place where buyers and sellers interact with each other and participate in the trading of bonds, shares and other assets are called financial markets.

2. Financial assets – the products which are traded in the financial markets are called financial assets. Based on different requirements and credit seekers, the securities in the market also differ from each others.

3. Financial institutions – financial institutions are acting as a mediator between the investors and borrowers. The investor’s savings are mobilized either directly or indirectly via the financial markets. They offer services to organisations who want to raise funds from markets and take care of financial assets (deposits, securities, loan, etc).
It includes bank and non-bank financial institutions.
Banks: they include;
1)Public banks
2)Commercial banks
3)Central banks
4)Cooperative banks
5)State-managed cooperative banks
6)State-managed land development banks

Non-Bank Financial Institutions;
1)Finance and loan companies
2)Insurance companies
3)Mutual funds

4. Financial services – services provided by assets management and liabilities management companies. They help to get the required funds and also make sure that they are efficiently invested. (eg. banking services, insurance services and investment services)

Why are financial market important for the economy?
The financial system acts as a mediator between those in need of finance (borrowers) and those who have excess funds (lenders). This type of transaction can be done straightforward by engaging in direct lending or indirectly via organized markets (stock markets) or financial intermediaries like banks. The financial system plays an important role in the allocation of resources in any economy since it helps in the channeling of money from the saving portion of the population to the corporate sector. It also assists in the allocation of investment funds among companies and enables the sharing of risks between firms and the household sector.
Economic development requires a balanced growth which means growth in all the sectors simultaneously. Primary sector, secondary sector and tertiary sector require adequate funds for their growth. The financial system in the country will be geared up by the authorities in such a way that the available funds will be distributed to all the sectors in such a manner, that there will be a balanced growth in industries, agriculture and service sectors.

Name: NNANYELUGO CHIDERA MICHAEL
Dept: ECONOMICS
REG NO: 2017/245023
Email address: chiderannanyelugo@gmail.com
Assignment on Eco 362

What is a Financial System?
A financial system is a network of financial institutions – such as insurance companies, stock exchanges, and investment banks – that work together to exchange and transfer capital from one place to another. Through the financial system, investors receive capital to fund projects and receive a return on their investments.
A ‘Financial system’ is a system that allows the exchange of funds between financial market participants such as lenders, investors, and borrowers. Financial systems operate at national and global levels.[1] Financial Institutions consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.
Derivative instruments are also traded in the financial markets as well, which are contracts that are determined based on an underlying asset’s performance.When determining the guidelines of raising capital within a financial system, the project being funded and who funds them are decided upon by the planner, who can be a business manager. Thus, the financial system is typically organized through central planning, a market economy, or a combination of both.
centrally planned economy is structured around a central authority, such as a government, which makes economic decisions regarding the manufacturing and distribution of products for a specific country. A market economy is when the pricing of goods and services is dictated by the aggregated decision of citizens and business owners, often resulting in the effects of supply and demand.
Financial markets operate within a government regulatory framework that filters the sort of transactions that can be conducted. Financial systems are heavily regulated due to their influence and facilitation capabilities to contribute to the growth of real assets.
Financial System Components
The financial system is composed of many components depending on the level. From a company’s perspective, its financial system includes procedures that follow its financial activities. It would include aspects such as finances, accounting, revenue, expenses, wages, and more.
a regional standpoint, the financial system, as mentioned above, facilitates the exchange of funds between borrowers and lenders. Players on a regional level would include banks and other financial institutions such as clearinghouses.
On a global scale, the financial system includes the interactions between financial institutions, investors, central banks, government authorities, the World Bank, and more.
A financial system can be perceived on a company, regional, or global scale, which facilitates the practice of exchanging funds between one entity to another.
It involves various players such as insurance companies, stock exchanges, investment banks, and more.
Financial systems are regulated, as their processes influence and contribute to the growth of many assets.
Understanding Financial Systems
Financial markets involve various players, including borrowers, lenders, and investors that negotiate loans for investment purposes. The borrowers and lenders tend to trade money in exchange for a return on the investment at some future date. Derivative instruments are also traded in the financial markets as well, which are contracts that are determined based on an underlying asset’s performance.
When determining the guidelines of raising capital within a financial system, the project being funded and who funds them are decided upon by the planner, who can be a business manager. Thus, the financial system is typically organized through central planning, a market economy, or a combination of both.
A centrally planned economy is structured around a central authority, such as a government, which makes economic decisions regarding the manufacturing and distribution of products for a specific country. A market economy is when the pricing of goods and services is dictated by the aggregated decision of citizens and business owners, often resulting in the effects of supply and demand.
Financial markets operate within a government regulatory framework that filters the sort of transactions that can be conducted. Financial systems are heavily regulated due to their influence and facilitation capabilities to contribute to the growth of real assets.
Example
An example of one player within the financial system is the Bank of Canada (BoC). The BoC promotes economic and financial welfare for Canadians by cultivating a financial system whereby banks, credit unions, financial markets, and other factors interact to ensure the economic landscape continues to operate effectively for its citizens. The BoC achieves its objectives through the following:
Providing central bank services such as liquidity and credit facilities: The Bank of Canada sources liquid funds to the financial system and is often known as the lender of last resort.
Developing and implementing national policy: The federal government introduces legislation to implement a new retail payments framework. The BoC would oversee the service with operational and financial requirements, ensuring regulations are maintained.
Oversees financial market infrastructures: The Canadian central bank conducts regulatory oversight and acts as the resolution authority for financial market infrastructures. They include payments systems and clearing and settlement systems.
 List of Financial System Banks
 Banks
Public banks
Commercial banks
Central banks
Cooperative banks
State-managed cooperative banks
State-managed land development banks
 Non-Bank Financial Institutions
Finance and loan companies
Insurance companies
Mutual funds
 The interactions between the investors, lenders and borrowers
1. investment: the act of redirecting resources from being consumed today so that they may create benefits in the future
2. financial system: the network of structures and mechanisms that allows the transfer of money between savers and borrowers
3. financial asset: a claim on the property or income of a borrower
4. financial intermediary: an institution that helps channel funds from savers to borrowers
5.mutual fund: an organization that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
6.hedge fund: a private investment organization that employs risky strategies to try to make huge profits for investors
7. diversification: the strategy of spreading out investments to reduce risk
8.portfolio: a collection of financial assets
9. prospectus: an investment report that provides information to potential investors
10. return: the money an investor receives above and beyond the sum of money initially invested
 Savers and Investors
• Financial systems bring together savers and investors, or borrowers, which fuels investment and economic growth.
– Savers include:
• Households
• Individuals
• Businesses

– Investors include:
• Businesses
• Government
The relationship between the borrower and lender has always been known to be an integral factor in the loan approval process. As the lender gains more information on the borrower through a longer relationship, the terms of the loan will change. This can come in the form of reduced interest rates when the trust between the borrower and lender grows, or it can come in the form of a quicker approval process.
However, the recent development of technologies that enable lenders to gather data on a loan applicant via an online application has led the distance between lenders and loan applicants to grow significantly. Beyond the application process, technology has also transformed the loan approval process with automated credit scoring models being implemented by most lending institutions. These technologies limit the amount of interaction between the borrower and lender.
Financial Intermediaries
• Financial intermediaries, including banks and other financial institutions, accept funds from savers to make loans to investors.
The components of a financial system
Financial System Components
The financial system is composed of many components depending on the level. From a company’s perspective, its financial system includes procedures that follow its financial activities. It would include aspects such as finances, accounting, revenue, expenses, wages, and more.
From a regional standpoint, the financial system, as mentioned above, facilitates the exchange of funds between borrowers and lenders. Players on a regional level would include banks and other financial institutions such as clearinghouses.
On a global scale, the financial system includes the interactions between financial institutions, investors, central banks, government authorities, the World Bank, and more.
Financial institutions
Financial institutions provide financial services for members and clients. It is also termed as financial intermediaries because they act as middlemen between the savers and borrowers. There are mainly four components of the financial system:
Financial markets
Financial assets
Financial institutions
Financial services
1. Financial markets – the market place where buyers and sellers interact with each other and participate in the trading of bonds, shares and other assets are called financial markets.
2. Financial assets – the products which are traded in the financial markets are called financial assets. Based on different requirements and credit seekers, the securities in the market also differ from each others.
3. Financial institutions – financial institutions are acting as a mediator between the investors and borrowers. The investor’s savings are mobilized either directly or indirectly via the financial markets. They offer services to organisations who want to raise funds from market and take care of financial assets (deposits, securities, loan, etc).
4. Financial services – services provided by assets management and liabilities management companies. They help to get the required funds and also make sure that they are efficiently invested. (eg. banking services, insurance services and investment services)
Conclusion
A financial system can be perceived on a company, regional, or global scale, which facilitates the practice of exchanging funds between one entity to another.
It involves various players such as insurance companies, stock exchanges, investment banks, and more.
Financial systems are regulated, as their processes influence and contribute to the growth of many assets.it helps to ensure economic growth and development by ensuring that money is circulated to all sectors of economy.

Name: ONAH GEORGE CHIEDOZIE.
REG. NO: 2017/241453.
DEPARTMENT: ECONOMICS

Financial system constitute institutions, these institutions include banks insurance companies stock exchange market e.t.c which permit the exchange of funds. “Financial instruments on the other hand are assets that can be traded, or they can also be seen as packages of capital that may be traded. Most types of financial instruments provide efficient flow and transfer of capital all throughout the world’s investors. These assets can be cash, a contractual right to deliver or receive cash or another type of financial instrument, or evidence of one’s ownership of an entity”. Or “A financial instrument is a monetary contract between parties. We can create, trade, or modify them. We can also settle them. A financial instrument may be evidence of ownership of part of something, as in stocks and shares. Bonds, which are contractual rights to receive cash, are financial instruments”. It is also important to note that financial system exist on firm, regional and global levels. The sense of interactions exist on the basis that borrowers, lenders and investors which inturn is used to finance projects, for consumption or productive investments, with the purpose to pursue a return on their financial assets. The financial system also include sets of rules and practices that borrowers and lenders make decision on the project to be financed, who financed projects and terms of financial deals.
In the other hand, financial market includes lenders borrowers and investors which come together to negotiate loans and other transactions. The economic good traded in the market is usually in form of current money (which is the cash), claims on the future money(which include credits), and value of real asset(which is the equity) .The financial system has contributed in the economic development, this is done by the transfer of funds from surplus economic units to insufficient units. Provision of financial services such as loans, overdraft e.t.c to firms and individuals by the financial system, helps to ensure that money is well_distributed in the economy. The intention of any business establishment is to make profit therefore those loans and overdrafts that are provided to individuals and firms by financial system have some charges attached to them.
Furthermore, when money market are being put into consideratons. Actually money must be needed to start off a business, thus fund could be gotten via money or capital market, depending on the term the individual needs (it could be long or short term loan), all these financial services takes place in the economy through the help of the financial system, inturn, these activities lead to economic growth and development. Therefore in an economy, development could be attained depending on the strength of the financial system that is , how well the financial system is developed.

Name: Asika joy ogechukwu
Reg no: 2017/242025
Dept: economics
Course: eco 324
Email: joy.asika.242025@unn.edu.ng
THE FINANCIAL SYSTEM
Financial system comprises of an association of financial institutions, markets, investors, organizations that interact with each other to facilitate financial intermediation and provide financial services in form of loans, payment mechanisms and resource mobilization and allocation. The Financial System which is made up of three units and they are: Financial Institutions (the banks and other), Financial Markets (the money and capital markets), and Financial Instruments (Cash instruments as well as securities)
These parts or economic units help the transfer of funds from the surplus economic units to the defifict economic units which of course all go on in the financial system. They help ensure that money is well-distributed in the economy. For example, the financial institutions make it possible for financial transactions to take place in the economy by providing financial services in form of loans, overdrafts, etc to individuals, firms, businesses, and the government in the economy and in turn these banks charge interests on those loans issues out. Taking into consideration that these loans are people’s money that have been saved in the banks by the households who are also called the savers in the economy.
Another scenario would occur where the money market is involved. Individuals could be in need of money but don’t have probably for business or some sort. They could go to the money or capital market, whichever one provides the kind of money they are looking for, either short-term (money market) or long-term (capital market) to borrow this money.

NWAFOR CLARA DABELECHI
2017/249534
ECONOMICS
THE FINANCIAL SYSTEM
The development of any country depends on the economic growth of the country over a period of time. Economic developments deal with investment and production in the country. The people will only experience growth in the standard of living when this investment, production and GDP improve. These are facilitated through the financial system to achieve economic development. The financial system is a complex system of various markets instruments, operators and the institutions that interacts within an economy to provide financial services. It is made up of financial instruments, financial markets and financial intermediaries. The financial system facilitates investment and savings since it induce the public to save by offering attractive interest rates. Such savings are channeled to productive resources in the form of investment that is by lending to various businesses which are involved in production and distribution of goods and services. The financial system also assists in the growth of the capital market by the issue of debentures and shares. The public and other financial institution invests in them in order to get a good return with minimized risk. The financial system enables the state and the central government to raise both short-term and long-term funds through the issue of bills and bonds which has attractive rate of interest along with tax. The budgetary gap can be filled with the help of the government security market. Thus the capital market, money market along with the foreign exchange market and government security market enable businessmen, industrialists as well as the government to meet their credit requirements. The financial system also plays a crucial role by providing funds for the growth of infrastructure industries. For long, infrastructural industries were started only by the government in India since the private sector finds it very difficult to raise the huge sum needed for starting up such industries. But with the policy of economic liberalization, more private sector industries have come forward to start infrastructural industries. Through the development banks and merchant banks, the financial system has help in raising fund for these industries. The financial system also promotes both the domestic and foreign trade through the financial institutions that provide finance to traders and through the financial market that helps in discounting financial instruments such as bills. Foreign trade is also promoted due to pre-shipment and post-shipment finance by the commercial banks. The best part is that the buyer and seller do not have to meet since payment and documents can be negotiated through the banks. The financial system will generate more employment opportunities in the economy through the money market that provides working capital to the businessmen and manufacturers leading to increase in production which will result to even more employment. Therefore the financial system creates a web or platform that links all financial markets, institutions and financial participants together. This web begins with the households and down to firms and the government and other bodies. It serves as link to distribute resources from the surplus sector which is the household to the deficit sector which includes firms and the government. Hence development can be achieved in an economy with a good and functioning financial system.

A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets.
The Financial System which is made up of three units and they are: Financial Institutions I.e banks, Financial Markets (the money and capital markets), and Financial Instruments (Cash instruments as well as securities)
COMPONENTS OF FINANCIAL SYSTEM
Financial Institutions: They are referred to as a company that deals in all types of finance-related businesses. They are different from banks and play a very important part in broadening the financial services in the country. They provide a very attractive rate of returns to the customers in comparison to any government-centric banks.
They are further divided into banking and non banking institutions.
Banking institutions: They are the key part of development in an economy They play the savings and investment function of money from the public and lending to investors.
Non-banking institutions: they are the entities and the institutions that provide certain bank-like and financial services but do not have banking license and cannot fully operate as a bank. Examples are IDBI, IFCI, LIC.
Financial market: This is a market which deals with various financial instruments such as shares, debentures, bonds, etc. and financial services such as merchant banking, underwriting, etc. They are further divided into capital market and money market
Financial instruments: This is any contract that gives rise to a financial asset of one entity and a financial liabilities or equity instruments to another entity. The various instruments are bonds, debentures, shares in the capital market and commercial paper, treasury bill, certificate of deposit etc
SERVICES PROVIDED BY THE FINANCIAL SYSTEM
Risk Sharing: Financial system provides risk sharing by allowing savers to hold many assets. It also means financial system enables individuals to transfer risk.
Liquidity: The second service that financial system provides for savers and borrowers is liquidity, which is the ease with which an asset can be exchanges for money to purchase other assets or exchanges for goods and services.
Information: The third service of financial system is collection and communication of information or we can say that it is the facts about borrowers an expectations about returns on financial assets.
FUNCTIONS OF FINANCIAL SYSTEMS
Financial system works as an effective link for optimum allocation of financial resources in an economy.

It helps in establishing a link between the savers and the investors.

Economic resources (i.e., funds) are transferred from one party to another through financial system.

The financial system ensures the efficient functioning of the payment mechanism in an economy. All transactions between the buyers and sellers of goods and services are effected smoothly because of financial system.
Financial system helps in risk transformation by diversification, as in case of mutual funds.
CONCLUSION
The financial system helps allocate savings into investment channels. It helps in mobilizing savings and make better use of these funds by allowing investments in various sectors of the economy.

By NWANKWO BASIL CHUKWUEMEKA
2016/233850

Okonkwo Faith Munachi
2017/242422

FINANCIAL SYSTEM
A Financial system is one of the various systems in the economy that allows the exchange of funds between financial market participants such as lenders, investors, and borrowers. Financial systems operate at national and global levels. Financial Institutions consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.
In other words, financial systems can be known wherever there exists the exchange of a financial medium (money) while there is a reallocation of funds into needy areas (financial markets, business firms, banks) to utilize the potential of ideal money and place it in use to get benefits out of it. This whole mechanism is known as a financial system.
Money, credit, and finance are used as media of exchange in financial systems. They serve as a medium of known value for which goods and services can be exchanged. A modern financial system may include banks (public sector or private sector), financial markets, financial instruments, and financial services. Financial systems allow funds to be allocated, invested, or moved between economic sectors, and they enable individuals and companies to share the associated risks.
STRUCTURE OF THE FINANCIAL SYSTEM
The Financial System can be divided into:
Seekers of Fund
Business firms
Government
Suppliers of Fund
Households
COMPONENTS OF A FINANCIAL SYSTEM
Components of a Financial System include:
1. Financial assets
2. Financial markets
3. Financial institutions
1. Financial assets – the products which are traded in the financial markets are called financial assets. Based on different requirements and credit seekers, the securities in the market also differ from each other. They include money, debt, equity, derivatives.
2. Financial markets – the market place where buyers and sellers interact with each other and participate in the trading of bonds, shares and others assets are called financial markets.
The primary market (or initial market) generally refers to new issues of stocks , bonds , or other financial instruments. The primary market is divided in two segment, the money market and the capital market.
The secondary market refers to transactions in financial instruments that were previously issued.
3. Financial institutions – financial institutions act as a mediator between the investors and borrowers. The investor’s savings are mobilized either directly or indirectly through the financial markets. They offer services to organizations who want to raise funds from markets and take care of financial assets (deposits, securities, loan, etc).
The Financial institutions could be divided into
Bank and
Non-bank financial institutions
Banks
Banks are financial intermediaries that lend money to borrowers to generate revenue and accept deposits. They are typically regulated heavily, as they provide market stability and consumer protection. Banks include:
Public banks
Commercial banks
Central banks
Cooperative banks
State-managed cooperative banks
State-managed land development banks

Non-bank financial institutions
Non-bank financial institutions facilitate financial services like investment, risk pooling, and market brokering. They generally do not have full banking licenses. Non-bank financial institutions include:
Finance and loan companies
Insurance companies
Mutual funds
Financial markets

Financial instruments
Financial instruments are tradable financial assets of any kind. They include money, evidence of act in an entity, and contracts.
Cash instruments
A cash instrument’s value is determined directly by markets. They may include securities, loans, and deposits.
Derivative instruments
A derivative instrument is a contract that derives its value from one or more underlying entities. It includes an asset, index, or interest rate.

Ideba Tochukwu Emmanuel
2017/241435

The economic expansion of any country depends upon the existence of a well-ordered financial system. It helps in the creation of wealth by linking savings with the investment. The financial system is an organized and regulated structure where an exchange of funds takes place between the lender and the borrower. It supplies the necessary financial inputs for the production of goods and services, in turn, promote the well-being and standard of living of people in the country.
In other words, the financial system ensures a free flow of funds from the surplus economics unit to the deficit economics unit i.e free flow of funds from lenders to borrowers. This borrowers are mainly investors or people with good business plan( entrepreneur) who need this fund to start up a business. The financial system provide a platform by which this entrepreneurs gets this needed funds to start up business and also ensures that the lender get his money when needed with an amount of benefit.

These entrepreneur/investor invest this fund into the production of goods and services which generates economic growth, they will also employ labor in the process of production invariably this reduces the rate of unemployment in the economy and also increases the standard of living by ensuring that an average man can afford basic necessities of life.

Financial system
Meaning of Financial System
The economic expansion of any country depends upon the existence of a well-ordered financial system. It helps in the creation of wealth by linking savings with the investment. The financial system is an organized and regulated structure where an exchange of funds takes place between the lender and the borrower. It supplies the necessary financial inputs for the production of goods and services, in turn, promote the well-being and standard of living of people in the country.

Definition of the financial system

According to Prasanna Chandra: the financial system consisting of a variety of institution, markets, and the instruments which are related in a systematic manner and provide the principal means by which savings are transformed into instruments.

Significance of the Financial System:

1. To attain economic development, financial systems are important since they induce people to save by offering attractive interest rate. These savings are then channelized by lending to various business concerns which are involved in production and distribution.

2. It helps in monitor corporate performance

3. It links savers and investors. This process is known as capital formation

4. It helps in lowering the transaction cost and increase returns which will motivate people to save more

5. It helps government in deciding monetary policy

Constituents of the Financial System:

1. Financial institutions: it is a corporation affianced in the business of dealing with financial and monetary matters such as deposit, loans, investments and currency exchange. They are providing various services to the economic development with the help of issuing financial instruments. They are further divided into banking institutions and non-banking institutions.

a) Banking institutions: they are the key part of economic development. They play a vital role in the field of savings and investment of money from the public and lending to business concerns.

b) Non-banking institutions: they are the entities and the institutions that provide certain bank-like and financial services but do not have banking license. E.g. IFCI, IDBI, LIC.

2. Financial market: it is a market which deals with various financial instruments such as shares, debentures, bonds, etc. and financial services such as merchant banking, underwriting, etc. They are further divided into

a) Capital market: institutional arrangement for borrowing medium and long term funds and which provides facility for marketing and trading of securities. E.g. shares, debentures, bonds, etc. They are then divided into:

Primary market: where securities are offered for the first time for receiving the public subscription.

Secondary market: where pre-issued securities dealt between the investors.

b) Money market: it is for short term funds, which deals in financial assets whose period of maturity is up to 1 year. They are highly liquid and easily marketable. Eg treasury bill, commercial paper etc

3. Financial services: these services are provided by the finance industry. They are usually customer focused. They study the needs of the customer in detail before deciding their financial strategy, giving due regard to cost, liquidity, and maturity. Eg insurance company, credit rating facility, etc

4. Financial instruments: it is any contract that gives rise to a financial asset of one entity and a financial liabilities or equity instruments to another entity. The various instruments are shares, debentures, bonds in the capital market and Treasury bill, commercial paper, certificate of deposit, repurchase agreement in the money market.

Capital market Money market
1.It is a market where lending and Borrowing takes place for medium and long term.

1.it is a market where lending and
borrowing takes place for short-term up to 1 year.
2. They deal in equity, shares, debentures, bonds, preference shares

2. They deal in treasury bills, commercial bill, Deposit etc
3. Capital markets are formal

3. The money market is informal
4. Due to less liquid nature and long Maturity risk is comparatively high maturity is less than 1 year, risk

4. Due to more maturity is less than Involved is low
5. The capital market fulfills long term Credit needs of the business

5.The money term credit needs of the business
6. It stabilizes the economy due to long term savings

6. It increases the liquidity of funds in the market
7. The returns are high because of higher Duration 7. The returns are usually low

Remarks

The money market is usually accessed alongside the capital market. This money market is termed as a good place to park funds that are needed in a shorter period. They provide a variety of functions for individuals, corporates or government entities such as high liquidity. The company may want to invest funds overnight and look to the money market to accomplish or to cover operating expenses or working capital of any. Those individuals living on a fixed income often use the money market because of the safety associated with these types of investment.

The capital market is a widely followed market. Their daily movements are analyzed for the general economic conditions of the world markets. The institutions operating in the capital market access them to raise capital for long term purposes such as for merger and acquisition or to expand the business or capital projects.

Development Economics
Lewis fei and Ranis Model;
Economic Growth One of the best known early theoretical models of development that focused on the structural transformation of a primarily subsistence economy was that formulated by Nobel Laureate W. Arthur Lewis in the mid-1950s, and later modified, formalized, and extended by John Fei and Gustav Ranis. The Lewis two-sector model became the general theory of the 1960s and early 1970s, and it is sometimes still applied, particularly to study the recent growth experience in China and labor markets in other developing countries.
The Fei-Ranis model is an improvement over the lewis model. John Fei and Gustav Ranis analyze the transition process through which an underdeveloped economy hopes to move from a condition of stagnation to one of self-sustained growth.
The theory relates to underdeveloped labor surplus and resources; poor economy in which the vast majority of the population is engaged in agriculture amidst widespread unemployment and high rates of population growth.

ASSUMPTIONS OF THE MODEL

1. There is a dual economy divided into a traditional and stagnant agricultural sector and an active industrial sector.
2. The output of the agricultural sector is a function of land and labor alone.
3. There is no accumulation of capital in agriculture except in the form of land reclamation.
4. Land is fixed in supply.
5. Population growth is taken as an exogenous phenomenon.
The real wage in the industrial sector remains fixed and is equal to the initial level of real income in the agricultural sector. It is called an institutional wage.
6. Workers in either sector consume only agricultural products.
Given these assumptions, Fei and Ranis analyze the development of a labor surplus economy into three phases;
In the first phase, the disguised unemployed workers who are not adding to agricultural output are transferred to the industrial sector at a constant institutional wage.
In the second phase, agricultural workers add to agricultural output but produce less than the institutional wage they get. Such workers are shifted to the industrial sector. If the migration of the workers to the industrial sector continues, a point is eventually reached when farmworkers produce output equal to the institutional wage.
In the third phase, which makes the end of the take-of and the beginning of the self-sustained growth when farmworkers produce more than the institutional wage they get. In this phase, the surplus labor is exhausted and the agricultural sector becomes commercialized.

. HARRIS-TODARO AGENT-BASED MODEL

In this section we describe the implementation of the computational model we proposed, as well as the aggregate patterns obtained numerically and the comparison with the respective analytical results.

A. Computational Implementation

Initially, workers are randomly placed in a square lattice with linear dimension L = 500. The reference values of the parameters used for these simulations are the same done to evaluate the equilibrium of the Harris-Todaro model, namely, Aa = 1.0, Am = 1.0, f = 0.3, a = 0.7, r = 1.0 and g = 1.0. The value of the minimum wage used is wm = 0.8 and the initial urban fraction of the total population is nu = 0.2, where nu = Nu/N is the normalized urban population also called urban share. The initial value nu = 0.2 is in agreement with historical data of developing economies. Given these parameters, one can calculate the vector which characterizes temporary equilibrium of the system by using eqs. (7 – 12).

By using eq. (7), the employment level of the urban sector, Nm, is obtained. If nu Nm/N there will be a fraction of Nm/Nu workers employed, which earn the minimum wage, wi = wm, and (1-Nm/Nu) workers unemployed, which earn a wage wi = 0.

Each worker can be selected to review his sectorial location with probability a, called activity . Therefore, in each time step only a fraction of workers becomes potential migrants, going through the sectorial location reviewing process. Potential migrants will determine their satisfaction level of being in the current sector by comparing their earnings, wi, among nearest neighbors.

The potential migrant starts the comparison process with a initial satisfaction level si = 0. When wi > wneighbor the satisfaction level si is added in one unit; if wi < wneighbor, si is diminished in one unit; if wi = wneighbor, si does not change. After the worker has passed through the reviewing process his/her satisfaction level is checked. The migration will occur only if si < 0, what means that the worker's i earnings is less than the most of his/her nearest neighbors.

After all the potential migrants complete the reviewing process and have decided migrate or not, a new configuration of the system is set. Therefore, once again a new temporary equilibrium of the system is calculated by using eqs. (8 – 12). The whole procedure is repeated until a pre-set number of steps is reached. It is important to emphasize that Nm is kept constant throughout the simulation. Its given by eq. (7) which depends on the technological parameters, a,Am, and the minimum wage, wm, which are constants too.

B. Analysis of the Emergent Properties

In this section we develop the analysis of the long run aggregate regularities of Harris-Todaro agent-based computational model. These long run properties will be compared between the solution of the analytical model and simulations.

show the basic characteristics of the transitional dynamics and long run equilibrium generated by simulations. When the economic system has a low initial urban share, nu = 0:2 or nu = 0:3, there is a net migration toward urban sector. This migration takes the urban sector from a full employment situation to an unemployment one. The positive differential of expected wages that pulls workers to the urban sector diminishes. However, if the economic system initiates with a high urban share, nu = 0:8, or nu = 0:9 there is net flow of migration toward rural sector in such a way that the unemployment rate of the urban sector decreases

In this case, the differential of expected wages is negative. In an economy mainly rural (nu < 0:5), the transitional dynamics characterized by a continuous growth of population of the urban sector with a differential of expected wages relatively high is followed by the stabilization of rural-urban differential of expected wages. In other words, the generalized Harris-Todaro condition, eq. (15), arises as a long run equilibrium result of the agent-based migratory dynamics.

Figure 3 also shows that even after the urban share has reached an stable average value, there are small fluctuations around this average. Therefore, differently from the original Harris-Todaro model, our computational model shows in the long run equilibrium the reverse migration. This phenomenon has been observed in developing countries.
for a given value of a, the variation of wm practically does not change the equilibrium values of the urban share, the differential of expected wages and the unemployment rate. However, for a given wm, higher values of a make the urban sector less attractive due the reduction of the employment level. This causes a lower equilibrium urban share, a higher unemployment rate and a gap in the convergence of the expected wages.

The equilibrium values of the urban share, the differential of expected wages and unemployment rate do not have a strong dependence with wm. However, variations in g for a fixedwm, dramatically change the equilibrium values of the variable mentioned before. Higher values of g generate a lower urban concentration, a higher gap in the expected wages and a higher unemployment rate in the equilibrium.
The convergence of migratory dynamics for a urban share, compatible with historical data, is robust in relation to the variation of the key technological parameters, a and f. The impact of the variation of these parameters in the values of the equilibrium differential of expected wages, ( – wa), and the equilibrium urban unemployment rate, (1-Nm=Nu).

CONCLUSION

The dispersed and non-coordinated individual migration decisions, made based on local information, generate aggregate regularities. Firstly, the crucial assumption of Harris and Todaro, the principle that rural-urban migration will occur while the urban expected wage exceed the rural wage, comes out as spontaneous upshot of interaction among adaptative agents.

Odoh Chukwunonso Michael
2017/249541

Meteke Joy Orimusue
2017/242430

What is a country without a financial system?
The Financial system is one of the most important inventories of modern society. The phenomenon of imbalance in the distribution of capital or funds exists in every economic system. There are areas or people with surplus funds, while other areas or people are facing a deficit. A financial system functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. It is a composition of various institutions, markets, regulations and laws, practices, money managers, analysts, transactions, and claims & liabilities. The financial system helps determine both the cost and the volume of credit. This system can affect a rise in the cost of funds, thus adversely affecting the consumption, production, employment, and growth of the economy. Vice-versa, lowering the cost of credit can have a positive effect and enhance all the above factors. Clearly, a financial system has an impact on the basic existence of an economy and its citizens.
1. As already stated, public savings find their way into the hands of those in production through the financial system. Financial claims are issued in the money and capital markets, which promise future income flows. The funds, in the hands of the producers, resulting in the production of better goods and services and an increase in society’s living standards. When savings flow decline, however, the growth of investment and living standards begins to fall.
2. Money in the form of deposits offers the least risk of all financial instruments. But its value mostly eroded by inflation. That is why one always prefers to store funds in financial instruments like stocks, bonds, debentures, etc. However, in such investments (i) a greater level of risk is involved, (ii) and the degree of liquidity (i.e., conversion of the claims into money) is less. The financial markets provide the investor with the opportunity to liquidate the investments.
3.The financial systems offer a very convenient mode of payment for goods and services. The check system, credit card systems et al are the easiest methods of payment in the economy; they also drastically reduce the cost and rime of transactions.
4. The financial markets provide protection against life, health, and income risks. These are accomplished through the sale of life, health, and property insurance policies. Overall, they provide immense opportunities for the investor to hedge himself/herself against or reduce the possible risk involved in various instruments.

5. Most governments intervene in the financial system to influence macroeconomic variables like interest rates or inflation. For example, the federal bank or a central bank does indulge in several cuts in CRR and try to force the interest rates down and increase the availability of credit-at cheaper rates to the corporates.

NAME: UMELO CHIDERA NICOLE
REGISTERATION NUMBER: 2017/249589
EMAIL: nicoleumelo@gmail.com.
When talking about the importance of the financial system in any economy, it is common to understate this importance. However, the fact remains that the financial system is one of the major and important structure in any economy (developed or developing). To fully understand this importance, it is helpful to understand the types of financial institutions and financial instruments available;
1. Examples of financial institutions:
• Central Banks
• Retail and Commercial Banks
• Internet Banks
• Credit Unions
• Savings and Loan Associations
• Investment Banks and Companies
• Brokerage Firms
• Insurance Companies
• Mortgage Companies
2. Examples of financial instruments:
• Bonds
• Loans
• Futures and options
• Premium
• Currency
• Swaps
• Derivatives
Some scholars may believe that the financial system supports the life-blood of the economy because it allows for the movement of money from areas of surplus funds to areas of deficit, thus allowing for the financing of investments that lead to the overall economic development of the economy. To understand this concept better, it is wise to use an example that can be applied to all.
Let us imagine a situation where a graduate by name Yinka, is unable to obtain paid employment after graduation from the university. As a wise young woman, Yinka decides to start up a company of her own rather than wait for years to obtain employment. She decides on a fish farm enterprise to supply all kinds of fish to companies and local businesses for production and events. After putting together, a business plan, the next step for her to take is to obtain the necessary finance for the project. She could decide to obtain such funds from friends and family, but she opts for a loan financed by the bank. Yinka obtains this loan, (which is technically sourced from the savings of other people in the economy.
How is this done? When we save money in the banks, it means the bank owes us money i.e. they are keeping money they do not own. In order to create money, banks loan out the money kept in their coffers to investors (usually described as “the people who need it”), and the investors are charged an interest i.e. they pay back the money which they borrow with an additional amount which is the interest. These investors in turn use this money profitably in order to raise the borrowed money and the interest.
In this case, Yinka is one of such investors. When she obtains this loan, she invests in her fish factory business. In this business, she employs workers, makes purchases and carries out production, sales and distribution of fish. As this continues, employment increases, production also increases and the GDP of the country increases. Again, development is enhanced since the welfare of the population is enhanced because standard of living of the population increases.
It should be noted that Yinka is only one of such investors. So many other investors, (Big-time investors or small scale investors), at one time or another also obtain loans from the banks for various business ideas. In this case, Yinka in this case could be a small scale investor. There could be other investors like Aliko Dangote and others.
It should be noted that investments are not limited to private individuals. There are also government investments i.e. when the government borrows to finance capital investments in the country like bridges, roads and schools that enhance economic development and also generate income. How? These social infrastructures can help to increase productivity in the economy by supporting productive activities in the economy. E.g. a newly constructed road will help to ease the flow of traffic, allow for easy access of producers to their consumer base, as well as allow for easy access of agricultural products to the markets where they would be sold. All these amongst others help to ensure that the productivity and the development of the economy is guaranteed.
Furthermore, after firms have been set up, such firms may decide to expand into public limited liability companies (this is what is meant by “going public”), they have to sell shares of the company in to investors through a process known as the initial public offering. It is the financial system (which encompasses financial instruments and the financial institutions), that helps the company to achieve this feat. On its own, it may be difficult for firms to expand production however, with finance obtained from investors who are interested in owning a part of the company through the shares, the company can be able to raise the needed capital to increase production. These investors are easily found in the financial markets. This helps to ensure that firms are able to expand. This expansion is marked by an increase in productivity and employment and subsequently an increased GDP and economic development. Firms can continually, at different periods, use the stock exchange markets of their various countries to raise revenue for expansion.
Again, financial services such as the services of brokers, banks, analysts etc. also help to keep the economy moving.
Hence, it is obvious that the financial system is very important for the economic and all- round growth and development of any nation. Thank you.