ECO. 512–Online Discussion/Quiz—8/2/2023 (INTRO. TO FINANCIAL MARKETS)

Name: Ukaigwe, Ugochukwu Francis
Reg No: PGCBN/MSC/21/0005
uukaigwe@gmail.com

Question 1
During the past decade, much of the emphasis had been placed on understanding the role of the financial sector, in part because earlier lessons we have learned and in part as a consequence of the financial crises of the 1990s. Understanding the roles of the financial sector has increased markedly, but research and insights continue to mount. As that has happened, some have turned to “governance issues” as “the key” to development, but lessons about the importance and key roles, of the financial sector in development have certainly be learned. The financial market is a marked in which people and entities can trade financial securities, and other items of value at low transaction costs and at prices that reflects supply and demand, securities. Includes stocks and bonds financial markets are used to match those who want capital to those who have it. As the sector advisor to the president of finance and development, you are required make a presentation to the committee of commercial bank executive directors on the topic “some money markets players, instruments and their role to the economy” what you tell your audience?
Answer
In Presenting of some money market majors instrument and roles I would
Introduce and salute the audience observe all protocols and inform them of my delight to talk about “some money market players, instrument and then role in the economy” beginning by stating the objectives of enlightening the audience of how liquid the money market assets can become. And continue by saying Its short term of debt instruments provides facilitators for funding surplus economic units to satisfy players. Our minds or the roles of money market in an economy of and its operation in Nigeria. i will like to give you some background information of the history of money markets in Nigeria. Recalling the evolution in 1894 when banking operations was institutionalized as a savings warehouse over the years the scope of these institutions bid not provide a run way for development bid as emphasized. However their turned around with the establishment of the central bank of Nigeria in 1957 which eventually established the money market instrument treasury bill which subscribed holders includes development banks, commercial banks, private savings institutions individuals, Federal, State and LGA including the CBN.
In order words, the money markets objectives includes the promotion of a solvent, competitive and efficient financial market culture effectively reduce over relevance of money market for industrial financing mobilize funds surplus units to deficit units, of lending and to ensure an effective allocation of scare of resources some instruments available to the money market includes government stocks, ordinary shares or equities, company bonds and debentures of participatory capital market institutions such as stockbrokers, commercial or merchant banks, insurance companies and other financial intermediaries is made up of two sub markets (a) the inter bank fund market and (b) the discount house.
The inter-bank fund market simply said one mainly used by bonds or borrowings and lending unsecured not with dawn by customers at short maturity either at call overnights or other defined short term periods an example is The discount houses – which specializes in discounting bills of exchange and shot-term securities of short. This which is achieved through discounting bill of borrowers which pay on a short term or even a shorter period to put if in another way. Discount houses borrow from commercial banks at short notices and the CBN which lends to the commercial banks short of discounts requirements.
I will like to expand the roles of the money market, on the aspects of national economy as if elaborates a medium of transferred savings from surplus basis for investors. Banks having commercial gr developmental industry or otherwise enhances channels floors through which borrows have access to these surplus funds toward attaining economic development by a well-placed productive investment increased production capacity due to the availability of resources Individuals and institutions would be able to channel funds into the money market by savings in bank. The banking system various account types current, savings and fixed deposits as the case maybe in Nigeria. This explains why the money market is a financial intermediary for short term funds for productive investments thereby providing read and supposedly steady cash for market transaction which increases the circulation of money, which of not controlled can reach an economic buoyancy stage if not controlled can arise to inflation’s. This leads me to what I said earlier the money market instruments or financial assets which are reaching convertible to cash a good example of this is Electronic Commodity Receipts, transferring bills, LTB promissory notes such as draft, cheque s, treasury certificate, certificate of deposit bankers acceptance (BA), bankers unit fund (BUF) others in bond bills of change and offshore bill of exchange.
The promotion of this capital market in Nigeria is liked to the objective of accelerated long term fund mobilization for investment toward attaining Economic growth and development of institutions. In Nigeria Investors longed for British stocks thereby driving saving funds for investment abroad as it wills believed African countries lacked investment ratings. Towards encouraging the capital market development and to finance fiscal deficits the Nigeria government floated the first long term bond in 1959 and thereafter 1961 and 1962 respectively the instruments included a long term bond of the government and debentures of companies after the indigenization policy of the government stating foreign companies which operated in Nigeria and had to take ownership stakes in listed companies.
The money market can only be operated through the capital market and primary market saddled with facilitating fresh applications of sailings into the economic framework by selling new security instrument lets now than to the secondary market which assures the savings investors of its existence of trading on its instruments by trading outstanding now we are wave that these two frame works must be developed for an effective capital market. In summary the roles of the capital market is to mobilize funds for long term financed and productive investments. It is sometimes referred to as the securities market where transactors in debt and equity instruments for long maturity dates. The capital market comprises of a network of institutions with long term financial assets mortgages shares and debentures within this framework both the primary and secondary markets aligns on the floor of the stock exchange for trades to the consummated on organized participant dealings on stock and shares.
Participating registered member of a brokers are admitted by the Securities and Exchange Commission (SEC) to transact according to set rules and regulation thereby employing that only brokers must buy and sell securities behave of an investor at pervading market prices. In Conclusion a good example is the Nigeria Exchange Group (NGX) offered capital market in Nigeria this is where all stocks are traded on all trading days the Nigeria capital market has a total capitalization of trading companies which trades and average of stocks their values at these stocks standing in for funds the institution reinvest into the companies to generate more productive instruments in term of increase unit production, technology advancement, provision of better machining among other developmental productive strategies as driven by the share holders if desired institution who meet during annual to declare share profit of the financial year. I hope you are a little clearer now on how the capital market operates.
Just to round the talk of I want us to go back to the beginning when I said capital market is are setup to mobilize funds for investment I want you to note that the debt management office of Nigeria is linked to the capital market, the CBN, Federal ministry of Finance and Budgeting are key stakeholders in organizing the finance capital market through the money market. Therefore the is a need to record and monitor government and institutional seeking funds as including units purchase to avoid character crimes, another significant point is including and other forms of ills which would demerit the aim of using this medium to seek investments words attaining economic development and growth.
We are ready to respond to questions or comment as I will continue to advice investments in the money market visit a stock broker today.
Question 2
At the apex of the financial development is the central bank of Nigeria (CBN). The chain of financial developments in Nigeria started with the establishment of the central bank in 1958. Since then the CBN has become a dynamic agent and a catalyst of investment and economic growth in the economy. The expansion of the national assets of the CBN attests to its dynamic role in the economy. As the incoming government of CBN after 2023 elections clearly discuss the dynamic role of commercial banks in the economy. Ajairo clearly justify the new currency redesigned policy of the CBN.

Answer
The power establishing in the CBN/Apex bank is recognized as the central monetary authority with the entire financed structure at monetary stability referencing the financial system their roles in the structural powers and functions determine the power decisions of the economic and political outstanding in the economy as its main responsibilities in saddled with the economy growth and development ravaging of issuance of a legal tender of the local economy, fund mobilization and regulates competitions among financial institutions including banks and non-banking institutions and advising the central governments Apex bank traditional function which includes banker to other banks currency issuance and distributions banking supervision and examination through development saddled to promote development and financial system, government policy formation and execution including this money markets and its instruments Treasury bills,Treasury certificate and other eligible deposit others includes the regulatory functions of promoting and maintaining price stability by policy formation of money in circulation controlling lending rate of banks, by rising instruments of direct and indirect processes such as open market operation, bank rate moral persuasion, minimum cash ratio.
Commercial banks on the other hand are main source of finance and are the closest banks to the general public by accepting deposits from the public extent credits to customers and perform other agency services and assistance, lend money to customers towards investment which they also undertake furthermore, they undertake in lending operations to create money and sustain purchasing power in the economy. In Nigeria the first commercial bank was established in 1891 and called ABC African n company which was a South Africa based company and an office in Lagos in 1894. It imported British silver in to Nigeria which it distributed in 1975 it name was changed to British bank of West Africa and changed again in 1969 to standard bank of Nigeria. And to first bank of Nigeria in 1979 its one of the oldest bank in anglophile West Africa. Barclays bank was the second bank in 1926 and renamed to union bank and (UBA) which transgressed from a British and French bank. In Nigeria commercial banks they are about twenty two commercial banks
With millions of customers This explains the commercial banks are protect making ventures on an organize of money market commercial banks primary and secondary functions mainly includes accepting a deposits and advancing funds, enhancing forging trade, cheating of cheque s, acting as trustees and advisors, action of wealth and granting facilities and acting as agent to customers. Some factors affecting commercial branches in Nigeria includes the indiginization policy which came with the negatives of independent, more the monetization proceeds form the oil boom, deregulation of the financial system to pent bottle necks, political stability, perceived awareness for the need for the people, and private sector in development of prices can be said to have hindered development of commercial banks in Nigeria to some sought across various investment sectors of the economy others are factors affecting commercial banking structure includes the apex bank, government policies, federal ministry of finance in missions of regulation and deregulation, subsidiary agencies of the Apex bank such as the Nigerian Deposit Insurance Corporation NDIC and Nigeria minting and printing company and the dominance of bank branches in Nigeria
Please, recall that leading to Nigeria independence in 1960. The CBN account was established in 1958 to eliminate foreign deficiency to monetary growth and policies distorting the domestic monetary and capital markets with objectives which aims to issue and distribute currency, bankers to banks, supervision and examination, regulation functions such as the use of open market operation, banking rates, direct controls or moral situation and the developmental functions which promotes growth in the financial markets in formation and execution of government economic policies Also, note that the currencies are originally defined by the amount of precious metals and the choice of name to form Now, coming denominations may be due to inflationary or structural reasons thereby decreasing purchasing power expressed by higher numbers. Therefore, re denomination can be done more than once so countries most adopt re-re-denomination to address large, numbers with a certain ratio so if inflation is the reason for re-denomination, if must be with a certain ratio the intended structural will drop zero’s moving towards two decimal points to the left of the currency and entails a total currency exchange and phasing out of the existing re-denomination bringing expected exchange rate and therefore re-dominate prices of contracts towards to better monetary market and convert billing of the international Monetary Fund (IMF) achieved through Forex convention, foreign exchange, roles foreign currency, floating exchange rate and conversion into foreign currency. Which determines the three reasons for holding money according to J.M. keynes who explained as (a) the transaction and motive (b) the precautionary motive (c) the speculative motive as this influences determines money supply ans assumed nominal money supply is endogenously determined and supplied by the CBN influenced by several behavioral influences such is the CBN cash reserves, reserve requirement, demand for money, demand for time deposit, demand for excess reserve, interest rate and bank rates. Which leads to the monetary policy application insured by the federal government through the CBN in growing inflationary funds which needed to be slowed down to relive the upward pressure on prices and wages by simplifying checking multiple contractions to deposits, reducing money supply, and increase in interest rates to lighten credit conditions and finally tighten monetary pressures on aggregate demands by reducing by multiple, outputs jobs and inflation in managing ,the excess lending adequate or excess to optimize the assumed rated of growth in GDP and the demand for money measured by the broad money supply made up of private fund deposits localities in private banks and CBN. It is initial to margin of the broad monetary stack over and desired level of longevity. Furthermore this is production of services with high quick returns would be promoted while the real sector would be reduced and therefore reduce the aggregate demand and lower economic activities.
Furthermore, the rate of economic growth would deceive and improvise the population accelerating inflating in relative prices and making external sectors uncompetitive resulting form over valuation if real exchange rate of the domestic currency which will thus pressure forcing exchange market on exchange ratio to intensify the intensity of non-inflationary rates of economic growth in the external sector and compromise viability at the same time.
Having said that, we now realize what causes shortage of supply among other factors leading to the increase in demand which drives inflation to occur is said to be the aggregate demand and supply excesses such as the demand pull cost push and demand push inflation of which some factors of aggregate demand leading to inflation can be identified as the higher his increase in nominal neuronal supply the higher the rate of inflating and increase in disposable income would increase rise of goods and services as y = c + c + t, y = c + s furthermore increase in public expenditure increase price levels and promote inflation as consumer increase spending others are to deepness monetary policies to increase credit for expansion and money supply, reduce deficit financing so government meets its obligations and can borrow from the public, the expansions aggregate demand, black or corrupt money also increase ability of people to spend more money, other include increase of domestically produced goods and aiding repayment of public debts.
We can also identify some factors affecting aggregate supply leading to inflation as factors resulting to the shortage in production such as land, labour, capital, industrial deputies also reduces supply others one national calamities, artificial scarcities, increase in exports, lob sided productions.
We have seen the CBN measure and control inflation with a cartigozied control using the monetary, fiscal and other measures which have resulted curbing the social aspects of the ills of the society in recent times such as robbery, banditry, kidnapping and the introduction and education of wide rage of the population to the cashless policy at getting and increase CDP development ion financial inducing, limitation of black and corrupt money among other financial benefits
Reference
Macroeconomics 10th editon – Abel, Bormarb and Crushone – Addisin westly person publishers]
Applied principles of economics – Nwaimi C.C
Macroeconomics the fronter of public polices –Nye Tom Ekone PHD
Macro economics for Universities-Willie J. Okowa
imf.org.data
world bank.org.data
cbn.gov.ng

The Money Market is a portion of the financial market where short term highly liquid financial instruments are traded. The market provides a platform for borrowing and lending in the short term, for a specific period within a year. Money markets trading are commonly done in over-the-counter (OTC) and are in tranches. Participants in the money markets includes; central bank, commercial bank, acceptance houses, finance houses, discount houses insurance company etc.
The fundamental area in money market comprises interbank activities, where financial institutions can lend and borrow to one another using several instruments such as repurchase agreements, commercial paper, amongst others
According to Ridwan, (2022) and Bouveret, Martin, & McCabe, (2022) the money market instruments include;
1. Treasury Bills (TBs).
2. Bankers’ Acceptances (BAs).
3. Negotiable Certificates of Deposit (CDs).
4. Commercial Paper (CP).
5. Repurchase agreements
6. Call Money etc.

 Treasury Bills
It refers to short-term negotiable debt instruments or securities issued by the Federal Government of Nigeria for various tenors not exceeding 364 days. It is government debt instruments issued by the Country’s Treasury Department to finance the national debt.
Treasury bills do not come with an interest rate attached to them; instead, they are sold through competitive bidding, and they pay face value at maturity. The holder’s return, therefore, is the difference between the price paid and the face value. Interests are earned up-front because they are discountable instrument.
They are issued mainly to borrow money from the public to execute Federal Government obligations and sometimes to reduce excess liquidity. Nigerian Treasury Bills (NTBs) show the relationship between yield and maturity on Nigeria’s treasury bills differing only in term to maturity.
Treasury securities are broadly classified into marketable and non-marketable treasury securities. Examples of marketable treasury securities are Treasury bills, Treasury bonds, Treasury notes and Treasury Inflation Protected Securities (TIPS). They are very liquid and are heavily traded on the secondary market.
Those treasury securities that are non-marketable have several types such as; Subregional Government (e.g., State and Local) Series, Government Account Series debt issued to government-managed trust funds, and savings bonds.
The participants includes Central bank, the Commercial Banks, Governments and other approved bodies, Discount and Finance House, Corporate entities, General public.

 Treasury Certificates and Term Money
It is a short-term loan from the Central Bank of Nigeria to Federal Government of Nigeria where there is a need to borrow money. It is largely a non-marketable treasury security issued to the public with a short maturity, typically three months but not more than a calendar year. They are usually issued once or twice monthly with interest rates that are odd (e.g., 7.233% and 9.131%).
An example of a treasury certificate is the Central Bank of Nigeria lending N1 billion to the Federal Government of Nigeria for twelve months. It signifies an obligation of the Federal government represented by certificates in denominations ranging from N1 million to N1 billion maturing in one year or less with interest periodically payable by the redemption of coupons.
Term money products are short term financing instruments used by banks with fixed maturity typically 30, 60, 90, 180 or 360 days. They offer a longer duration than call money and earn interest rates higher than call money etc.

 Bankers’ Acceptance
Bankers’ acceptance are short-term loans, usually to importers and exporters, made by banks to finance specific transactions. An acceptance is created when a draft (a promise to pay) is written by a bank’s customer and the bank “accepts” it, promising to pay. Banker’s acceptance (BA) is a future promissory note that is recognized and guaranteed by financial institutions and drawn on a deposit at the institution. Bankers’ acceptance stipulates the person to whom the payment is due, the amount of the fund and the date. Once the acceptance is done by the financial institution, the draft develops into an unconditional liability of the financial institution. However, the bill-holder can discount the draft for immediate cash, while the new holder may need to wait till the maturity of the fund. Bankers’ acceptance commonly begins as the time a draft is drawn on a financial institution’s deposit by a bank’s customer to pay at a later date, say within six months. Afterward, the financial institution accepts and guarantees payment to the draft holder. This is equivalent to a postdated cheque drawn on a deposit with overdraft safeguard. Typically, bankers’ acceptances have maturities of less than 180 days. Bankers’ acceptances are sold at a discount from their face value, and the face value is paid at maturity. The likelihood of default on bankers’ acceptances is very small because acceptances are backed by both the issuing bank and the purchaser of goods.
It makes a financial transaction among parties who may not be familiar with each other safer, since they allow the parties to substitute the financial institution’s credit worthiness for that of the individual owing. Banker’s acceptances are typically sold in multiples of millions of Naira and those that are smaller than the agreed multiple is referred to as odd lots.

 Commercial Papers/Bills
Commercial paper is a promissory note, a written promise to pay, issued by a large, creditworthy corporation or a municipality. This financial instrument has an original maturity that typically ranges. one day to 270 days. The issuers of most commercial paper back up the paper with bank lines of credit, which means that a bank is standing by ready to pay the obligation if the issuer is unable to. Commercial paper may be either interest bearing or sold on a discounted basis.
It is a money-market instrument that is often offered by big companies for funds to meet short term debt obligations. It is commonly collateralized solely by an issuing company or financial institution with an agreement to pay the face value on the date of maturity stated on the bill.
It is largely unsecured, short-term debt instruments that a corporation or other private organization uses to ensure it has adequate cash on hand to cover operating costs.
In view of the fact that it is not supported by collateral, only corporations with exceptional ratings from reputable credit rating organizations will have capacity to offer their notes at good rates. It is commonly offered at a markdown from face value, and normally tendered interest rates that is lesser than shorter maturities bonds. Normally, the lengthier the maturity on a bill, the greater the interest repayment the issuing company offers. These rates oscillate with prevailing conditions in the market, but are usually less than financial institutions’ rates. In sum, it is a trading bill (bill of exchange) offered by a corporation, that is recognized by a financial institution (or a bank), unlike Treasury bills that are offered by the government. Participants in commercial paper includes corporate borrowers, primary dealers and financial institutions, which have been permitted to raise resources through money market instruments.

 Negotiable Certificates of Deposits (CDs)
Certificates of deposit (CDs) are written promises by a bank to pay a depositor. Investors can buy and sell negotiable certificates of deposit, which are CDs issued by large commercial banks. Negotiable CDs typically have original maturities between one month and one year. Investors pay face value for negotiable CDs, and receive a fixed rate of interest on the CD. On the maturity date, the issuer repays the principal, plus interest.
A certificate of deposit (CD) is a fixed deposit, instrument commonly offered by financial institutions, such as banks, credit thrifts and unions. CDs are analogous to savings deposits in that they are protected “money in the bank” and thus virtually risk free. In Nigeria, it is insured by Nigerian Deposit Insurance Corporation (NDIC).
Participants includes individuals, corporations etc.

 Repurchase Agreement.
To understand a repurchase agreement, we will briefly describe why companies use this instrument. There are participants in the financial system that use leverage in implementing trading strategies in the bond market. That is, the strategy involves buying bonds with borrowed funds. Rather than borrowing from a bank, a market participant can use the bonds it has acquired as collateral for a loan. Specifically, the lender will loan a certain amount of funds to an entity in need of funds using the bonds as collateral. We refer to this common lending agreement as a repurchase agreement or repo because it specifies that the borrower sells the bonds to the lender in exchange for proceeds and at some specified future date the borrower repurchases the bonds from the lender at a specified price. The specified price, called the repurchase price, is higher than the price at which the bonds are sold because it embodies the interest cost that the lender is charging the borrower. The interest rate in a repo is the repo rate. Thus, a repo is nothing more than a collateralized loan; that is, a loan backed by a specific asset. We classify it as a money market instrument because the term of a repo is typically less than one year.

 Call Money
It is an exceptionally short-term financial institution is loan that must be repaid on demand and does not contain regular principal and interest payments. As opposed to term loan that has fixed maturity and repayment arrangement, call money needs not follow a stereotyped arrangement. It is regularly operated by brokerage companies to fund margin transactions. Brokerages utilize call money as a short-term funding source to shield margin transactions. They are however, unguaranteed, recallable credits that are often riskier than other credit lines. For example, a brokerage firm XYZ wants to acquire many stocks of Firm123 for a customer. The customer does not have money immediately and requires margin loans which will be repaid in 21 days. The Broker may decide to borrow call money from a financial institution and then use the funds to purchase the stocks. The financial institution may decide not to establish a repayment arrangement for the Broker given that the Broker has promised to repay the loan on time. However, financial institutions can recall the credit at any time and fix the call money rate at NIBOR + 0.10%. If the financial institution decides to recall the credit before the 21 days expires, the broker may release a margin call to its customer, thereby demanding the customer to pay the loan immediately. It provides solution to the immediate stock of liquidity pressures in the money market.
Participants in Call Money Market includes Those permitted to operate both as lenders and borrowers; Commercial Banks, Discount & Finance House, Entities/ corporates/ mutual funds etc.

Money Market Participants
Participant Role
Central Bank Buys and sell treasury bill as its primary method of controlling the money supply.
Sells treasury bill to fund the national debt.
Commercial banks Buy treasury bill; sell certificates of deposit and make short-term loans; offer individual investors accounts that invest in money market instruments.
Businesses/Corporations Buy and sell various short-term securities as a regular part of their cash management.
Investment companies
(Brokerage firms) Trade on behalf of commercial accounts.
Finance companies
(Commercial leasing companies) Lend fund to individuals.
Insurance Company
(Property and Casualty Insurance companies) Maintain liquidity needed to meet unexpected demands.
Pension funds Maintain funds in money market instruments in readiness for investment in stocks and bonds.
Individual Buy money market mutual funds.
Money market mutual funds Allow small investors to participate in the money market by aggregating their funds to invest in large denomination money market instruments.

No 2 Answer
Commercial Bank
Commercial banking is the act of rendering financial intermediation services to the economy (household, firms and businesses and government). It brings together people with surplus funds and those in need of these funds. It serves as the meeting point for lenders and borrowers of money. Commercial banks are the main operators in the Nigerian financial system and act as agents for mobilization and allocation of resources. It plays a dynamic role in stimulating investment and channeling of such investment to the different sectors of the economy. The Nigerian banking system has undergone significant changes over the years, in relation to the number of institutions, ownership structure, as well as complexity and extensiveness of operations. These changes have been influenced largely by challenges posed by deregulation of the financial sector, globalization of operations, technological innovations and adoption of regulatory requirements that conform to international standards. Between 2004 till March 2017, there were 23 commercial banks in Nigeria. Some examples of commercial banks in Nigeria are: First Bank of Nigeria Plc., Zenith Bank Plc., Access Bank Plc., First City Monument Bank Plc., Guaranty Trust Bank Plc., ECO Bank Plc., United Bank of Africa Plc., Union Bank Plc., Wema Bank Plc., etc.

Role of Commercial Bank in the Economy
Commercial banks carry out the following primary functions in the economy:
Acceptance of deposit from customers; Granting of loans and overdraft (ability to withdraw more than you have in your account) to customers, Transfer of customers fund on instructions; Educational loan schemes; Provision of foreign exchange facilities; Financing SME’s; Housing finance, etc.
The secondary functions performed by commercial banks are;
overdraft facility (it’s a facility that allows customers to overdraw his current account up to an agreed limit.
Discounting bills of exchange (it is a facility that allows holders of a bill of exchange to get bills discounted with the bank before maturity.
Also, the banks provide an Agency function that is performed by commercial banks with some commission. (Some of these agencies are; transfer of funds, collection and payment of various items, purchase and sale of foreign exchange, purchase and sale of securities, income tax consultancy, trustee and executor, letters of reference etc.)
Commercial banks also perform some general utility functions such as (locker facility, traveler’s cheques, letter of credit etc.)

I. Acceptance of Deposit
Commercial banks accept deposits from the public for safe keeping. This is the oldest role of commercial banks, which helps in taking care of people’s money. Money can be kept in current, fixed and savings accounts.

II. Lending Money
This is perhaps the most profitable function of commercial banks. Deposits from different customers are pooled together and given out as loans and overdrafts with interest to people and firms for profitable investment.
III. Agent of Payment
Commercial banks can act as agent of payments on behalf of their customers. They encourage and permit customers to have current accounts in which they can draw by cheque without notice. Money can also be transferred from one account to another, e.g., credit transfer.

IV. Discounting Bill of Exchange
Creditors can be paid by the bank immediately by discounting bill of exchange for their customers. This enables the creditors to be paid instantly and the debtor is allowed a period of credit.
V. Issuance of Bank Statement
At regular intervals, the banks will prepare and send bank statements to their customers to show their transactions with them.
VI. Investment and Stock Exchange Transactions
Banks act as agents for the customers in the purchase or sale of securities, e.g. shares in the stock exchange.
VII. Issuance of Travellers Cheque
Travellers cheques are often issued to those travelling overseas in order to facilitate their commercial transactions.

VIII. Foreign Exchange Transaction
Commercial banks make foreign currencies available to their customers. They participate in foreign exchange market and help in solving any problem

IX. Provision of Financial Advice
Commercial banks encourage and advise businessmen on the type of projects they should invest their money in.

X. Facilitate International Trade
Commercial banks provide credits to exporters and this facilitates payment in foreign trade.

XI. Act as Executor for their customers
Commercial banks can act in the capacity to execute the will of their customers.

The new currency redesign policy of the Central Bank of Nigeria is the CBN cash swap programme for rural areas or those with limited access to formal financial services to easily exchange old naira notes for the redesigned notes beginning from Monday January 23, 2023.
1) Consumers can exchange the old notes (N1000, N500 & N200) for the redesigned notes or the existing lower denominations which have not been redesigned (N100, N50 & N20).
Private individuals who stack up money as an asset will change their old notes for the redesigned notes. They will have no choice than to put their money in the bank including those in the rural area.
2) The cash swap agents also known as agent banking representatives or pos agent banking representatives or pos agents are available for members of the public to exchange their old notes for new ones or make cash deposits into their accounts.
3) The maximum amount to be exchanged per person through the agents shall be N10,000.
However, this will be treated as cash-in deposits as the agents would deposit the amounts into the depositors’ account or wallet.
4) Where the person does not have a bank account or a wallet opened for her/him and the amounts deposited accordingly.
5) Before opening accounts/wallets for consumers, agents are required to sensitize them on the account opening procedure as well as the various electronic channels available.
When government increases expenditure, it is to stimulate the economy by creating employment etc. which will bring about economic growth. But when this money is stack in the hands of private individuals, the money will not be in circulation and the aim will be defeated.
Looking at the CBN monetary policy for last year, the widened the MPR corridor by increasing interest rate and one of their main aims is to mobilize savings. Because when you save, you are sure of getting higher return for what you save, which makes this money available for investment. But the truth is that, government has been expanding the MPR corridor believing that there is much money in circulation in order to curb inflation. But in real sense, over 35% of this money are stacked in the hands of private individuals.
This kept Nigeria in a dilemma; a situation of stagflation where we are having a continuous increase in the price of goods and services and an increase in unemployment rate. The best way to force the private individuals to bring this money back into the financial sector which has to do with the deposit money bank is to redesign the currency. At the time you resign it and give them a time frame, the have no option than to bring this money back to the cash teal (i.e., money that is available for circulation).
What the CBN has done by implementing this policy is to mob up ideal cash that are not in circulation and they are not in the deposit money bank but they are stack up with private individuals. Those money that are stacked up by private individual are not performing monetary value because they are stack up like an asset.
In economics, there are three basic reasons for holding money; it is either for transactionary motive, or speculative motive or for precautionary motive. But the private individuals are not holding this money for that purpose because those money was acquired through corrupt means and so they can’t put the money in banks. For example, look at Banditry, Kidnappers etc. they can demand an amount as high as hundred million naira from their victims and they are paid in cash because those money are not put into the bank. And most of this money are hidden inside our forest and they are money that are performing its function.
With the new currency redesign policy of the Central Bank of Nigeria, central bank of Nigeria has been able to recover about 2.7 Trillion naira already and the are still awaiting over 500 billion naira. From the analysis, over 2.5 billion of that money were in the hands of kidnappers who took those money as ransom.
They aim of this policy is to promote cashless economy, to curb crimes, for financial inclusion.
Although it might have its negative effects. But in the long run, the benefits of this policy will outweigh the negative effects.
In summary, Naira redesign is typically carried out to prevent naira counterfeiting and control the amount of money in circulation lowering inflation and is also a good monetary policy. As a result of the COVID-19 pandemic hurt the world economy, particularly Nigeria’s economy, monetary policymakers have been developing various strategies, such as the redesign of the Naira, to control inflation and stabilize the economy (McKay et al., 2016 [9]; CBN, 2022) [12]. As the top federal government bank in Nigeria, the central bank’s responsibility is to manage inflation and prevent the counterfeiting of naira notes. The central bank of Nigeria has the sole authority to print and redesign the Naira to remove corrupt money from the system, control the amount of cash in circulation to lower inflation, maintain a robust security system by discouraging voting fraud and kidnapping, and ensure a successful cashless economy that reduces misuse of Naira notes and causes the Naira to appreciate over time. Although there have been a variety of responses from the public regarding the timing of the Naira redesign in light of the unusually high Naira to dollar exchange rate caused by the deficit in the balance of payments, market interactions, and high inflation, which in turn led to a steady increase in unemployment as many businesses are struggling to survive (CBN, 2022) [12]. To manage inflation, money hoarding, and counterfeiting, the central bank of Nigeria supervises monetary policy, one of which is the redesign of the Naira.
 
Refrences
Bouveret, A., Martin, A., & McCabe, P. E. (2022). Money Market Fund Vulnerabilities: A Global Perspective.
Central Bank of Nigeria. (2021). Revised guidelines on supervisory review process of internal capital adequacy assessment process (SRP/ICAAP). Retrieved from https://www.cbn.gov.ng/out/2021/bsd/7.%20revised%20guidelines%20on%20supervisory%20review%20process%20of%20icaap.pdf.
Emefiele G, Buhari M. The governor of the central bank of Nigeria announces the Naira redesign decision following the approval of president Mohammadu Buhari for the Apex bank to proceed with the Naira redesign; c2022. https://www.thisdaylive.com/index.php/2022/10/31/pre sident-cbn-has-my-backing-to-redesign-naira-notes/.
Pillah, T. P. (2023). Currency Redesign and Monetary Policy of Nigeria: An Evaluation. International Journal of Public Administration and Management Research, 8(4), 46-53.
Ridwan, M. (2022). DETERMINANTS OF INFLATION: Monetary and Macroeconomic Perspectives. KINERJA: Jurnal Manajemen Organisasi dan Industri, 1(1), 1-10.