The Role Of Financial Intermediation On The Capital Market And Economic Development

The Role Of Financial Intermediation On The Capital Market And Economic Development

Chapter One

Preface

An Overview Of The Study

In every country, there live a fiscal system that’s responsible for the regulating the fiscal terrain of the country, determine the types and quantum of finances to be issued, cost of finances and the uses of these finances.

The fiscal system plays abecedarian part in the growth and development of an frugality, particularly by serving as fulcrum for fiscal intermediation between the fat and deficiency units in the frugality. It consists of fiscal interceders, fiscal requests, fiscal institutions rules, morals and conventions that grease and regulate the inflow of finances within the macro frugality.

Banks and other fiscal institution are providers of liquidity and payment services and thus represent an important whim-whams center of the frugality and the link between the real and fiscalsectors., in particular, they grease the intermediation of fiscal coffers through the creation of the savings and investment process, as well as, constitute the institution frame for the conduct of financial policy and channel for the transmission medium. therefore, the fiscal system is the mecca part of fiscal intermediation, anchor payment services and is the bedrock of financial policy perpetration.

The development of the fiscal system charges in tandem with the development in the frugality. The Nigeria fiscal system has continued to transfigure in character, power, structure, depth and extent of the instruments, number of institutions and nonsupervisory frame. The fiscal system is thecounter-part of the real system and because the fiscal system has to do with the provision of finance the grease conditioning in the real sector, any insufficiency therein will reflect negatively on the real system and will have negative impact on the frugality as a whole.

The fiscal system therefore serve primarily for the purpose of allocating and exercising fiscal coffers efficiently for frugality advancement. The fiscal request comprises two broad parts; the capital and the plutocrat requests. Institutions or association in both requests constitute fiscal interceders that play the vital part of intermediation and other places in the frugality.

The plutocrat request is the request which creates openings for raising and investing short- term finances. It’s also refers to a collection or group of fiscal institutions or exchange system set up for dealing with short- term credit instruments. The colorful fiscal instruments that are exchange or traded in the plutocrat request include storeroom bill, storeroom instruments, marketable paper, bank acceptanceetc.

The Capital Market On the other hand, is simply the aspect of the fiscal system which mustered medium to long- term finances and channel same into diligence and government for design backing. It’s distinct from the plutocrat request which serve basically to meet the short- term fiscal demand of ménage( individualities), commercial bodies and government. The capital request is a connection of instrument, institutions, individualities and facilitates acting in musicale to grease the savings and investment process and accordingly fostering socio- profitable development. The capital request has two parts

The primary request( New issue)

The secondary request

The primary request is the request that provides medium for commercial bodies and government to raise finances through the allocation of securities, which are subscribed by the general public of private placement.

The Securities and Exchange Commission( SEC) sits at the apex of the primary request, regulating the issues of public companies and all private companies with foreign participation. The drivers or interceders in this request are issuing house, stock broking enterprises, the register, coach, entering banker, trustee, solicitors to the issue, the reporting accountant and issuer. Investors pass on their coffers to some of these institutions for investment purposes. The part of intermediation played by these interceders in the primary request will be bandied considerably in chapter two of this exploration work.

The secondary request by discrepancy provides an avenue for the deals and purchase of being securities, that is, securities which have been vended in the primary request and which are being disposed off by the original or posterior holders of the security. It thus enable investors to fluently convert their holding of securities into cash.

The major instrument used to raise fund at the Nigerian capital request includes

Equity Ordinary shares and preference shares.

Debt Government bonds( civil, state, original government).

Industrial Loan Debentures stock and bonds.

The major actors in the Nigerian capital major are as follows

The Securities and Exchange Commission( SEC)

The request interposers or drivers

The Central Banks of Nigeria( CBN)

The Nigerian Stock Exchange( NSE)

The Federal Ministry of Finance( FMF)

The nonsupervisory bodies of Nigerian Capital Market are

The Federal Ministry of Finance( FMF)

The Central Bank of Nigeria( CBN)

The Securities and Exchange Commission( SEC)

The Nigerian Stock Exchange( NSE)

The constituencies in the Nigerian Capital request can be astronomically classified into four orders.

Fund providers( individualities, unit trust, pension fund)

druggies of finances( companies, Government)

interceders( Stock broking enterprises, issuing houses, registers, inspection establishment)

Controllers( SEC, NSE, CBN, FMF)

Some of these constituencies of the Nigerian capital request will be bandied in details in capital request will be bandied in details in chapter two of this exploration work.

Statement Of The Exploration Problem

fiscal intermediation won’t be necessary, if the lender and the borrower can come into direct contact and would infact not be necessary if there’s no deficiency or fat sector or unit.