History of Commercial Banking in Nigeria: Commercial banking activities started 1892 with the establishment of the African Banking Corporation ledger depositor and Co. This can happen only when there is a facility for savings. According to Nzotta 1999 , a system can be defined as an organized group of components subsystems linked together according to a plan, to achieve specific objects. They also provide various financial services to the community, particularly business organizations. Banking and insurance services further contribute to step up such promotional activities. Thus, the power of credit can be used highly discriminately to favour some and to hinder others.
In addition to this, the government is able to raise long-term funds by the sale of government securities in the securities market which forms apart of financial market. To strengthen the financial system and improve on the ending to the private sector; the consolidation exercise was launched in mid — 2004. Economic growth The development of all the sectors is essential for the development of the economy. In addition, the increasing attractiveness of specialized funds such as bond funds and index funds has also fueled unit trust fund growth. This lead to tremendous excesses in housing actually land values and priced future home buyers out of the market.
To begin with primary markets, the most pressing need of users is that they should be able to do business with each other at low cost. The industries should be given suitable protection through the financial system so that their credit requirements will be met even during the difficult period. The financial system guarantees that there is a sufficient stock of money to enhance the productive process in the economy. The financial transactions which take place outside the well-established exchanges or without systematic and orderly structure or arrangements constitute the unorganized markets. It does not deal with non-monetary information of non-financial aspect. 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.
A primary market for financial assets deals in new issues of all types of loanable funds. Bank acquisitions of non-bank financial intermediaries are part of broader consolidation of the entire financial services industry. An adequate stock of money ensures that there is monetary balance and stability. Second, many of the new innovative activities in which banks engage are not reflected on bank balance sheets as assets even though they add significantly to bank revenue. To understand why financial institutions exist and the economic services that they provide, it is important to understand the different ways in which funds are transferred within an economy between businesses, government, and households economic entities that need to borrow funds borrowers and those that have surÂplus funds to lend investors. It would also include the development of directional economic policy and counter-cyclical fiscal policies by the government and further development of capital markets as alternative to bank funding. The nature, meaning, and scope of activities of these types of markets will be discussed later in the book.
Primary markets The primary market or initial market generally refers to new issues of stocks, bonds , or other financial instruments. Economic growth deals about investment and production and also the extent of Gross Domestic Product in a country. This ensures a balanced development throughout the country and this will mitigate political or any other kind of disturbances in the country. The discount market is another traditional financial market, but one which operates without a physical site at all. The main financial sector reform policies applied were deregulation of interest rates, exchange rate and access into banking business. They may be classified base on the basis of their primary activity or the degree of their specialization with relation to savers or borrowers with whom they customarily deal or scope of activity or the type of ownership are some of the criteria which are often used to classify a large number and variety of financial institutions which exist in the economy.
This involves the expansion of banks branches into the rural and semi areas. This discipline of knowledge has been evolved out to meet the need of financial information required by different interested groups. But after a full year of exchange controls, the autonomous market was brought back in 1995 to co-exist with the fixed official exchange rate. The effect of new issues might then be decrease the price and undermine the value, and hence the liquidity, of old issues, in turn negatively affecting the primary market. For example, in terms of relative importance the winners are unit trust, Cagamas Berhad, leasing companies, factoring companies and venture capital companies.
The period 1945 — 1952 was a period of free for all banker. When money is borrowed or lent for a day, it is known as Call Overnight Money. Its use is not confined to the business world alone, but spread over in all the spheres of the society and in all professions. Investments from abroad is attracted. As a result interest rates fell and people did not need to deposit money in banks and collect interest.
In this way, the development of the economy is ensured by the financial system. As an economy develops, markets emerge for trading direct securities. Alternatively, they may listlessly exploit their quasi-monopolistic position and fritter away investment possibilities with unproductive loans investments. The financial institutions are in a position to expand their activities and thus diversify the use of their funds for various activities. The problem gets more complicated when viewed from this angle because the definition of productivity from a social perspective may be different from that taken by lenders. It is possible for a physical good to be sold or a financial security to be issued in a primary market which subsequently ceases to function, leaving the secondary market only. Oyejide 1994 , Investment decisions concise introduction.
Financial institutions are also classified as intermediaries and non-intermediaries. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. The financial services ensure equal distribution of funds to all the three sectors namely, primary, secondary and tertiary so that activities are spread over in a balanced manner in all the three sectors. Liquidity function: The financial markets provide the investor with the opportunity to liquidate investments like stocks bonds debentures whenever they need the fund. Financial system helps in Uniform interest rates The financial system is capable of bringing an uniform interest rate throughout the country by which there will be balanced movement of funds between centres which will ensure availability of capital for all kinds of industries. It follows that a primary market should operate in such a way that it minimises disruptions to the secondary markets. Supervision remained weak and there was evidence that many banks had bad balance sheets, conducting only very limited lending to the private sector, while engaging in short term foreign exchange arbitrage.