General Introduction
1.1 Background of the study
In every Country Nigeria inclusive, there is a financial system which is responsible for regulating the financial environment of the economy, determining the types and amounts of funds to be issued, cost of funds and the uses to which these funds are to be put. The role of financial intermediation to economic growth and development is being increasingly recognized, especially in developing economies (Sanusi, 2011). Financial intermediation involves the process in which financial market transfer funds from the surplus economic units to deficit ones. The financial market is made up of two majors markets which are institutional arrangements that facilitate the intermediation of funds in an economy, they are: the money market and the capital market. The basis of distinction between the money market and the capital market lies in the degree of liquidity of instruments bought and sold in each of the market (Osamwonyi, 2005).
Therefore, the money market is simply the market for short-term funds and securities including treasury bills, one-year treasury certificates, Central Bank notes, negotiable certificates, commercial papers, commercial and merchant bank savings and other funds of less than one year duration. The capital market on the other hand is the market for longer-term funds and securities whose tenor exceeds beyond one year. These include long-term loans, mortgage bonds, preference stocks, ordinary shares, Federal Government bonds and industrial loans and debentures. This market is the source from which companies and industries obtain capital for expansion and modernization and also from which government borrows on a long-term basis for development purposes.
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