You can make money by investing in money market instruments. The money market deals in fixed-income securities, not unlike the bond market. The major difference is that the money market deals in short-term debt and monetary instruments. In other words, money market instruments are forms of debt that mature in less than one year and are very liquid.

That sounds simple enough, so why don’t more brokers offer you the ability to buy money market securities? The reason is that money market securities trade in very high denominations, giving the average investor limited access to them. The easiest way for retail investors to gain access is through money market mutual funds or a money market bank account. These accounts and funds pool together the assets of thousands of investors to buy money market securities.

Some investors also purchase Treasury bills (T-bills) and other money market instruments directly from Central Banks or through other large financial institutions with direct access to these markets. There are several different instruments in the money market: certificates of deposit, T-bills, commercial paper, banker’s acceptances and more.

Objectives and Risks
Institutional investors have used the money market as a safe haven for quite some time. The emergence of money market mutual funds has allowed individual investors to take part in the money market’s rates of return, which are higher than those of a savings account or other low-risk investments. The performance of a money market fund depends heavily on the interest rate situation; the best time to put your money in money market funds is when interest rates are peaking.

Money market funds are low-risk investments because they invest in short-term government treasuries such as T-bills and in highly regarded corporations. The one downside of money market funds is that they are not covered by the same federal securities insurance that covers bank accounts, although some funds pursue insurance through private companies.

Who Are the Participants?

The key parties in the money market include the Banks, the Central Bank of Nigeria (CBN), large corporate organizations and the investing and/or banking public. The banks play the role of intermediaries bringing providers of funds and users of funds together. The providers of funds are simply the business units, government agencies, body corporate and individuals who keep their money with the bank through the various account types or instruments with which the bank take these monies. On the other hand the users of funds are the segment of these units, i.e. businesses, body corporate, agencies and individuals who borrow money from the banks to fund different their needs.

The Central Bank is the regulator of money market activities. Its roles include providing policy direction for operators to conduct their business in line with the provisions of the laws. The CBN uses some monetary policy instruments to regulate activities of the banks and these usually have an impact on key economic indicators such as interest rates, inflation and money supply. The large corporate institutions access the money market through the primary intermediaries to raise funds in order to finance mostly working capital needs. They do this by either borrowing directly from the banks or raising instruments through which they borrow from the banking public.

How Can You Make Money Investing in Money Instruments

These money market instruments provide opportunity for you to invest and earn reasonable amount of returns well above what you will get if you simply leave your money in your savings or current account with your bank. We now examine each of the money market instrument in some details to highlight the opportunities that are there for you to explore to make more money out of your banking experience.

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The Nigerian Money Market - in financial institutions, bond are referred to as long term promissory note on which a borrower promises to make payments of interest and principal on specific dates to the lender. That is, the bond is a financial instrument used only by the government or incorporated public liability companies to raise long term funds.