A financial expert, Mr. Sunday Oduyemi, has advocated the need for the establishment of more discount houses across the nation.
A discount house is a firm that buys, sells, discounts, and or negotiates bills of exchange or promissory notes. This is generally performed on a large scale with transactions that include bonds and treasury bills.
According to him, the firms need to close the gap between the Central Bank of Nigeria and other financial institutions as they are expected to assist the latter to effectively manage their idle cash balance by bringing together the surplus and deficit units in the money market.
He said, “The gap has made the net domestic assets of the banks problematic. The full impact of the excessive CBN’s credit to the government on money supply is realised when government draws on the proceeds of the issue securities to finance its operations.”
He reiterated that the private economic agents, which were paid for services rendered, credit their accounts and earnings with their respective banks thereby providing additional sources of credit creation to the banks.
“The more the CBN accommodates the Federal Government’s funding habit, the greater the amount of high powered money available for government to inject into the economy and the more volatile the money supply,” he added.
According to him, to safeguard discount houses’ statutory role in the economy, the CBN can delegate the function of underwriting the issue of treasury securities to an agent.
