A financial expert, Mr. Sunday Oduyemi, has advocated the need for the establishment of more discount houses in the country.
He described discount houses as financial institutions with intermediate funds among banks. They invest in short-term securities, especially treasury securities, and other short-term financial instruments.
Oduyemi explained that these financial instruments also assisted financial institutions to effectively manage their idle cash balance by bringing together surplus and deficit units in the money market.
“Discount houses also stand between the central bank and the licensed banks. This implies that there is the need for short-term funds under urgent situations that allows the licensed Nigerian banks, which should exhaust the available facilities at the discount house before having recourse to the CBN,” he said.
He noted that discount houses “do not accept deposits from non-banking financial institutions.”
Oduyemi, who is also an economist, said in the era of difficulty and challenges being experienced by the CBN on the effective control of the monetary policy of the nation, and also due to the large amount of treasury securities usually taken up by the central bank, there was undue large credit to government.
He said, “This has made the net domestic asset of the bank problematic. The full impact of the excessive CBN credit to government on money supply is realised when government draws on the proceeds of the issued securities to finance its operations.”
