Finance

7 Functions of Discount Houses in Nigeria

Functions of Discount Houses in Nigeria

In this post, we look at the functions of Discount Houses in Nigeria. Discount house is one of the financial institutions, established with the sole responsibility of contributing to the growth and development of the Nigerian economy., the discount house was to achieve this through its outstanding contribution to the development of the money market in Nigeria.

Unlike other financial institutions, the discount house does offer some services that directly impact on the generality of the Nigerian public.

Discount house is known for short term security trading. What the discount house does is to act as an intermediary, while trading on short term securities. The activities of the discount house have indeed, add some steam to the economy of Nigeria.

Read Also: 8 Functions Of Nigeria Security And Exchange Commission

7 Functions of Discount Houses in Nigeria
Functions of Discount Houses in Nigeria – Photo Source: https://www.concisenews.global

Functions Of The Discount Houses:

There are numerous functions assigned to the discount houses in Nigeria, like I stated earlier, the sole objective of establishing discount houses was to help boost the economy of Nigeria through the development of the money market in the country, and there are a number of ways discount houses can achieve this, and this can be achieved through its functions, and in this article, we are going to discuss quite a number of these functions as assigned to the discount houses in Nigeria.

1. Discount Houses Intermediate In Money Market Transactions

One of the functions of the discount houses is to ensure that in money market transactions they must act as intermediaries, in order words, discount houses are to serve in the money market during transactions by intermediating, that is, to go in between the operators or participants in the money market.

We are made to understand that, in the money market, short term securities are traded, so their transactions are more or less short term security trading.

The short term securities traded by the discount houses in the money market are of various short term investment. The short term securities traded in the money market offered services, such as lending and borrowing.

Read Also: 8 Steps To Start E-Currency Exchange Business In Nigeria

2. Discount Houses Trade On Instruments And Securities

The primary function of the discount houses is to trade on securities and instruments, and since their focus are in these securities and instruments, coupled with their deep understanding in relation to transactions in the money market, they have been able to maximize their functions in this regard, and most of the instruments and securities traded by the discount houses in the money market include securities such as,  Nigerian Treasury Bills, and Nigerian Treasury Certificates, and Central Bank of Nigeria Open Market Operations Bills, and Commercial Bill, such as that of Bankers Acceptances and Commercial Papers. Another instrument traded in the money market by discount houses is Bank Deposit Certificates.

3. Discount Houses Train Personnel For Excellent Performance

In every establishment, given the depth of knowledge that has driven the business world today, organizations have been embarked on training programs for its members and staffers with a view to upgrading their skills and knowledge in the current way of running businesses.

Discount houses in Nigeria are not exempted in this innovation. One of the functions of the discount houses in Nigeria is to ensure that their staffers are adequately trained to carry out money market transactions optimally.

4. Discount Houses Deal On Treasury Securities

Discount houses are the primary dealers in the treasury securities in the money market, this function of the discount houses in Nigeria, just like any other of their functions was assigned to them by the Central Bank of Nigeria.

In other words, if someone wants to purchase new treasury security for example, in the money market, it is expected the discount houses to be there for him, by helping him out in his quest to buy treasury security in the money market.

Outside the discount houses, no other person or organization is allowed to intermediate in money market transactions by bidding directly for any instrument, and money market is accessed only by those dealers appointed by the central bank of Nigeria.

Read Also: Nigerian Stock Exchange Recruitment 2018 (2 Positions)

5. Discount Houses Deal In Primary And Secondary Market Bond Auctions

Another function of the discount houses in Nigeria is that of dealing in primary market bond autions. Besides dealing in the primary market, the discount houses also dealt in the secondary market, that is, secondary market bond auctions.

You will agree with me that bond is not short term security since discount houses are primarily traded short term securities in the money market, but the truth is that discount houses in Nigeria are one of the financial houses appointed as dealers for government bond, by that, I mean federal government bond.

Therefore, in the event where there is an investment in government treasury security, the discount houses remained one of the key players in these transactions.

6. Discount Houses Manage Liquid Assets

Another function of the discount houses is the management of liquid assets because the short term securities traded in the money market by discount houses are considered primarily as a liquid, and managing a large portion of liquid assets by the discount houses have actually support liquidity management.

There is this structured investment apparatus by discount houses called,  ‘Open Buy Back’, and investors, through open buyback, have been afforded flexibility in liquid management, because the possibility of redeeming it at short notice is a hundred percent. This is achieved without a discount cost of treasury security.

7. Discount Houses Provide Services For Assets Management

The discount houses have been known for providing services for assets management, and the discount houses are rendering these services actually with a bias, and that bias is for the money market, as well as for treasury securities.

Someone may decide to do his or her investment with a different fund manager, just as this different fund manager could manage your money, discount houses can as well manage your funds, you can call it someone’s money market portfolio.

Read Also: 10 Functions Of The Nigerian Stock Exchange

Conclusion

Unlike other financial institutions, the discount house does offer, as I said earlier, some services that directly impact on the generality of the Nigerian public.

Discount house is known for short term security trading. What the discount house does is to act as an intermediary, while trading on short term securities. The activities of the discount house have indeed, add some steam to the economy of Nigeria.

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Joseph Athanasius

Joseph Athanasius is a Content Developer at InfoGuideNIgeria.com. InfoGuide Nigeria is a team of Resource Persons and Consultants led by Ifiokobong Ibanga. Page maintained by Ifiokobong Ibanga. If you need a personal assistance on this topic, kindly contact us.

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