Topic: Economic Institution
- State the meaning and examples of economic institution;
- State the role of economic institution in Nigeria’s economy.
Lesson SummaryMEANING AND EXAMPLES OF ECONOMIC INSTITUTIONS
Definition Of Economic Institutions
Economic institutions are agencies responsible for the organization of a society’s resources and services.
Examples of economic institutions:
- The Nigerian Stock Exchange ( Nse)
- Securities And Exchange Commission ( Sec)
- Insurance Companies E.G Life Insurance,Health Insurance.
- Nigerian Deposit Insurance Coorporation ( Ndic)
- Marketing Institutions Etc
A. BANKS: Banks are economic institutions that receive, keep and lend money at interest. They are the pivot around which a nations economy revolves.
Types Of Banks
The types of banks operated in Nigeria to meet both private and corporate organizations’ needs include:
- Central bank of Nigeria- a non-profit organization for government transactionsCommercial banksFederal savings bankAgricultural credit banksMerchant bank- for merchants and large scale tradersIndustrial development banksMortgage banks for small and medium scale industries.
B. NIGERIAN STOCK EXCHANGE: It is an organized and essential part of the capital market where investors buy and sell stocks, shares, debentures etc.
The NSE was established through the act of parliament in 1960 and was then called Lagos Stock Exchange until 1977. It is situated in Lagos with its branches in Port Harcourt and Abuja, Ibadan, Kaduna, Kano and Onitsha.
C. INSURANCE COMPANIES: Insurance is a system of providing compensation for the effect of losses. It operates on the principle of risk pooling.
A provision made by an individual or establishment to cushion the effect of future losses. Life, automobile, health, and property can be insured and the companies involved in insurance include: Goldlink insurance company, Africa alliance insurance companies, Lion of Africa insurance, reinsurance corporation of Nigeria, industrial and general insurance (IGI), NICON insurance corporation etc.
TYPES OF INSURANCE
- Agricultural insurance
- Fire insurance
- Marine insurance
- Whole life insurance
- Fidelity guarantee
- Cash in transit insurance
- Motor vehicle insurance
- Health insurance
- Liability insurance
- Group insurance
- Home insurance
- Credit insurance etc
D. SECURITIES AND EXCHANGE COMMISSION (SEC): This is an economic institution which oversees, regulates, monitors and controls the activities on the capital market. It was established in 1979 to replace the Capital Issue Commission formed in 1973 by the federal government. Its scope covers all public limited liability companies or private limited liability companies.
E. NIGERIAN DEPOSIT INSURANCE CORPORATION (NDIC): This is an economic institution established to protect bank deposit in order to enhance healthy banking system in Nigeria.
It is empowered to regulate, supervise and advice the insured banks. It also operates on a mechanism that all commercial banks, merchant banks and other financial institution receiving deposits must insure their deposits with the NDIC.it conducts periodic examination of bank records and banks’ activities and protects the interests of depositors.
We also have marketing institution, farming institution , manufacturing institutions etc
ROLES OF ECONOMIC INSTITUTIONS IN NIGERIA’S
Role Of Banks
- Banks issue cheques – this helps to enhance trade and travel
- Lending money to the government, firms and private individuals.
- Safe keeping of valuables
- Banks play the role of payment agents.
- The central bank controls the flow of cash in circulation
- Banks, especially commercial banks act as executor of will
- Banks buy and sell shares and stock to their customers
Roles Of Insurance Companies
- Insurance is very vital in the economy of Nigeria because of the following roles it plays:
- It provides an avenue for businesses to keep going, even after liabilities are incurred.
- It improves productivity of workers through group insurance policy, where workers are fully assured of a secured future.
- It encourages international trade
- It makes money/ fund available for investment, which invariable helps in developing the country’s economy.
- Insurance encourages savings
- Life assurance certificate can be used as collaterals for bank loans.
Roles Of Nigerian Stock Exchange
- The NSEhelps companies, government and investors to mobilize funds for projects execution.
- It serves as a market where people can invest their money in of companies’ shares i.e. financial market investment.
- It acts to promote the transfer of shares.
- It provides the platform for government to mobilize funds through bond selling or gilt – edge securities in the stock market.
- It assists investors to buy or sell old securities.
- It helps individuals to transfer securities easily
- Provides job opportunities for stock brokers, computer operators etc
- It monitors the activities of quoted companies
- Assist investors in the identification of thriving and viable companies
- Aids selling and buying of stock, shares and debentures
Roles Of Securities And Exchange Commission (Sec)
Helps to determine the allotment of securities.
It functions to regulate time, prices and quantity of securities issued.
Promotion of capital market development.
It monitors the transactions on the stock exchange in order to ensure fair play.
e) Registration of securities and participants.
GENERAL ROLES OF ECONOMIC INSTITUTION
- They assist in determining how political decisions are made.
- They provide the platform for the exchange of goods and services.
- They ensure the continuous circulating and security of money.
- They dictate the level of a country’s economic development
- Provision of employment opportunities
- They play the role of professional advisers.
- Enhancement of industrial development.
- They encourage industrial growth through provision of working capital
- Economic institutions earn the country foreign exchange
- They promote cultural exchange.
- They encourage savings needed to boost the level of investment.
- They provide the needed securities for commercial activities through insurance services.
What are economic institutions?
Mention examples of economic institution.
- Mention the different types of banks.
- Give the full meaning of the following acronyms: