Idle Cash Management – High Cash Proportion in a Developing Economy

IDLE CASH MANAGEMENT – HIGH CASH PROPORTION IN A DEVELOPING ECONOMY

One of the most prominent characteristics of under developed nation is the use of high proportion of cash, relative to demand deposit in business transaction.

This cash relative to demand deposit has resulted to the existence of idle cash in such economics.
In an under developed country like ours, a significant percentage of money is held in form of cash a sizable portion of this cash is kept idle, with the resultant consequence that the productive sector is denied they of such fund.

This sizable amount of cash that is not used for anything. Under the banking system ability to create deposit money, thus affecting the volume and cost of loans. The effect of these idle money has system magnified itself that it has resulted to unemployment low business investment and declining national income.
This research has been organized into five chapters with the first chapter dealing on introduction, while the second chapter centers on review of related literature chapter three showed the method of research used. Chapter four and five deals on analysis of data test of hypothesis summary of findings, recommendations and conclusion respectively.

With the multifarious (many / various ) increase in the economic system money become the most acceptable means of transaction and payment of debt. The proportion of money which is not used in normal recurring transaction or is held in excess of the normal need is called “idle cash” The excess of the normal need is called “Idle cash” The continuous with drawl of money from the circular flow of income between the household individual s, firms and industries becomes so alarming and devastating; it deprive the  users the great opportunity of making any meaningful and judicious use of idle cash.

In the area of research methodology primary and secondary source of data collecting will be adopted. The primary data source includes oral interview administration on questionnaire observation and literature review. While the secondary sources of data collection to be adopted are the use of text books, financial standards etc.

There are some constraint towards this project which I include money –which is inadequate time to combine my lectures, personal chores and project research work, protocols to be observed will surely delay this project. Inadequate libraries and materials to lay hands on.

The researcher therefore wish to embark on this work to remedy some of these problems and their effects on the economy. The project work intend to highlight the pros and cons of the negative use of idle cash , constant flow of money in circulation , light interest rate and poor cross Domestic product (GDP) the research work will not only be in document for the accounts department

1.0    BACKGROUND INFORMATION OF IDLE CASH
In a developing economy like ours, a sizable amount of money is held in excess of  normal need. This excess money   is held is idle, because it does not produce any income, The business communities, individuals, household etc are holding a great proportion of this idle money. The involvement in the evil of boarding cash has a very serious effect on the financial institutions. The banking system ability of creating deposit money is constrained or hampered. The banks can only create small amount of deposit money, which is not enough to satisfy the teeming population seeking for loan. As a result of this, the interest rate will increase proportionately. Prices will increase while on the other hand demand will reduce increase in unemployment rate and drastic fall in national income.

The industrial sector is also affected because they depend on commercial and merchant banks loan for effective production and expansion. The consequences of bank not wholly honoring loan realest has put these industries in a light corner by producing below capacity, low quality product and retrenchment as an available means of production cost cut measure or to bread even

Economic growth and development of any nation is a combination of many variable ie price, inflation deflation employment and interest rate. This variable. Money is the prime mover of economic development as a result of its relationship with economic activities. Increase in the volume of money supply in the economy will definitely bring a remarkable change in the interest rate. This effect will lead to increase investment, employment, national income and expansion of industries.

With increase in awareness and effective mobilization of idle cash held by these prime agents of the economic activities, the ability of creating deposit will be enhanced. Banks can now meet the loadable demands of the entire economy wholly

1.1    STATEMENT OF PROBLEMS
The availability of capital is the most outstanding factor to consider in assessing the workability feasibility, survival and its ability to met business expenses as and when due. Are business organizations able to finance their business activities? If not what is responsible for this? Is it the inability of banks to give enough loans.?

With the increasing number of banks every day there is the assertion that banks are not able to meet the Loanable demand of theses business organization, both small and big organization. Why have these apex institution failed to meet up to the financial needs of these yearning organization? Is it that enormous amount of money is held idle in the pocket purses and homes of public.

What factors are responsible for high interest rate, unemployment, inflation etc? have the reasons of holding money ie transaction speculative and  precautionary motives actually justified the need  for continued holding of cash? What has been done by government and financial institutions towards solving these problem?

The research will therefore analyze the problems facing the effective mobilization of idle cash held by the public with greater emphasis on ogbete main market. In  line with this research the effects of idle cash holding to the economy in general and the holder in particular, will not be left out Recommendation based on the findings will be made to rebuild the relationship between banks and business communities.

1.2    OBJECTIVE OF THE STUDY ON IDLE CASH
The objectives of the study is centered on
1.    Examining the extend or level of relationship between banks and the businessmen
2.    Finding out the cost of holding cash relative to demand deposit and the consequences involve in holding money.
3.    Determining what the financial institution has been doing in respect to mobilizing these idle cash and channeling them to the productive sector of the economy.

1.3    HYPOTHESIS
The following hypothesis will be focused and tested on:
1.    Idle cash holding and economic activities are not related.
2.    Idle cash did not contribute to the factors responsible for rising interest rate

1.4    SIGNIFICANCE OF THE STUDY ON IDLE CASH
The idle of this study I aimed at the determination of the dynamic effects of idle cash holding in a developing economy like Nigeria and Enugu business communities is particular. Precisely, on completion of this research it will provide:

1.    An insight into the size of idle cash hold which does not contribute to the economic growths and development of the economy.
2.    A means solving the liquidity problem of banks
3.    Government with the knowledge of the effectiveness of banks activities and reveal areas of loop- hold that need arrest.
4.    The business communities the economic advantages of making use of banks.
5.    Solution to the problem of literature on idle cash on Enugu, which is scarcely available.

1.5    SCOPE OF STUDY
The research is limited to only Enugu business communities an important city in Enugu state. Discussions in most aspects affect Nigeria economic position and other countries.

1.6    LIMITATIONS OF THE STUDY
In the course of this research work, 1 encountered some numerous problems as
1.    FINANCE: As a result of lack of finance 1 the researcher was unable to visit ogbete market as often as possible. As a student one is faced with many problems that gulp all the money give for the exercise.
2.    TIME: Thee time given for the study is rather too small and short as the researcher is faced with other school activities and lectures in other   courses during the period of the study. A research of this nature that is expected to give an in depth preview should require a concentration of time and efforts.
3.    ACCOMMODATION: The researcher had neither a relation nor friend resident at the surrounding of ogbete main market. This made it difficult for a permanent stay around Ogbete.
4.    LITERATURE: There is hardly enough literature or material concerning the implication of idle cash holding in Enugu state and this serves as a major constraint. Finance and accommodation made it possible to limit research to what is only obtainable in Enugu library.
5.     TRANSPORTATION SYSTEM POBLEM     The research being carried out in main Enugu metropolis transport cost is high coupled with incessant fuel scarcity it was a problem at the period of this research

1.7    DEFINITION OF TERMS
1.    MONEY: Money is anything used to facilitate transition. In other word, money is anything that is generally acceptable as an instrument for settling debts and carrying out different transaction. Money must function as a standard of differed payment store of value  unit of account and medium of exchange.
Moreover before money can perform this function effectively it must have some characteristic as general acceptability divisibility etc.
Different commodities that have various time and culture served as money paper gold silver mental cigarettes etc.

2.    FINANCIAL INSTITUTION: This is an organization or institution that acts as a middle may in order to being lenders and borrowers together making available, Loanable funds to those willing to pay for the cost.
3.    BANK: This is a financial institution whose main motive is to maximize profit through the maximization of deposit and extension of loans and advances to the economy. Banks pays interest to fund owners and change interest on; loans extended to fund users.
4.    CASH: This is the aggregate amount of notes and coins held in the bank branches, head offices and also the amount that are in the hand of the public
5.    BANKING HABITS:      This portrays the degree of responsive of the public in a given territory to the use of banking facilities available to them. In another words, it is seen as the rate at which the populace makes use of banks.
6.    IDLE CASH:     cash that is put into unproductive use because it does not contribute anything to the holder. This sis also an accumulation of currency in excess of the normal needs usually motivated by fear of future scarcity
7.    ECONOMIC GROWTH AND DEVELOPMENT: Economic growth is the process of increasing national output and income per head of a nation. It demonstrates the extent to which real national output head has increased
Economic development is where a country real per capital gross national product of income increases over a sustained period of time. It is also the desirable change in the economic and social super structure of the society.

REVIEW OF RELATED LITERATURE
1.0    THE ROLE FUNCTION OF MONEY IN THE DEVELOPMENT PROCESS.
We all know what money is but we tend to take it for granted. The very existence of our complex economic structure depends upon the very existence of money. It become very clear that the very important purposes of money are as follows:

1.    TO ACT AS A MEANS OF EXCHANGE
This is the most significant function of money. Each producer sells his commodities or services for money and then uses the money obtained, to buy those goods and services, which to be battered directly for each other. However money does not change hand, it is lurking in the background in  determine the amount of commodities that should be swapped for each other. The most import function of money is thus, to dominate the need for this  double coincidence of wants, which is attributed to barter system.

Many has been performing this exchange function in this modern economy. Money has enormously eased and stimulated trading there by encouraging specialization. The role of specialization in the development of any economy  and an increase in national income should not be over emphasized and ours will not be an exception. This implies that each worker devotes himself to a single occupation. Specialization is only possible if each  worker  can readily exchange his specialized services for good and services which how and his family actually need. This can only be enhanced by the development of an intricate system of exchange.

2.    TO ACT AS A MEASURE OF VALUE
Everyone would need to carry a hot of exchange rate in his head in order to trade effectively. Thus money has come to obviate this nonstandard system of measure of value. Therefore comparisons of the value of good are facilitated by reducing them all to a single standard. This makes it easier to recognize a bargain and to avoid paying excessive prices.

3.    ACT AS A STANDARD FOR DEFERRED PAYMENTS
Most people do not hold their savings inform of money largely because it yields them no interest. They deposit their money with one of the financial institution, who promise to pay back demand or subject to specific notice and  to pay interest on the money. Thousand of other agreements, to settle debts at a future date also depend., on money serving as a standard for deferred payment. It is the use of money that makes it because possible for people to buy goods on credit and pay in future. Without the existence of money, the will be no standard as to know how much will be paid in future many world transaction depend on credit and effected at future date.

4.    AS AN INSTRUMENT FOR ECONOMIC CONTROL
The economy of our country in controlled by the use of a scale and monetary policies ie by the adjustment or increasing and decreasing the volume of money in circulation by the use tax interest rate etc.   during the period of inflation the quality of money in circulation can be reduced which in turn lowers the price system. Also deflationary period can be made good by increasing the quality of money in circulation. This helps to stimulate economy.

5.    AS A UNIT OF ACCOUNT
The unit of account in Nigeria today is the Nauru and kobo in the USA it is the Dollar. In japans it is the year for every human under taking whether it be an individual company etc. are all expressed in money unit expenditure, profit, sales and losses. Without the use of money this can be achieved.

6.    AS A STORE VALUE
This is achieved when people store away part of their current earning for future use. But in period of inflation, money is bad store of value. By fulfilling each of these  function the commodity that serves as money allows the economy to develop as money serves as a means of exchange it allows division of labour and specialization to occur. Each work achievement of a double coincidence of wants to exchange his surplus out put. Money as a stand of value permits the speedy setting of transition and act as a stimulus to trade. On the order hand the role of money as a store of wealth or value and standard for deferred payment money permits and even encourages savings.

“Eric furness”, emphasized that important way in which the  standard of living of the society can be raised is by replacing the subsistence economy with one based on specialization and exchange. However to be effective this system must be organized efficiently on a comm. unity basis. There must be some convenient ways of co-ordination the preferences and decision of all the individual producer and worker, as to the quantity of out put and type of work or employment for which they are trained and  offer their services.

Money as a store of value the saving unit or financial institution transmits the money so saved or mobilized to the investing sector.
W.L coat and D.R KhatKhate, argued that, if the development of the economy is to be accelerated it is essential that the resource saved by the surplus sector be put to the most productive and that the amount of such surpluses be increased. Policies should be made in such a way as to supply the financial assets and liabilities that are demanded by the surplus sectors. The flows of fund between various economic units create assets and liabilities but are not the same in all phase of economic development.

1.1    MONEY AND BANKS
From time immemorial, various objective have been used as money. Some of these are cattle, salt, cowries, tobacco, cigarettes, ornamental objects etc. the cumbersomeness of the commodity, money makes it possible to develop the use of “Certificate” that testify to an ownership of such full body metal money already deposited with a reputable person such as the goldsmith. In time, these certificates or receipts issued by such custodians of precious metals which later become a more convenient means of exchange  where forerunners of today’s currency notes and  other taken money.

They are document of “promise to pay”, now those who issued the “promise to pay” certificates the gold smiths and similar custodian of commodity money – were the first banks. They make their living by charging commission for the service as reliable custodian.

The banking system in a modern economy perform the same function the bank notes in normal circulation are promises to pay the holders the equivalent sums or similar resources of intrinsic value.

When depositor cashes cheque he reduces the amount of deposit and increases the volume of currency in circulation. The issues of bank  money relationship has not generated much argument. The banking system performs its monetary functions effectively because common denominations have come to be generally accepted as money (currency and deposits).

1.2    DEMAND FOR MONEY
Demand for money is the total amount of money one wishes to hold for all purposes regardless of the bank deposit.

Household, individuals and firms demand money for various reasons which depends on the

1.    Interest rate elasticity and the stability of the demand for money determined in part by the efficacy of the fiscal and monetary policy
2.    It depends on wealth and income of individual firms etc.
3.    High inflation and the moves to flexible exchange rates.
4.    The existence of perfect substitute for domestic and foreign bonds leads one to a portfolio balances models in which changes in wealth affect the damage for money
5.    The level of development of the capital markets in advanced world the capital   market is developed unlike that in Nigeria people are sensitive changes in the interest rate of bonds and other trading assets and this determine, the  amount of money to be demand.
6.    The people banking habit.

1.3    MOTIVES OF DEMANDING MONEY
a.    Precautionary or liquidity motives.
b.    Tranzactionary motives and
c.    Speculative motives

A.    PRECAUTIONARY MOTIVES
People hold money as a precaution against emergencies such as accident sickness and unemployment. The careful individual and the prudent businessman will hold a further reserve of cash to meet irregular  or unexpected expenditure. The amount held in the from of money will probably be fairly stable and  depend upon income. Beyond holding cash for these reason it might seen sensible for firms and individual to invest their money to earn a return. But wealthy individual and most financial institutions have a further reason for holding assets inform of cash

b.    TRANSACTIONARY MOTIVES
Most people hold part of their money to enable them buy their daily requirements, such as foods, cloths, soaps and other small purchases. Some they do not spend all their money the moment they receive it, but try to spread expenditure over the whole period between pay – days, they need to hold some income in money balances either in cash or bank accounts.

The average amount held depends partly on the frequency of the pay – days and party on the level of income. The balance held for transaction purpose is likely to be fairly stable, each knowing their probable commitments for the period and holding equivalent amount of cash.

C)    SPECULATIVE MOTIVES
People hold money for speculative motives. Opportunities do arise from time to time whereby people who have money in their hands buy things cheaper.

The price of fixed interest security varies inversely with the rate of interest. When interest rate is expected to rise and security prices to fall, the motive suggests that prudent investors should hold money until the rise in interest rate Cease. When interest rate falls, cash may be invested in security prices. More also, the spread of speculative motive for demanding money depends on the level of development of the money and capital market and the literacy level in an economy but it is opposite in Nigeria.

1.4    FUNCTIONS OF BANKS
Banks performs innumerable functions but only those that are relevant to the research will be exhaustively dealt with. These are :
1)    Mobilization of savings and other deposits
2)    Extension of credit facilities to the economy
3)    Inculcating banking habit
4)    Creating money.

MOBILIZATION OF SAVINGS AND OTHER DEPOSITS
This is one of the oldest and most important functions of banks ie mobilization of savings and other deposit from savings sectors of the economy and making the fund available to investing sector of the economy. Banks, pay interest on savings so mobilized and charging interest on loans and advances extended.
Thus funds are made available to businesses to enable them expand their productive capacities, investment and employment.

EXTENSION OF CREDIT FACILITIES TO THE ECONOMY
Extension of credit is the major primary function of banks and non – banks to worthy borrowers. Making loanable finds available to customers will in turn increase the standard of living, increase capital investment base, employment and production.
“Ejimba”, described extension of credit as, the most important measure of an economic growth. He postulate that, credit should be extended as much as possible, not minding the fact that some loans are doubtful. Such doubtful loans will be made due by the comparatively good loans.
Banks makes mass production possible by providing the much needed loans. During the interval of production through consumers, money is needed to carry out the anticipated expenses. Credit facilities could be amongst others in form of.
a)    Loans account
b)    Overdraft

INCULCATING BANKING HABIT
Suffice it to say that, this is one and utmost function and purpose, which banks, are supposed to fulfill. The role of banks are so basic to be regarded as the condition precedent on which the ability of banks to successfully fulfill their noble function of financial inter mediation is predicated.

Chizea said inculcating the banking habit is a measure of financial sophistication as it dearly indicates an appreciation of the inherent opportunity cost of holding idle cash. The development of banking habit is linked with the growth of branch banking in the cities as well as in rural areas.
Banking habits therefore could b e seen, as inculcating banking attitude to people as well as the degree of responsiveness of people to banking facilities available.

CREATING MONEY
The central banks of Nigeria (CBN) prints currency and mints, coins while the commercial banks credit deposit. The volume of money in circulation is determined by these two process. The ability of the commercial banks to create money depends on the total deposits available to the commercial banks and minimum ratio approved by the CBN at that period. The money that does not pass through the commercial banks cannot create deposit itself. It will become a leakage to the system. These banks create money in multiples to the extent of the inverse of the minimum cash ratio. If the total deposit is big and the minimum cash ratio reduced, commercial banks will create money in multiples of the cash ratio.

MONEY CREATION AS AN ANTIDOTE FOR ECONOMIC DEVELOPMENT
The process by which the banking system creates is the granting of loans and overdrafts. Every loan overdraft approved by a bank creates a new deposit. Upon the granting of loan, the  customer can draw a cheque to effect payment. The cheques will be paid into another bank account and after it has been cleared form or increase the total deposit to the banking sector a new deposit has been created.

To property determine the amount of credit created by the banking sector,  the credit multiplier effect is used.
M = 1/R
While M = Multiplier effect
R = Legal cash reserve ration

ILLUSTRATION
A customer deposited the sum of N ,1.000 only at one of  the new generation banks. The legal reserve ration 20% determine the amount of credit deposit to be created?
Solution
By multiplier effect
Deposit = N1,000
Reserve ration = 20%
Reserve ration to loanable ration = 1:4
M = 1/20%
M = 1/0.2
M= 5
Creation of deposit = M  x deposit
5 x 1000  = N 500
Alternatively,

LIMITATION OF MONEY CREATION
If deposit money can be created in a large volume what then prevent banks from meeting the loanable  demand of the public resulting from the optimum use of the productive resources at stable prices. Some of the limiting factors are:

1.     RESERVE REQUIREMENT: This is one of the presuming factors that hinder banks ability to create deposit. Credit creation can continue only to be turn where the existing reserve requirement. When the reserve requirement are raised, this in turn put demand affection the reserve of banks. This will make banks to liquidate some of their loans and investment in order to meet the nece4ssary reserves. There is an inverse relation ship between changes in the reserve ratio and the expansion.

Consider these possible reserves 20% and 40% requirement on every deposit of any bank. Then the deposit for the period is N 1000 only. What effect has this?
Solution
Multiplier effect = 1/L
R means reserve ie (20% and 40%)
1/20% = 1/20/100 = 1/0.2     = 5
: 5 x 1000 = N 5000
but on the other hand, m = 1/40%
1/40 = 1/0.4 = 2.5
100
: 2.5 x 1000 = N 25000.

The credit creation reserve ration is 2:11 the lower the reserve the higher the deposit created while on the other hand opposite is the case.

2.PROFITABILITY OF ASSETS
Banks can increase their lending at existing rate only when there is an unsatisfied demand for loans of the type that they consider as safe. It is true that an increase in the bank lending tend to stimulate economic activity and raise prices, but banks only lend on high profitability return on its assets.
The demands for loans are influenced by the relationship between the interest changed and the conveniences of the bank loans on one hand, cost and conveniences of alternative source of finance on the other hand. Moreover, the demand for loans, the bank may consider suitable will depend on the number of borrowers of satisfactory collateral security.

3.         READINESS TO HOLD ADDITIONAL DEPOSITS
“Furness” said that the readiness of the public to hold additional bank deposit is an extremely important factor and that since  this  readiness is influenced by the level of economic activities and prices.

In Nigeria and other developing countries of the world the degree and extent at which the public hold additional deposits constraints bank expansion of credit. This proves the sign of under development where the public prefers to keep a high proportion of money inform of currency. If bank loans are made in cash and the public are ready to hold additional cash. This will hinder deposit creation as was originally created, because     a high proportion are withdrawn from circulation in cash or currency if not by the original recipients, then by the substance recipients as the deposits are transferred in the course of transaction.

1.5    SUPPLY OF MONEY
The supply of money is the amount or volume of money in circulation in an economy. It is composed of.
1.    All the currency outside the banks
2.    The deposits with banks.
The care money supply is the 19, category. This comprise the coins, paper currency and the current accout. It is the most liquid of all categories but least interest earning.
M2 category is M1, + time and saving deposit with commercial banks and other savings banks, postal savings and loans agencies. M3 category is M2 + private sector time deposits in banks and public sector deposits both time and sight.

2.7    VELOCITY OF CIRCULATION
The  measurement of  velocity is the ratio between the stock of money and the value of mortuary transaction like in a year divided by the stock of money. The velocity V. stands for average number of times a unit of money turns over in the transaction that creates cross Domestic product (GDP).

The amount of money people wish to  hold might, for example be one tenth of the annual value of national income. If K (Money Supply) is 0.1 then velocity must be 10. This indicates. That if the money supply K, is to be one tenth of the value of national income,   the  average unit of money must change hands 10 times in order to bring about an aggregate value of income ten times as large as the stock of money.

Holding money is the opposite of spending it. Let I stand for total transactions and P. for the average of the same set of prices. Whether money is held against transactions, or as a proportion of wealth or income or for any other motive; the average value of actual money holdings could be expressed as a proportion of PT. Suppose that M = 100, it must be held by someone If K = 1/3. Then PR = 300. Since PR = PT, PT also has a value of 300. Then the value of K (the proportion R over which people wish to hold command in the form o money) R = real resources, would have been the inverse of the value of V.
V = velocity of circulation, M = quantity of money, P = price level. This is known as the similarity between fisher equation and Cambridge equation. The velocity of money in circulation is highly determined by the  frequency and the regularity of payments.

2.8    THE CONCEPT OF IDLE CASH HOLDING
The stock of money is considerably higher than the minimum amount, the society needed to finance. The excess amount is regarded as idle cash because output transition can be conducted without inconveniences. The stocks of money held outside transaction purposes that is transactionary and speculative motives are idle.

In Nigeria and other developing countries of the world where the capital market is not developed, the idea of idle money is highly evident as most people are unaware of the reasons of holding money and the cost of holding such money.

“Furness” has this to say on why we hold more money than we need to finance our normal payment the yields on alternative assets are not through sufficiently attractive to justify the trouble and risk of investing the excess money”.

In Nigeria and other countries of Africa, the most single reasons why majority prefer holding cash is  that the convenience of holding alternative assets are not sufficiently attractive to justify the risk of investing the excess money. These are delay in cash payment, poor banking habit, illiteracy level, excessive demands of bank personnel and finally personal attitude.

2.9    REASONS THAT LED TO A FALL IN IDLE CASH HOLDING
There are enormous reasons that befall or influence idle cash holding demand in the economy. These include:

1.    OPPORTUNITY TO SPEND MAY UNEXPECTEDLY EMERGE:
The  demand for idle cash holding balances may be  depleted in the hand of an individual or an organization if an attractive new product appears in the market. Commodity expectation can also cause a reduction in the amount of idle cash one holds, since there is a wild spread expectation that price of some essential commodities will change in the near future.

For this reason, there will be a substitution of stocks with the idle balances, in anticipation of profit in the nearest future.

Jackson proffered that “A more lasting reduction in demand for idle money, may result from expectation of continuous inflation, which is really a sharp reduction in the purchasing power of money, which creates a strong preference for holding wealth in commodities”, said Jackson.
The implication of this is that, the idle cash holding will reduce in proportion to the level of anticipated rise in price. They will do this by, buying some of the commodity now in order to jump the price like

2.    RATE OF INTEREST
In a country with a high level of developed capital and money market, the rate of interest can be the most determinant factor in assessing the amount of cash held idle. The interest can be the most determinant factor in assessing  the  amount of cash held idle. The interest rate is a parameter to determine the reward or yield offered by alternative financial assets.

A rise in the rate of interest is a signal to idle cash holders, that the reward in deposit or acquisition of security is becoming profitable and this induces  them to transformable cash to these financial assets.

3.    INCOME
In a country   where the standard of  living is how, coupled with low income earning by individuals and firms people do not have enough to consume not to talk of saving or keeping a fraction idle. In a prosperous economy where the standard of living and income level is high, people will have enough to meet their daily expenses and save or keep idle. In Nigeria, where poverty is a common household name, can people have  enough to  eat and meet current expenses of life and still dream of keeping some idle? Can it happen?

2.10    EFFECTS OF IDLE CASH HOLDING IN A DEVELOPING ECONOMY.
1.    RETARDATION OF ECONOMIC DEVELOPMENT
The economic development and growth of the economy like ours, is highly remanded by the increasing rate of idle cash. Funds that are hoarded ie not save banks and other financial institution, or nor invested in any economic unit, are not released for people to use there by remanding economic activity which in turn promote the economic net nation income.
Adekanye wrote say, “That if the rate of Harding cash is high as in Nigeria, it will have a very negative influence on the economy as such money is completely lost form the economy as such money is completely lost from the economy?

2.    HINDERS BANKS ABILITY TO CREATE DEPOSITS:
The practice of money hoarding, constraints bank ability to create deposits. Such action, results in banks creating small amount of deposits, which is not enough to satisfy the teeming population seeking for loanable funded. This will result in increase in interest rate

3.    INCREASE IN UNEMPLOYMENT PRICES REDUCED NATIONAL INCOME
With little money in  circulation, industries will not have enough resources to meet their operation cost therefore, the retrenchment alternative becomes the alternative way of culling down cost to make profit to breakage in profit making.
This result will adversely affect the national income because little is produced and consumed it in higher price. The poor masses are the most proud to the adverse effect at this point in time.

4.    INABILITY OF THE MONETARY AUTHORITIES TO CONTROL THE QUANTITY OF MONEY SUPPLY

Supply of money as earlier stated, compress bank deposits and money outside banks. The resultant effect of hoarding money will seriously limit the central bank of Nigeria (CBN) ability to effectively control the quantity of money in circulation through it polices like open market operation (OMO) taxation etc. despite all these into control measures, inflation continues to eat deep into the fabric of the society. More money is held outside banks and are idle. The CBN can not effectively control money supply, stabilize prices, ensure full employment, maintain to interest rate and finally curb inflation.

SUMMARY OF FINDINGS RECOMMENDATIONS AND CONCLUSION

5.0    SUMMARY OF FINDINGS
This section tries to give a full highlight of the causes of the increasing wave of idle cash holding in a developing economy like ours. This  is an opinion sanctioned from two dimensional forms, these are from the traders angle and financial institution point of view.

The respondents form this school through unanimously agreed that a high rate of idle cash holding contribute to low business investment unemployment high rate of interest rate etc. different classes of respondents  and  from  different authors in monetary economy agreed that a high proportion of any developing nation. This idle money is lost from the stream of circulation which have been judiciously utilized by the productive sector of the agreed that effective mobilization of this portion of money will do some good  than harm. These good are:

1.    It will lead to a reduction of interest rate
2.    It reduces inflation to the barest minimum.
3.    It increases the quality of money in circulation
4.    It increases investment rate  in a multiple proportion, employment rate  and total national income?
5.    Will increases the standard of living of the citizens.
The financial institution attributed that the high degree of idle cash holding is due to lack of awareness on part of traders. And traders (public) of the  goods in making use of financial intermediaries which they calmed is precipitated by high illiteracy level in our society. the official o banks believes that despite the advertisement strategy adopted businessmen in Ogbete.

And its environment are not making good use of the facilities, banks place operation in areas of saving, mobilization and extension of loans to the productive sector of the economy.

Over half o the respondent in the financial institution agreed with trades submission that they have been losing money to robbers, burglary, fire etc. but only maintained that the only important cost of holding cash is the interest income that would have accrued to such idle money if invested. On this ground the productive sector is adversely affected because it is not used for any productive activities.

Further more, some people interviewed are of the opinion that some businessmen are not conscious of the reason for demanding cash. They opted that despite the transaction art motive of holding money, very few appreciates the concept of other conventional motive; speculative and precautionary notices are concern only very few tend to know and depend on the changes in interest rates, this is due to the  under developed native of our capital market.

This is capital market is only been used by few who are privilege to know the changes in interest rate this accounted for high demand of idle cash holding  relative to demand deposit
Again respondent in the financial cycle argued that money held outside banks hinders CBN ability to control money supply in the economy.

They said that there are bound to be a loophole in the monetary control mechanism,, when a large proportion of the public is not making affective use of the banks. These respondents argued that CBN can not effectively and successfully use monetary instrument for control, for instance, the sells of government securities through open market operations (OMO) because large amount of money is held idle resulting from non use of bank or demand deposit.

This will, without mincing words, affect the CBN ability to control money supply and thus check inflation.

On the other hand, the second school of thought argued that traders are of the opinion that the reason responsible for high rate of holding money relative to demand deposit are do the following reasons,

1.    Low literacy levee
2.    Attitudes of banker
3.    Low bank branch relative to population ratio.
4.    Poor relationship that exist between businessmen and bankers in Enugu metropolis.
5.    Unnecessary time wastage at banks and
6.    The transactionary, speculative and precautionary motive of holding money.

About 75% of the respondents have no bank account as at now, despite the advertisement rate and they also added that nights, those that uses the banks could not run to their bans at such odd hours is with draw money. The 25% that have bank accounts handed down that apart from the interest been paid on savings account, that they are yet reap the dividend of having bank account.

5.1    RECOMMENDATIONS
Based on the finds of this research through questionnaire and oral interview, I have come to recommend the following solution for the reduction of the idle cash holding in ogbete business community and the country at large.

1.    EDUCATION
It is obvious that  the incidence of low literacy level in our society is one of the greatest factor affecting the general economic activities and  growth of the country. It is as result of high illiteracy level that people can hardly access the pros and cons of situations facing them including that of selecting or electing to hold money in form of cash instead of demand deposit despite the high danger they will face.

It is at this juncture that government, financial institutions and member of public (spirited citizen, that are literate should ensure that the illiterates in our society are adequately educated and made to know the benefits arising from the use of banks.

Much load is led on the shareholders of financial  institution to employ different strategies in educating our innocent illiterate citizen  like organizing lectures and seminars, personal advertising, indirect advertising, printing hand out and pamphlets in a simplifies English or vernacular, and the use of traders association.

2.    OPENING OF MORE BANK BRANCHES.
I strongly believe that because of shortage of banks in business community, banks should be sited at the heart of any business society or area. This will go a long way to rescue the rate of hoarding cash. More so, to further and effectively set the banks on their brim, more and more licensed bank should be opened at the interior parts of our communities where the activities of banks have not been felt. This will induce the needed aggressiveness and competition in banking.

3.    EXTENSION OF BANKING HOURS
The practice whereby banks close its door to customers at 4.30pm every day with exception of Fridays whereby they close at 1.00pm should be extended. In view of this I will recommend that  banks should close its door at 6.00pm every working  day and the extension of banking days to include Saturday to give business men enough time to balance and deposit their money in the bank.

4.    PROVISION OF NIGHT SAFE SERVICE
Banks should try as much as possible to provide night safe facilities in big business communities and cities where customers of the particular bank deposit their money irrespective of the branch he OR she banks. To facilitate easy implementation of night safe facilities and this minimize fraud, banks should have a special type of instrument that would permit customers to cash or deposit money at the night.

5.    INTRODUCTION OF MOBILE COLLECTION AND PAYMENT UNIT
In addition banks should introduce mobile cell action and deposit unit at strategic centers, as it is obtainable in developed countries of the world. This unit should provide customers easy access to banking facilities at their doorsteps. Any transition is done as if it is at the bank branch. It less timer wastage and  embarrassment customers receive at  their   bank branch.
There is no doubt that such mobile unit  will enhance customers confidence on the bank and minimize the incidence of idle cash holding.

6.    MINIMIZATION OF BANKS DELAY
Financial institution especially commercial banks should try as much as possible to avoid unnecessary delays usually associated  when deposits and with drawing money. Such uncalled delays infuriate customers and to cut short the delay they resort to completely avoid banks.
Delay in clearing of inter bank cheque should be collectively minimized to avoid bank scare. The delay in inter bank cheque clearing contributes to mis- trust between sellers and buyers, which usually end up, that the sellers prefer cash instead of cheque. This delay can be minimized by the introduction of computer in banking activities.

5.2    CONCLUSION
It is a well known fact from study that idle cash holding contributes  to factor responsible for low rate of economic growth in Nigeria.. the decision of wealth holders to keep their money inform of cash has denied the productive sector of the economy the use of such Moines. As a result of this incessant increase in the amount of money held idle, this has manifested it self to increased interest  low  business investment, unemployment rate, and retrogressing national income.
The research also revealed that the financial sectors re not doing much towards curbing this  epidemic nor finding a lasting solution to minimizing the incidence of idle cash holding.

But I hope that if the suggested solution as to ways of finding a lasting solution is effectively implemented and adequate machinery put in place to monitor the programmes, this will success full put the economic bank in the growth path once again.

IDLE CASH MANAGEMENT – HIGH CASH PROPORTION IN A DEVELOPING ECONOMY