Nigeria financial markets have reacted swiftly to the Central Bank of Nigeria’s (CBN) recent adjustment of the monetary policy corridor, recording broad-based yield declines across the money and bond markets.
Although the Monetary Policy Committee (MPC) kept the Monetary Policy Rate (MPR) unchanged at 27%, it surprised the market by narrowing the asymmetric corridor to +50/-450 basis points from +250/-250bps. Analysts say this signals a subtle shift toward monetary easing, triggering widespread repricing of fixed-income instruments.
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The adjustment effectively reduced the Standing Deposit Facility (SDF) rate to 22.5% from 24.5% and the Standing Lending Facility (SLF) rate to 27.5% from 29.5%, prompting expectations of improved liquidity and a more accommodative policy stance.
Liquidity Boost Pushes Money Market Rates Lower
Following the announcement, Nigeria’s interbank lending rates fell sharply, driven by improved liquidity and lower risk-free rate expectations, according to Cowry Asset’s November 26, 2025, market report.
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Overnight (O/N) rate: dropped 198bps to 22.69%
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Open Repo (OPR) rate: steady at 22.50%
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1-month, 3-month, and 6-month interbank rates: fell by 169bps, 157bps, and 187bps respectively
Dealers attribute the declines to both the corridor adjustment and the impact of a ₦360 billion OMO maturity that boosted system liquidity.
Treasury Bills and Bond Yields Continue to Compress
Treasury Bills recorded modest yield declines across short-term maturities:
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1-month: -2bps
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3-month: -10bps
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6-month: -11bps
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12-month: -1bp
Average NT-Bills yield remained unchanged at 16.85%, showing investor caution amid economic uncertainties.
The FGN bond market also saw a slight yield drop, with average yields dipping 1bp to 15.47%, supported by strong investor demand and expectations of gradual policy easing.
Nigerian Eurobonds followed suit, with average yields falling 11bps to 7.56%, as global investors responded to signals of improved macroeconomic alignment.
Adjustment Signals “Technical Loosening” – Experts
While the headline MPR remains unchanged, analysts view the corridor shift as a form of indirect easing.
A senior trader at a Lagos commercial bank said:
“Lowering the SDF reduces banks’ incentive to park idle funds at the CBN, increasing liquidity in the system.”
Dr. Yemisi Ayinde, a monetary economist at Covenant University, added:
“This adjustment provides flexibility to ease liquidity pressures while maintaining a disinflation-focused stance.”
Headline inflation eased for the third consecutive month in October 2025, dropping to 16.05%, supported by naira strength, stable fuel prices, and improved food supply—providing the MPC room to adjust liquidity conditions.
Market Implications: Portfolio Shifts and Bank Strategy
Analysts say the yield compression will push investors toward higher-yielding assets such as government bonds, corporate bonds, and private-sector credit.
Chartered accountant Blakey Ijezie noted:
“With lower passive returns at the CBN window, banks will be under pressure to redeploy funds more efficiently, likely boosting credit expansion.”
Meanwhile, the increased SLF rate discourages last-resort borrowing, reinforcing the need for stronger liquidity planning within banks.
Cordros Securities predicts continued downward pressure on yields through year-end, assuming no major shocks.
