Nigeria’s money market witnessed a notable decline in key rates as liquidity in the financial system inched closer to the N2 trillion threshold, following the Central Bank of Nigeria’s (CBN) latest adjustment to the asymmetric corridor around the Monetary Policy Rate (MPR).
The CBN’s new corridor structure—designed to reduce the interest earned by banks on placements at the Standing Deposit Facility (SDF)—has continued to reshape liquidity behaviour in the interbank market.
Data from the financial system showed that aggregate liquidity remained firmly in surplus territory throughout last week, closing at approximately N1.96 trillion. This represents a sharp rise of 49.98% from the N1.31 trillion recorded the previous week.
Analysts and investment firms attributed the liquidity expansion to substantial inflows from Open Market Operations (OMO) maturities and coupon payments on Federal Government bonds, which provided banks with additional funding buffers.
Deposit Money Banks maintained significant use of the CBN’s SDF window, although at reduced reward levels following the corridor adjustment. TrustBanc Financial Group reported that SDF placements averaged N1.67 trillion last week—down 34% from the preceding week’s N2.51 trillion.
The group also noted that average daily liquidity for November stood at N3.35 trillion, marking a 13% increase compared with October’s average of N2.96 trillion.
Following the Monetary Policy Committee (MPC) meeting—which left the MPR unchanged but tightened the corridor to +50 bps/-450 bps—interbank rates fell sharply on Tuesday. The refined corridor structure strengthened market confidence, prompting more activity at both the Standing Lending Facility (SLF) and SDF windows as banks adjusted their liquidity strategies.
Market watchers say the corridor changes will discourage banks from locking large volumes of funds with the CBN, encouraging more lending to the private sector and potentially stimulating economic expansion.
Under the new structure, the SLF now stands at 27.50% (50 basis points above the MPR, down from 29.50%), while the SDF is now priced at 22.50%—a wider discount compared to the previous 24.00%.
Effectively, banks will now borrow from the CBN at 27.50%, representing a 200-basis-point reduction from the previous 29.50% rate. Conversely, funds placed at the SDF will earn 22.50%, a 2% drop from the earlier rate of 24.50%.
The Nigerian Interbank Borrowing Rate (NIBOR) eased by 198 basis points last week, according to Cowry Asset Management, reflecting both abundant liquidity and the CBN’s decision to maintain the MPR.
Other funding benchmarks followed a similar trajectory: the Open Repo rate slid by 2 percentage points week-on-week to 22.50%, while the Overnight (ON) lending rate declined by 2.12 percentage points to settle at 22.71%.
