Nigeria’s financial markets have responded decisively to the Central Bank of Nigeria’s (CBN) recent adjustment of the monetary policy corridor, with yields falling across both money and bond markets.
While the Monetary Policy Committee (MPC) left the Monetary Policy Rate (MPR) unchanged at 27%, it delivered a surprise tweak to the asymmetric corridor—reducing it to +50/-450 basis points from +250/-250bps.
Market analysts believe the move signals a subtle pivot toward easing and igniting a wave of repricing across fixed income instruments.
It also effectively lowered the rate at which banks can deposit funds with the CBN, the Standing Deposit Facility (SDF), to 22.5% from 24.5%, and the Standing Lending Facility (SLF) to 27.5% from 29.5%.
Analysts say this adjustment marks a critical shift in monetary posture, prompting recalibration in the yield curve as investors price in expectations of improved liquidity and a more accommodative policy path.
Liquidity surge drives money market rates down
In the immediate aftermath of the policy announcement, interbank lending rates experienced sharp declines, reflecting enhanced system liquidity and a retreat in risk-free return expectations, according to Cowry Asset Daily Market Insight for November 26, 2025.
- The Overnight (O/N) rate fell by 198 basis points to 22.69%, while the Open Repo (OPR) rate remained stable at 22.50%.
- Short- to medium-term interbank tenors also posted notable drops. The 1-month, 3-month, and 6-month rates fell by 169bps, 157bps, and 187bps respectively.
Market dealers attribute the declines not only to the corridor shift but also to the impact of a N360 billion OMO maturity which added to available system liquidity.
Treasury Bill and Bond Yields Compress Further
The secondary market for Nigerian Treasury Bills (NT-Bills) also responded, albeit with more modest shifts.
Yields on short-term instruments compressed further, with 1-month, 3-month, 6-month, and 12-month NT-Bills declining by 2bps, 10bps, 11bps, and 1bp respectively.
Despite these movements, the average NT-Bills yield remained flat at 16.85%, suggesting that the market remains cautious amid ongoing macroeconomic uncertainties.
The government bond market echoed the same sentiment, with average yields across Federal Government of Nigeria (FGN) bonds dipping by 1bp to 15.47%.
This was supported by a combination of strong investor demand, improved liquidity, and expectations that the CBN may be entering the early stages of a policy recalibration.
Nigerian Eurobonds were not left out, with average yields declining by 11bps to 7.56% as global investors responded to signals of easing domestic monetary conditions and better macroeconomic coordination.
What they are saying
While the MPR was held at 27% for the second consecutive meeting, the asymmetric corridor change is widely viewed as a technical loosening of monetary conditions—one that supports credit expansion without compromising inflation control.
“The corridor adjustment acted as a liquidity cue for market participants,” said a senior trader at a Lagos-based commercial bank.
“With the SDF rate lowered, there’s less incentive for banks to sterilise funds at the CBN, leading to higher liquidity in the money markets.”
The corridor now gives a lower rate for bank deposits and a higher cost for borrowing from the CBN, nudging commercial banks to deploy funds more actively into the economy.
“This is a signal of accommodation beneath the surface,” said Dr. Yemisi Ayinde, a monetary economist at Covenant University.
“It doesn’t compromise the disinflationary stance, but it introduces flexibility to ease liquidity pressures and support credit growth.”
Headline inflation eased to 16.05% in October 2025—marking the third straight monthly decline—driven by naira appreciation, relatively stable fuel prices, and better food supply.
Analysts see this as giving the MPC room to make liquidity-friendly tweaks while maintaining a cautious posture.
Implications for investor positioning and bank strategy
For investors, the yield compression across tenors and asset classes suggests a shift in portfolio allocation strategies.
With lower SDF returns, banks and institutional investors are likely to seek higher returns in government securities, corporate bonds, and credit markets.
“Lower passive returns from the CBN window mean banks must redeploy idle funds more efficiently,” said Mr. Blakey Ijezie, chartered accountant and founder of Okwudili Ijezie & Co.
“Expect to see renewed interest in credit expansion, particularly into productive sectors that offer better returns.”
For banks, the higher SLF rate serves as a disincentive for last resort borrowing, reinforcing the need for stronger interbank coordination and internal liquidity planning.
Cordros Securities noted that the shift “could support further moderation in yields toward year-end, barring shocks,” and expects the corridor move to maintain downward pressure across the fixed income curve.
