Money Market Rates Crash as CBN Adjusts MPR Band
Money market rates crashed significantly on Tuesday as the monetary policy committee of the Central Bank of Nigeria (CBN) adjusted the band around its monetary policy rate (MPR).
This happened amidst a flood of inflows into the financial system, reducing the liquidity mop up effects of the latest round of monetary actions in the money market.
The CBN had gone fast and furious with aggressive open market operations and treasury bills auction to reduce excess funds in the financial system last week.
Huge naira take out for $400 million FX intervention sales to banks sharply sterilised the free funds seeing positions in standing deposit facility.
But new inflows from matured instruments have started to build up with excess liquidity level already surpassing N2 trillion, though the market anticipates another round of OMO auction to reduce the size.
Nigerian interbank rates declined across the board on Tuesday, with the overnight rate dropping 15bps to 24.66%, market analysts said in separate reports, supported by improved system liquidity in the financial system.
System liquidity expanded following the adjustment in the asymmetric corridor around the monetary policy rate which was kept at 27% by the Central Bank committee on Tuesday.
The market liquidity opened the day with a surplus balance of ₦2.3 trillion, reflecting an improvement of ₦1.1 trillion from the previous level, following an inflow of ₦1.1 trillion from 25-Nov 2025 OMO maturity.
According to AIICO Capital Limited, the market liquidity recorded slight moderation in Deposit Money Banks (DMBs) placement in the Standard Deposit Facility (SDF) window by ₦8.7billion.
Reflecting the tightening liquidity condition, banks access funds from the central Bank standing lending facility. Banks raised a total of ₦35.3 billion from the CBN window to augment their financial positions.
However, average funding rate eased significantly by 204bps as Open Repo Rate (OPR) eased 200bps to 22.50%, while the Overnight (O/N) slipped 208bps to 22.75%, following the MPC decision to adjust the symmetric corridor to +50/-450bps around the MPR.
In the Treasury Bills secondary market, yields exhibited divergent trends, with 1-month and 6-month tenors declining 23 bps and 19 bps, respectively, while 3-month and 12-month tenors rose 3 bps and 6 bps, respectively.
TheNigerian Treasury Bills average yield contracted 11 bps to 16.85%, underscoring robust investor demand and favourable sentiment in the fixed income segment, Cowry Asset Limited said in a note.
