Liquidity Surge: CBN’s Adjusted MPR Band Sends Nigerian Money Market Rates Tumbling

 

The Nigerian money market experienced a significant drop in lending rates on Tuesday, November 26, 2025, following a decision by the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) to adjust the asymmetric corridor around the Monetary Policy Rate (MPR).

While the MPC maintained the key interest rate—the MPR—at 27.0%, the subtle change in the corridor parameters, combined with a flood of new liquidity into the financial system, caused money market rates to crash across the board.

The Mechanics of the Crash

The significant decline in rates was driven by two core factors:

  MPR Corridor Adjustment: The CBN adjusted the asymmetric corridor around the MPR to +50/-450 basis points (bps). This corridor defines the rates at which commercial banks can borrow from (Standing Lending Facility, SLF) or deposit funds with (Standing Deposit Facility, SDF) the CBN.

    By expanding the negative side of the corridor (to -450 bps), the cost for banks to deposit excess liquidity with the CBN became significantly lower (less punitive), discouraging placements and pushing more funds back into the interbank market.

  Surplus Liquidity Inflows: Despite recent aggressive efforts by the CBN—including Open Market Operations (OMO) and Treasury Bills auctions—to mop up excess funds, the system liquidity saw a massive expansion. A significant inflow of ₦1.1 trillion from a maturing OMO instrument on November 25, 2025, pushed the system's surplus balance to an impressive ₦2.3 trillion.

Market Rate Reaction

This combination of corridor adjustment and liquidity surge immediately impacted key interbank rates:

  Open Repo Rate (OPR): Eased significantly by 200 bps to 22.50%.

  Overnight (O/N) Rate: Slipped by 208 bps to 22.75%.

Even the Nigerian Treasury Bills (NTB) segment reflected the improved sentiment, with the average yield contracting by 11 bps to 16.85%. This underscores robust investor demand for fixed-income instruments, which is typical when system liquidity improves.

While the CBN will likely conduct another OMO auction to sterilize some of this excess cash to manage inflation, the immediate effect of the MPC's corridor adjustment has been to improve liquidity and make short-term lending cheaper, a crucial development for the financial market.