At its 302nd Monetary Policy Committee (MPC) meeting, the apex bank announced its first rate cut since November 2024, trimming the Monetary Policy Rate (MPR) by 50 basis points to 27%. It also revised the Standing Facilities corridor to +250/-250bps around the MPR from the previous +500/-100bps.
The recalibration has already spurred record activity in the Standard Deposit Facility (SDF), with placements hitting ₦5.39 trillion on Monday alone.
Why it Matters
The policy shift comes on the back of moderating inflation. Nigeria’s headline inflation slowed for the fifth consecutive month in August 2025, easing to 20.12%. This gave the MPC room to slightly loosen monetary conditions to support market liquidity and growth.
Since the announcement, system liquidity has more than doubled from ₦2.12 trillion last week to Monday’s record ₦5.73 trillion. Much of this is concentrated in the SDF, the CBN’s key liquidity management tool that allows banks to park excess cash with the regulator in exchange for risk-free returns.
By sterilizing idle funds, the SDF helps curb inflationary pressures and stabilizes interbank rates. The adjusted corridor has made this option more attractive, especially given rising non-performing loans (NPLs), which reached 6.03% in Q1 2025.
Impact on Money Markets
Improved liquidity conditions have already driven money market rates lower. On September 24, 2025, the Open Buy Back (OBB) rate dropped to 24.5%, while the overnight lending rate eased to 24.88% — the lowest since November 2024.
According to Abigael Kazeem-Adeshina, Research Analyst at Norrenberger Financial Group, the CBN is “executing a delicate balancing act, easing rates in line with expectations while managing supply through the corridor adjustment, despite the earlier reduction in the Cash Reserve Ratio (CRR).”
She added that another moderate rate cut could be possible in November, depending on inflation outcomes in September and October.
Bottom Line
The CBN’s latest policy easing has injected fresh momentum into Nigeria’s financial system, with record placements in the SDF highlighting banks’ preference for safe returns. While this supports monetary stability and reinforces inflation control, it also means that much of the liquidity is effectively trapped within the CBN, limiting its immediate impact on credit creation and real sector growth.