CBN Corridor Shift Sparks Broad Yield Decline Across Nigerian Financial Markets
Nigeria’s financial markets have responded sharply to the Central Bank of Nigeria’s (CBN) recent adjustment of its monetary policy corridor, with yields falling across both money and bond markets. Although the Monetary Policy Rate (MPR) remained steady at 27%, the unexpected reduction of the asymmetric corridor to +50/-450 basis points from +250/-250bps has sent clear signals to investors. Analysts suggest this move represents a subtle pivot toward monetary easing, sparking a wave of repricing across fixed income instruments.
The corridor adjustment effectively lowered the Standing Deposit Facility (SDF) rate from 24.5% to 22.5% and the Standing Lending Facility (SLF) rate from 29.5% to 27.5%. Market experts describe this as a strategic step to enhance liquidity without compromising the CBN’s inflation control stance. By nudging banks to deploy funds more actively, the central bank aims to support credit expansion while maintaining cautious monetary policy oversight.
In the immediate aftermath, liquidity surged across the banking system. Interbank lending rates dropped sharply, with the Overnight (O/N) rate falling by 198 basis points to 22.69%, while short- to medium-term tenors also saw notable declines. Analysts attribute the moves not only to the corridor shift but also to a N360 billion Open Market Operation (OMO) maturity that further boosted system liquidity, reinforcing a favorable environment for money market participants.
Treasury Bill and government bond markets followed suit, with yields compressing modestly across the curve. Short-term NT-Bill yields fell between 1–11bps, while average FGN bond yields dipped slightly to 15.47%. Nigerian Eurobonds also saw a decline of 11bps to 7.56%, reflecting global investor confidence in a more accommodative domestic policy environment and improved macroeconomic coordination.
Experts say the corridor adjustment provides technical easing that supports liquidity and credit growth while preserving the disinflationary trend. “Lower SDF returns encourage banks to put funds to work rather than park them at the CBN,” noted a senior Lagos-based trader. Analysts predict continued downward pressure on yields toward the year-end, with banks likely redeploying idle funds into higher-yielding government and corporate securities, reinforcing the central bank’s subtle shift toward market-friendly policy.
source: nairametrics