In September, Nigeria’s central bank surprised markets by cutting its key policy rate by 50 bps to 27%, the first under Governor Olayemi Cardoso.
This decision followed a steady decline in headline inflation, which eased to 20.12% in August, giving the bank room to lower borrowing costs without stoking price pressures.
Liquidity Rules Reshape Banking
Meanwhile, the central bank narrowed its standing facilities corridor to ±250 bps.
As a result, banks can now borrow at 29.5% instead of 32.5%, and returns on excess deposits fell to 24.5%.
“This adjustment may influence banks more than the rate cut itself,” said Hakeem Muhammed of FSDH, explaining that it encourages banks to lend rather than hoard cash.
In addition, the bank imposed a 75% Cash Reserve Requirement on non-TSA public sector deposits.
Read Also: MPC’s Rate Cut Aims To Support Households And Businesses
“Banks must hand over ₦750 million for every ₦1 billion held, yet depositors still see the full balance.
That changes the game,” noted Tajudeen Ibrahim of Chapelhill Denham.
Mixed Signals For Markets
At the same time, the bank reduced the CRR for commercial banks from 50% to 45%, easing private sector lending.
Consequently, businesses gain access to cheaper loans, while banks holding government-linked funds face tighter rules.
The markets now face a complex picture.
Lower borrowing costs could lift equities, but banks must rethink revenue strategies.
Meanwhile, foreign investors may reassess Nigeria’s appeal after the US Fed’s 25 bps cut.
Overall, the MPC signals that it welcomes growth but prioritises stability, especially as a year-end liquidity surge approaches.
