System liquidity in Nigeria’s monetary market surged to a historic excessive of N5.73 trillion on Monday, up sharply from N4.02 trillion recorded final Friday, on the again of the latest coverage changes by the Central Bank of Nigeria (CBN).
Recall that on the 302nd Financial Coverage Committee (MPC) assembly, the CBN lower the Financial Coverage Charge (MPR) by 50 foundation factors (bps) to 27%, the primary adjustment since November 2024.
Alongside the speed lower, the apex bank additionally revised the Standing Amenities hall to +250/-250bps across the MPR from +500/-100. This coverage shift has spurred important exercise within the Commonplace Deposit Facility (SDF), with placements rising to N5.39 trillion on Monday alone.
The adjustment comes towards the backdrop of moderating inflation. Nigeria’s headline inflation slowed for the fifth consecutive month in August 2025, easing to twenty.12%, giving the MPC room to loosen coverage barely with a purpose to help development and liquidity circumstances.
For the reason that MPC announcement, system liquidity has greater than doubled from N2.12 trillion final Monday to N5.73 trillion this week, with a lot of the rise pushed by flows into the SDF.
The SDF is a key liquidity administration device that permits business banks to park surplus funds with the CBN in change for curiosity. By offering this protected in a single day possibility, the CBN absorbs extra liquidity, units a flooring for interbank lending charges, and maintains short-term market stability.
Its influence is twofold: it sterilizes idle funds, decreasing inflationary pressures, whereas additionally shaping the provision of liquidity within the wider market. The most recent hall adjustment has made the SDF extra engaging, prompting banks to lock up report volumes of money with the CBN. This additionally helps banks to earn curiosity on their deposits, with out publicity to doable non-performing loans, which rose to six.03% in Q1 2025.
Though this has pushed system liquidity to report highs, a lot of it stays sterilized on the apex bank, stopping extreme liquidity from spilling into the economic system and serving to reinforce financial coverage goals.
Cash market drops on improved liquidity
Following the CBN’s coverage shift, interbank lending charges dropped to their lowest ranges in virtually a 12 months. On Wednesday, twenty fourth September 2025, the Open Purchase Again (OBB) charge declined sharply to 24.5%, whereas the in a single day charge eased to 24.88%, reflecting the influence of improved system liquidity. These are the bottom ranges recorded since early November 2024.
In a dialog with Abigael Kazeem-Adeshina, Analysis Analyst at Norrenberger Monetary Group, she defined that the CBN’s newest coverage shift displays a fragile balancing act, easing rates of interest in step with market expectations whereas nonetheless managing cash provide by means of the hall adjustment, regardless of the latest discount within the Money Reserve Ratio (CRR).
Wanting forward, Abigael prompt that one other average charge lower could possibly be on the desk in November, contingent on inflation developments in September and October, which she expects could proceed to ease.
Backside Line
The CBN’s newest coverage changes have injected contemporary momentum into system liquidity, with report placements within the SDF highlighting banks’ choice for protected returns. Whereas this technique helps financial stability and helps tame inflation, it additionally signifies that a lot of the liquidity buildup is successfully trapped throughout the CBN, limiting its fast influence on credit score creation and actual sector development.
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