Summary:
- Monetary Policy Rate: 23.00% (From 26.50%)
- Standing Facilities Corridor: +50/-300 basis points around the MPR (From +50/-450bps)
- CRR of Deposit Money Banks: retained at 45.00%.
- CRR of Merchant Banks: retained at 16.00%.
- CRR of non-TSA public sector deposits: retained at 75.00%.
Market Implication
Fixed Income Market
The September decision introduces an important change to the outlook for the fixed-income market. The reduction in the MPR is expected to put downward pressure on fixed-income yields, as market participants adjust to the lower interest-rate environment. This is expected to be through higher prices for existing fixed-income instruments, as their relatively higher coupons become more attractive compared with newly issued securities at lower yields for the same tenure. The MPC decision creates potential reinvestment risk for investors positioned heavily in short-tenor instruments. As policy expectations shift, investors may increasingly look for alternative investment, which could encourage some portfolio rotation from fixed income towards equities
Equities Market
Lower interest rate has historically encouraged portfolio managers and Investors alike to reallocate into the equities market. Lower finance costs can serve as a form of tailwind for the companies on the NGX and this can translate to improved margins on earnings. However, the transmission from the MPR to corporate earnings is unlikely to be immediate. The 45% CRR remains high for the banks. WSTC Research expects the Tier1 and Tier 2 banks may decide to operate cautiously in extending credit despite the lower benchmark rate.
Foreign Exchange (FX) Market
We do not expect the 350bps MPR cut to result in significant devaluation of the naira in the near term. While lower interest rates can reduce the attractiveness of naira assets to foreign investors, Nigeria’s current Gross external reserve position provides a significant buffer. Also rising remittances, sustained positive balance of payments and stronger oil receipts should continue to support FX liquidity Against this backdrop, we believe the improved FX supply position should provide a meaningful buffer against potential pressure from lower interest rates.
Click here “September 2026 MPC Decision – CBN Cuts MPR by 350bps as Macroeconomic Conditions Improve” to view the full report.
