The Central Bank of Nigeria’s decision to cut its benchmark interest rate to 23 per cent is expected to put further downward pressure on yields across the fixed income market as investors adjust to a lower interest rate environment.
The Monetary Policy Committee cut the Monetary Policy Rate by 350 basis points from 26.5 per cent at its 307th meeting in Abuja on Tuesday. The decision came against a backdrop of moderating inflation.
Headline inflation fell to 15.39 per cent in August from 15.43 per cent in July, while food inflation declined to 19.57 per cent from 20.31 per cent. Month-on-month headline inflation also slowed to 0.71 per cent from 1.57 per cent.
Fixed income yields had already begun declining before the MPC decision. At its latest Open Market Operations auction, the CBN offered N1tn of bills, attracting N6.31tn in subscriptions and allotting about N4.4tn.
The 154-day OMO bill cleared at 18.41 per cent, while demand for the instrument reached N4.2tn against an offer of N400bn. Its true yield was 19.96 per cent, down from 20.64 per cent at the previous auction.
