The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) reduced the Monetary Policy Rate (MPR) by 50bps to 27.0% (from 27.5%), signaling the first shift towards monetary policy easing since 2020.
This decision was driven by the sustained disinflationary trend and continued naira stability. In addition, the Committee revised the asymmetric corridor around the MPR to +250bps/-250bps (from +500bps/-100bps) and lowered the Cash Reserve Ratio (CRR) for deposit money banks to 45.0% (from 50.0%).
To strengthen liquidity management, the MPC introduced a 75.0% CRR on non-Treasury Single Account (TSA) public sector deposits. On the other hand, the CRR for merchant banks and the liquidity ratio were maintained at 16.0% and 30.0%, respectively.
On Domestic Growth: The Committee acknowledged the robust growth recorded in Q2-25 (+4.23% y/y vs. Q1-25: +3.13% y/y), reflecting higher growth across the oil and non-oil sectors.
On Inflation: The MPC also noted the sustained decline in headline inflation, which eased by 176bps to 20.12% y/y in August, supported by tight monetary policy, the relative stability of the naira and steady PMS prices, all of which have helped anchor inflation expectations.
On the External Sector: The MPC highlighted the notable improvement in external reserves, which rose to USD43.05 billion as of September 11 (from USD40.51 billion in July 2025), providing approximately 8.3 months of import cover. The Committee also noted that the current account surplus widened to USD5.28 billion in Q2-25, compared to USD2.85 billion in Q1-25.
On Global Developments: The Committee noted the IMF’s upward revision of global GDP growth for 2025 to 3.0% y/y (from 2.8%), driven largely by reduced trade frictions following successful negotiations with the US and further easing in global monetary policy. However, lingering geopolitical tensions and persistent trade uncertainties remain key downside risks.
Cordros’ View
The MPC’s policy adjustment reflects optimism over recent improvements in key macroeconomic indicators, which are expected to remain favourable in the near term.
Notably, the Committee adjusted the asymmetric corridor around the MPR to +250/-250bps (from +500/-100bps) and reduced the CRR for Deposit Money Banks to 45.0% (from 50.0%), measures aimed at easing financial conditions and supporting private sector credit.
Conversely, the CBN introduced a 75.0% CRR on non-TSA public sector deposits to sterilise excess liquidity from higher FAAC distributions driven by increased government revenue. While monetary conditions are gradually being loosened for the private sector, the MPC remains cautious about surplus public sector inflows, which could undermine naira stability and disrupt the disinflation process.
Overall, we believe the move strengthens monetary policy transmission, mitigates risks of currency speculation, and reinforces the disinflationary trend.
Looking ahead, we expect further monetary policy easing, supported by projections of sharper declines in inflation in the coming months. Precisely, headline inflation is likely to trend towards 18.0% by October, which may warrant a more decisive policy adjustment at the next MPC meeting. As such, we anticipate a 100bps reduction in the MPR at the November meeting scheduled for the 24th and 25th.
Market Impact
Fixed Income: We expect the ease in monetary conditions and dovish policy guidance to anchor a broad-based moderation in yields across the fixed income curve. At the short end, OMO and NTB yields are expected to pare as improved liquidity fuels strong demand for short-dated instruments, flattening the curve in the near term. In the bond market, mid-tenor papers are expected to benefit the most from stronger demand, driving faster yield compression relative to the long end, where elevated fiscal borrowing requirements may temper declines.
Meanwhile, lower sovereign benchmarks will cascade into the corporate debt space, reducing borrowing costs and supporting refinancing activity, even as credit risk premia keep spreads differentiated across issuers. Collectively, these dynamics point to a bull phase in fixed income, characterised by stronger duration demand, more active corporate issuance, and a recalibration of yield expectations across all market segments.
Equities: Market sentiment has remained strong since the July MPR meeting, with the NGX All-Share Index (ASI) rising 6.4% during this period, bringing the YTD return to 36.9% as of September 23.
This positive momentum has been driven by a combination of factors, including relative exchange rate stability, moderating inflation, and stronger-than-expected H1-25 earnings. Looking ahead, the recent reduction in the MPR and CRR is expected to provide further support for the equities market, as moderating fixed income yields encourage portfolio rebalancing into risk assets.
The Committee’s decision to lower the CRR for Deposit Money Banks to 45.0% (from 50.0%) should also unlock incremental liquidity for private sector lending, with positive implications for sectors most sensitive to credit expansion. In addition, market performance will be influenced by sustained corporate earnings momentum through 9M-25, complemented by renewed interest from foreign portfolio investors.
The latter should be particularly reinforced by the US Federal Reserve’s recent rate cut, which narrows yield differentials and improves the relative attractiveness of Nigerian equities.
