CBN Cuts Monetary Policy Rate, Investors Shift to Long-term Securities

The Central Bank of Nigeria (CBN) reduced the Monetary Policy Rate (MPR) by 350 basis points from 26.5 percent to 23 percent, triggering a decline in fixed-income yields. The Financial Markets Dealers Association (FMDA) reported that this change prompted investors to seek longer-term securities to secure current returns before potential further rate adjustments.

The recent Treasury bills auction showed strong demand for the 364-day instrument, achieving a bid-to-cover ratio of 13.65 times. Average Treasury bill yields fell from 18.77 percent to 17.81 percent, while Open Market Operations (OMO) yields decreased from 19.80 percent to 18.51 percent.

The Nigerian Overnight Financing Rate (NOFR) also dropped from about 22 percent to around 20 percent following the MPC meeting. The FMDA noted that the MPR reset signals a restoration in monetary policy transmission across financial markets.

Average bond yields decreased from 16.5 percent to 16 percent, with the 15-year bond yield dropping significantly from 16.35 percent to 14.40 percent.