Nigeria’s ₦13.25tn October Liquidity: Why Lower Rates May Not Yet Cut Business Borrowing Costs

Nigeria’s banking system is projected to receive about ₦13.25tn in liquidity inflows in October, led by ₦9.05tn in OMO bill maturities. However, this does not automatically mean more money will be available for bank lending. The Central Bank of Nigeria is still absorbing excess cash through fresh OMO bill sales and other liquidity-management tools. Although the Monetary Policy Rate was reduced to 23%, the 45% cash reserve requirement and continued sterilisation could keep short-term funding conditions tight. Treasury-bill yields have started to decline, reflecting the lower policy-rate environment. Yet strong demand for CBN and government securities means banks still have attractive low-risk investment options instead of expanding private-sector credit. For businesses with floating-rate loans, refinancing needs or working-capital facilities, borrowing costs may fall only gradually. A sustained drop in money-market rates and Treasury yields will be needed before the policy-rate cut is fully reflected in corporate lending rates.

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