CBN Cut MPR to 23% as Naira Firms, Equities Gain N1.5trn

The Central Bank of Nigeria has cut the Monetary Policy Rate by 350 basis points to 23.00 per cent, triggering measured optimism across the financial markets. The naira closed the week stronger, external reserves rose and equities gained N1.5 trillion.

MPR cut and corridor adjustment

The Monetary Policy Committee of the CBN announced the cut at the end of its two-day 307th policy meeting earlier in the week. It reduced the MPR from 26.50 per cent to 23.00 per cent. The committee also adjusted the Standing Facilities Corridor around the MPR from +50 and -450 basis points to +50 and -300 basis points. Other parameters were left unchanged.

Naira firms, reserves rise

The naira closed the weekend stronger at N1,330.68 per dollar at the Nigerian Foreign Exchange Market, representing an appreciation of 0.1 per cent during the week. In the forwards market, the naira appreciated across all tenors by 0.2 per cent each. The one-month forward appreciated to N1,349.27 per dollar. The three-month trade closed at N1,386.17 per dollar, while the six-month and one-year forwards improved to N1,438.33 per dollar and N1,541.80 per dollar respectively.

The nation’s external reserves increased by $136.76 million to $54.86 billion, underlining increasing inflows from multiple sources.

Equities add N1.5trn

On the back of expectations of a reduction in the cost of funds, Nigerian equities rallied N1.5 trillion in net capital gains to close the weekend with a total market capitalisation of N163.655 trillion. The benchmark All Share Index rose by 0.92 per cent to push the country’s average year-to-date return to 62.01 per cent, one of the five highest returns globally.

For the naira, the stronger close and rising reserves suggest the market took the policy shift in stride. For Nigerian businesses and consumers, the cut is expected to lower the cost of funds, though the actual pass-through to lending rates remains the key test.