Naira Falls to N1,400/$ in Parallel Market After MPC Cuts Rate by 350bps

The naira weakened 1.08 per cent to N1,400 to the dollar in the parallel market, two days after the Central Bank of Nigeria (CBN) led Monetary Policy Committee (MPC) cut the benchmark interest rate by 350 basis points.

The local currency shrugged off the pressure at the official window, where it firmed 0.23 per cent to N1,328 to the dollar. That left a gap of N72 to the dollar between the official and parallel market rates.

Rewane Tracks the Transmission

In an emailed note to investors, Bismarck Rewane, Managing Director of Financial Derivatives Company Limited, said the MPC cut the policy rate to 23 per cent from 26.50 per cent and narrowed the corridor to plus 50 and minus 300 basis points. That put the deposit window at 20 per cent and lending at 23.50 per cent.

Rewane said the transmission everyone was waiting for has arrived, and it has gone into the bond market rather than into credit.

"For Nigeria, today's money market rates confirm it. The open repo rate fell a full point to 21.00 per cent and overnight to 21.76 per cent, against 22.00 per cent and 22.27 per cent yesterday," he said.

"The price of money has finally moved. What has not moved is the direction of the money itself, which is still going to the CBN. Cardoso called the corridor change an operational reset rather than a shift in stance, and both markets have taken him at his word."

Yields Fall Across Every Tenor

Analysts said yields fell across every tenor at Wednesday's auction. The 364 day bill cleared at 15.89 per cent from 16.62 per cent, a true yield of 18.89 per cent, on bids of N4.09 trillion against N400 billion offered and N447.07 billion allotted.

The 91 day bill cleared at 15.50 per cent and the 182 day at 15.80 per cent. Both were undersubscribed.

Reserves as a Buffer

Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), said that despite the current pressure on the naira, the local currency still has great potential. Foreign reserves at nearly $55 billion, he said, present a strong buffer for the naira against global shocks.

The CBN explained that monetary reform cannot be effective in a vacuum. Alignment with fiscal policy has strengthened Nigeria's macro stability and yielded tangible results, including reduced domestic borrowing costs, improved liquidity conditions, and more predictable fiscal operations.

For Nigerian businesses, the wider N72 gap between the two windows keeps parallel market pricing as the reference point for importers and dollar earners. Cheaper money in the bond market has not yet reached credit, and that is the channel that would ease funding costs for firms.