CBN cuts MPR by 350bps to 23%, reshapes investor allocations nationwide
FG's Central Bank of Nigeria cut the Monetary Policy Rate by 350 basis points to 23% at its September meeting, adjusting the standing facilities corridor to +50/-300 basis points—setting the Standing Lending Facility at 23.5% and the Standing Deposit Facility at 20% while keeping the Cash Reserve Requirement at 45%. Treasury bill yields have already been sliding, with the 364-day rate at 16.62% in September, marking three straight declines. Fixed‑income investors face further pressure on new issues, though existing holders of higher‑yielding bonds may see price gains as yields fall. The lower‑rate environment could make equities relatively more attractive, but analysts warn the rally will be selective, favouring companies with strong earnings, healthy balance sheets and clear benefit from cheaper financing—such as selected banks, cement producers and consumer‑goods firms. For banks, the reduced return on excess liquidity (now 20% at the CBN) and cheaper short‑term funding (23.5% via the Standing Lending Facility) may encourage more lending, yet net interest margins could come under pressure while asset quality improves as borrowers’ debt‑servicing burdens ease. Investors should monitor Treasury bill and bond yields, bank lending/deposit rates, the naira and portfolio flow data to gauge how quickly the rate cut transmits to the real economy and where to shift allocations.