CBN Adjusts Standing Facility Corridor to Stimulate Interbank Liquidity and Private Sector Lending

The Central Bank of Nigeria (CBN) has introduced a significant policy adjustment aimed at easing interbank funding pressures and encouraging greater credit flow to the private sector, while retaining the benchmark Monetary Policy Rate (MPR) at 27%. The move centres on a sharp revision of the Standing Lending Facility (SLF) and Standing Deposit Facility (SDF) corridor, representing one of the most targeted liquidity interventions by the apex bank this year.
According to the CBN, the revised asymmetric corridor from +250 basis points/-250 basis points to +50 basis points/-450 basis points around the MPR is designed to tackle two persistent challenges: elevated interbank borrowing costs and banks’ increasing preference for depositing idle liquidity with the central bank.

Under the new framework, the SLF rate has been reduced from 29.5% to 27.5%, while the SDF has been lowered from 24.50% to 22.50%. Economists note that this is a non-conventional easing signal that preserves price stability objectives while addressing liquidity constraints.

Razia Khan, Chief Economist and Head of Research for Middle East and Africa at Standard Chartered Bank, described the move as “significant easing,” noting that both ends of the corridor were adjusted by 200 basis points.

Implications for Interbank Activity and Credit Flow

Analysts at Meristem Securities explained that narrowing the SLF ceiling reduces the cost for banks seeking short-term liquidity, thereby lowering overnight interbank rates. Conversely, reducing the SDF return discourages banks from warehousing surplus funds with the CBN and nudges them toward higher on-lending to businesses.

Meristem analysts added: “The lower SDF yield reduces the attractiveness of placing idle balances with the CBN, while the narrower SLF spread limits the cost of covering end-of-day liquidity gaps. This combination should support greater interbank activity and aid monetary policy transmission.”

The adjustment is expected to boost liquidity already in the system, with banking sector liquidity currently estimated at ₦2.31 trillion. Market analysts anticipate that banks may increasingly allocate funds to fixed-income instruments where Nigerian Treasury Bill yields hover around 16.85%, or expand selective credit to the real sector.

Potential Impact on Private Sector Lending

The revised corridor structure marginally improves the risk-return balance for banks considering new credit creation, particularly for corporates requiring working capital or expansion financing. However, analysts caution that the high MPR continues to constrain borrowing appetite for some segments of the real economy.

“This measure supports liquidity and encourages lending, but the elevated policy rate still weighs on credit demand,” Meristem noted.

Outlook

The CBN’s corridor adjustment underscores its dual mandate of stabilising the naira while sustaining lending momentum in a high-inflation environment. While the policy shift is expected to improve liquidity and enhance the effectiveness of monetary policy transmission, its overall impact on private sector credit growth will depend on broader macroeconomic conditions, including inflation expectations, FX stability, and sovereign yield trends.