Interbank rate falls to 11-month low as funding pressure eases

Nigeria’s inter-bank call rate has fallen to an 11-month low of 24.5 percent in October 2025, reflecting improved liquidity in the banking system as funding pressures ease, following the Central Bank of Nigeria (CBN)’s gradual interest rate cuts.

The inter-bank call rate, also known as the call money rate, is the interest rate at which banks lend money to one another for very short periods, usually overnight or for a few days. Data from the CBN show that the last time the banking sector recorded such a low inter-bank call rate was on November 4, 2024, when it stood at 19 percent. The rate had peaked at 32.5 percent on March 13, 2025, before declining from 26.5 percent on September 22, 2025, to 24.5 percent on September 24, 2025, where it has remained steady as of October 9, 2025.

Explaining the trend, Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., said several factors contributed to the decline. He noted that the relatively low borrowing by the federal government in the domestic market improved liquidity in the financial system. In addition, the adjustment of the Cash Reserve Ratio (CRR) at the last Monetary Policy Committee (MPC) meeting helped to ease funding pressures on banks.

Olubunmi added that proceeds from ongoing capital-raising exercises also boosted the funding base of many banks. “All these reduced the demand at the market, which resulted in the lower rates,” he said.

According to Ayodele Akinwunmi, chief economist at United Capital Plc, the decline in inter-bank rates also reflects improvements in the macroeconomic environment, a gradual decline in inflation, exchange rate stability, improved external reserves, and stronger growth prospects for the economy. “These factors are driving a general moderation in interest rates across different segments of the market, including the inter-bank market,” he explained.

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Tilewa Adebajo, chief executive officer of CFG Advisory, described the development as a positive sign that monetary policy adjustments are taking effect. “It shows that the rate cuts have been implemented and transmitted into the system,” he said.

Last month, the CBN reduced its benchmark interest rate – the Monetary Policy Rate (MPR) – by 50 basis points to 27 percent from 27.50 percent, in a bid to support economic growth and sustain the inflow of foreign portfolio investments. Olayemi Cardoso, CBN governor, who announced the decision at the end of a two-day MPC meeting in Abuja attended by all 12 committee members, said the committee sought to balance monetary easing with targeted liquidity controls.

To support bank lending and credit to the private sector, the MPC reduced the CRR for commercial banks to 45 percent from 50 percent while retaining it at 16 percent for merchant banks. At the same time, it introduced a 75 percent CRR on non-Treasury Single Account (TSA) public sector deposits to mop up excess liquidity from fiscal inflows. The Standing Facilities Corridor (SFC) was widened to plus or minus 250 basis points around the MPR to strengthen monetary policy transmission, while the liquidity ratio was maintained at 30 percent.

Data from the CBN also show a decline in the Open Buy Back (OBB) rate, which fell to 26.50 percent as of October 12, 2025, from a peak of 32.58 percent on February 13, 2025. The lowest OBB rate in the last one year was recorded on November 19, 2024, at 24.25 percent. An OBB is a short-term secured lending arrangement between banks, where one party sells government securities to another with an agreement to repurchase them at a later date, often the next day, at an agreed price. The arrangement allows banks with excess funds to lend to those with temporary shortfalls, using government securities as collateral to manage short-term liquidity safely.

In its latest market commentary, Parthian Research reported that system liquidity increased by N693.57 billion, resulting in an opening credit balance of N4.49 trillion. Consequently, the overnight policy rate closed flat at 24.50 percent, while the overnight rate declined by two basis points to 24.84 percent. Analysts at Parthian Securities said they expect inter-bank rates to remain around current levels in the near term.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.