Meanwhile, the CBN has clarified that its recent adjustment of the MPR was not an easing of monetary policy, but a deliberate reset to close the widening gap between its benchmark rate and actual money-market conditions.
The apex bank said the move aimed to restore alignment between the policy signal and where liquidity and interest rates were trading in the financial markets.
Special Adviser to the CBN Governor on Financial Markets and Economic Policy, Mr. Mayokun Ajibade, explained that the distinction was important because the central bank’s policy stance remained “very restrictive” despite the adjustment in the benchmark rate.
Speaking during the “Drinks & Mics” session on Nairametrics TV, Ajibade said the latest decision should be understood as part of a longer process of rebuilding the monetary policy framework and making the MPR a more effective signal for the wider financial system.
“When you see the words ‘reset’ and ‘calibrate’, it is basically trying to tell the market something,” he said, stressing that “we did not ease.”
He added that “Policy stance is still very, very restrictive. What I think was delivered was a journey to reset.”
The comments came against the backdrop of the Monetary Policy Committee’s (MPC) September decision to cut the MPR by 350 basis points from 26.5 per cent to 23 per cent.
Ajibade noted that while the MPR had stood at 26.5 per cent, the SDF rate stood around 22 per cent, while the market yield curve had already moved considerably lower.
The divergence, he said, sent mixed signals about the actual direction of monetary policy.
Ajibade pointed to movements in the fixed-income market as evidence that the financial system had already begun adjusting to changing conditions.
“The market was already doing something,” he said.
The reset, he added, was partly an effort to align the official policy framework with the reality already emerging in the market.
Ajibade stressed that the move did not represent a return to indiscriminate monetary expansion, pointing out that the CBN had not simultaneously released large volumes of additional liquidity into the banking system.
The challenge for the CBN, therefore, was to influence the price of money while retaining sufficient control over liquidity to prevent renewed inflationary pressures.
Beyond the immediate rate adjustment, Ajibade said the CBN was working to strengthen the institutional architecture through which it transmits monetary policy.
He identified the development of the yield curve, overnight markets, repo transactions, fixed-income instruments and the foreign exchange market as part of the broader effort to establish reliable mechanisms for price discovery.
For monetary policy to work effectively, he stressed that changes in the CBN’s policy rate must be reflected predictably across financial markets.
He also linked the process to the wider effort to rebuild confidence in Nigeria’s economic institutions, pointing out that structural reforms could not be judged solely by their immediate political or economic optics.
He further described the relationship between fiscal, monetary and other economic management institutions as increasingly constructive, noting that disagreements among policymakers were part of the process of arriving at better decisions.
He said effort to make the country’s financial markets more functional was also reflected in the country’s recent return to a J.P. Morgan local-currency bond benchmark.
Ajibade said the development tested whether reforms to the foreign exchange and fixed-income markets had addressed structural concerns that had previously made Nigerian assets difficult for international investors to access.
He said the authorities, working with the Debt Management Office (DMO), had been addressing the deeper market conditions required for international investors to enter, trade and exit Nigerian securities efficiently.
Nigeria was removed from J.P. Morgan’s flagship local-currency bond index in 2015 amid concerns including foreign exchange liquidity, capital repatriation and market accessibility.
Ajibade said the authorities therefore focused on several interconnected issues, including FX liquidity, the depth of the domestic bond market, and the availability of sufficiently large and tradable benchmark securities.
The CBN adviser further disclosed that the apex bank was working with the National Bureau of Statistics (NBS) to improve data on Nigeria’s largely unmeasured informal economy, particularly informal cross-border trade.
He said the objective was to establish the scale and composition of transactions outside formal channels, arguing that effective policy could not be designed around poorly measured activities.
James Emejo and Kayode Tokede
