Interbank Call Rate Drops to 26.50% Amid MPR at 27.50%

Kayode Tokede

Following the decision of the Monetary Policy Committee (MPC) of the Central  Bank of Nigeria (CBN) to retain Monetary Policy Rate (MPC) at 27.50 per cent for the second consecutive meetings  this year, the average interbank call rate in the Nigerian banking sector dropped to 26.50 per cent as of June 02, 2025.

For the second consecutive  meetings in 2025, the MPC of CBN voted to retain MPR at 27.50 per cent in a move to tackle inflation rate and stabilize the foreign exchange market. 

Also, the members also cited the need to monitor global economic uncertainties before adjusting key monetary tools.

Average interbank call rate is the rate at which banks lend and borrow money from each other on a short-term basis.

The interbank call money rate is primarily determined by the demand and supply of funds in the interbank market and is used as a benchmark rate for other short-term lending rates. It is exactly like when a person borrows money from someone and promises to repay it the next day but with interest.

Since the MPC announced that MPR should remain flat at 27.50 per cent on May 20, 2025, the  average interbank call rate has witnessed drastic decline from above 30 per cent. 

Data by CBN revealed that the average interbank call rate jumped to 31.50 per cent in January 17, 2025, which is the highest since October, 2017 when it reached a peak of at 43.78per cent.

The average interbank call rate, which opened the new year at 26.5 per cent, crossed the 30 per cent mark to 30.15 per cent on January 13, 2025 and it has reached its peak of 31.85 per cent this year. 

Data sighted by THISDAY on the CBN website revealed that the weighted average call rate closed December 2024 at 28.83per cent from 16.43 per cent January 2024.

Further findings showed that the average interbank call rate had opened at 14 per cent in January 2023 and closed at 12 per cent December 2022.

In 2024, as the MPC  of CBN was increasing MPR, the average interbank call rate also grew significantly.

Specifically, when the average interbank call rate was at 18.75 per cent in January 2024, the average interbank call rate stood at 16.43 per cent.

Meanwhile, the increase in MPR to 22.75 per cent in February 2024 saw a growth in the average interbank lending rate to 19.25 per cent. 

In addition, MPR at 27.50 per cent impacted on the average interbank rate that closed 2024 at 28.88 per cent and that was the highest in 2024.

Analysts have attributed the downward in average interbank call rate to stable MPR, calling on banks to relate the changes in lending to customers. 

The Vice President, Highcap Securities Limited, Mr. David Adnori said the 26.50 the per cent average interbank call rate is an implication of enough on liquidity in the money market at the moment.

He expressed that the CBN status quo on the MPR also contributed to the downward movement in interbank call rate, maintaining its importance of slowing down inflation rate and stabilizing the economy at large. 

 “The average Interbank Call Rate remaining at 26.50 per cent is primarily determined by the demand and supply of funds in the interbank market and is used as a benchmark rate for other short-term lending rates. It is often an important indicator of the overall liquidity and health of the banking system,” he added.

As the average interbank call rate increases, the rate of which  the banks lend to customers was not left out.

According to the CBN data, the average maximum lending rate in the Nigerian banking industry increased to 31.19 per cent in March 2025, setting another record high since 2019 when it was at 31.43per cent.

Maximum lending rates refers to the average of the highest lending rates charged by deposit money banks in Nigeria.

From the CBN’s ‘money market indicators’, THISDAY gathered that an increase in the average maximum lending rate has a relationship with a hike in MPR.

In 2024, the CBN increased the MPR six times, with the primary objective to address key economic challenges such as double-digit inflation, foreign exchange stability, and financial system stability.

When inflation is high (currently at 23.71 per cent as of April 2025), the CBN retains the MPR to make borrowing more expensive and saving more attractive.

However, the steep increase in the policy rate has sparked concerns regarding the potential impact on the cost of credit for businesses already facing economic hardships.

Responding to hike in maximum lending rate as of March 2025,  the Chief Research Officer, InvestData Consulting Limited, Mr. Omordion Ambrose said, “Businesses need a lot of credit facilities to survive, but in an environment where the lending rate is astronomical high, many enterprises, especially small and medium-scale, might find it extremely difficult to survive as their products will remain uncompetitive and the cost of production and the sale prices to consumers will remain high.”

He added that, “A hike in interest rate is often considered a manufacturers’ nightmare as it stifles productivity and expansion.A hike in interest rate slows down productivity, as manufacturers struggle to keep machinery in operations and pay salaries. Those who look forward to borrowing for expansion and production will have to shelve such ideas in the face of the high cost of accessing funds.”