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The short answer
The interbank market is where banks with spare cash lend it to banks that are short, often just overnight, so each can meet its payments and reserve requirements. In Nigeria the rates move inside a corridor the CBN sets around the Monetary Policy Rate; as at September 2026 the MPR was 23% with a corridor of +50 and −300 basis points.
Why banks need to borrow overnight
Every day, millions of transfers move money between banks. By the close of business some banks have received more than they paid out and others less. Banks must also keep a share of deposits with the CBN as a cash reserve requirement. A bank that ends the day short must find cash quickly; a bank with a surplus wants to earn something on it. The interbank market matches the two.
- Unsecured overnight lending: one bank lends to another until the next working day, relying on its credit.
- Secured lending (repos): the borrower hands over government securities as collateral and buys them back later.
- Term lending: the same, for longer periods such as a week or a month.
How the CBN sets the range
The CBN's Monetary Policy Committee sets the Monetary Policy Rate (MPR) and an asymmetric corridor around it. The upper edge is the rate at which banks can borrow from the CBN's standing lending facility; the lower edge is what the CBN pays on its standing deposit facility. A bank will rarely pay another bank more than it would pay the CBN, or accept less than the CBN pays, so interbank rates tend to stay inside the corridor.
| Setting (as at Sep 2026, CBN MPC) | Level |
|---|---|
| Monetary Policy Rate | 23% |
| Corridor | +50 bp / −300 bp around the MPR |
| Implied standing lending rate | 23.5% |
| Implied standing deposit rate | 20% |
| Cash reserve requirement | 45% |
These settings change at MPC meetings. Check the latest communiqué on the CBN website for today's figures; the market's own overnight rate moves daily, so we do not quote one here; your bank's treasury desk or market data pages carry the day's figure.
What the rates tell you
When the overnight rate sits near the top of the corridor, the system is short of cash: banks are competing for funds. When it falls towards the bottom, there is surplus liquidity. Large tax payments, government spending, CBN bill sales and foreign-exchange interventions all shift this balance.
A worked example
Example: Bank A ends Tuesday ₦10bn short; Bank B has ₦10bn spare. If they agree an overnight rate of 22% a year, Bank A repays ₦10bn plus one day's interest on Wednesday: ₦10,000,000,000 × 22% ÷ 365 = about ₦6.03m. Had Bank A gone to the CBN's standing lending facility at 23.5%, one night would have cost about ₦6.44m; Bank B, parking the cash at the CBN's deposit facility at 20%, would have earned about ₦5.48m. Both do better dealing with each other, which is why the market trades inside the corridor.
When a bank cannot borrow
A bank that other banks will not lend to has to rely on the CBN's lending window. That is a warning sign. When the CBN revoked Skye Bank's licence in 2018, it cited, among other things, that the bank had been permanently borrowing from the CBN's lending window (ThisDay, 22 Sep 2018). Its deposits moved to Polaris Bank, a bridge bank (bridge banks explained).
Why it matters to ordinary savers
- Interbank rates feed into what banks pay on fixed deposits and charge on loans.
- Tight liquidity can show up as banks competing for deposits with better rates.
- Persistent heavy borrowing by one bank, if disclosed, is a sign to read its accounts closely (how to judge a bank's health).
Related reading: merchant banks vs commercial banks, which are among the most active interbank traders, and fixed deposit vs savings account.
Questions people ask
What is the interbank rate in Nigeria today?
It changes daily, so check a current market source. The CBN's MPR and corridor, set at each MPC meeting, define the range it usually trades in.
What is the difference between MPR and the interbank rate?
The MPR is the CBN's policy rate. The interbank rate is the price banks charge each other, which moves within the corridor around the MPR.
Why do banks borrow from each other?
To cover end-of-day shortfalls from customer payments and to meet reserve requirements at the CBN.
Does the interbank rate affect my savings?
Indirectly. When banks find overnight cash expensive, they tend to offer more for deposits, and loans cost more.
Sources
- Central Bank of Nigeria: Monetary Policy Committee decisions (Sep 2026) · accessed Oct 2026
- ThisDay: Polaris Bank takes over as Skye Bank's licence is revoked (22 Sep 2018) · accessed Oct 2026
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