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CBN unveils Nigerian Overnight Financing Rate as New Money Market Benchmark
The Central Bank of Nigeria announced on Friday the launch of the Nigerian Overnight Financing Rate (NOFR), a new benchmark for the country’s money market designed to boost transparency and strengthen the transmission of monetary policy.
The announcement was made in a press statement signed by Hakama Sidi-Ali, the bank’s Acting Director of Corporate Communications. According to the statement, the initiative was developed alongside the Financial Markets Dealers Association to help deepen the financial system.
“The Central Bank of Nigeria, in collaboration with the Financial Markets Dealers Association, today announced the introduction of the Nigerian Overnight Financing Rate, a standardised benchmark aimed at enhancing transparency, strengthening monetary policy transmission, and deepening Nigeria’s money market,” part of the statement read.
The CBN said the new rate brings Nigeria in line with global standards for short-term interest rate benchmarks and is expected to improve pricing efficiency in the money market. “NOFR was developed to align Nigeria with global best practices in short-term interest rate benchmarks. It is expected to improve price discovery and transparency while promoting consistent pricing of money market instruments,” the bank added.
The Central Bank noted that the benchmark would boost the effectiveness of monetary policy, support financial innovation, increase investor confidence, and enhance risk management across the financial system. It also said the NOFR places Nigeria alongside global benchmarks such as the US SOFR, the UK’s SONIA, the Eurozone’s €STR, Japan’s TONA, and complements Africa’s JIBAR in South Africa.
The CBN disclosed that the benchmark was finalised after a stakeholder meeting on February 27, 2026, where market participants adopted the rate, followed by regulatory approval. The rate is now operational, with the CBN acting as the benchmark administrator responsible for governance, transparency, and regular publication.
“Following a stakeholder engagement session held on February 27, 2026, where market participants formally adopted the benchmark and subsequent regulatory approval, NOFR is now in use, with the CBN serving as the benchmark administrator. The Bank will ensure governance, transparency, and regular publication of the rate,” the statement said.
Additional details from a set of Frequently Asked Questions released alongside the statement show that the NOFR is designed as a risk-free benchmark reflecting the cost of overnight secured funding in the interbank market, based strictly on actual transactions rather than estimates. The framework clarifies that the rate is not a monetary policy tool and is distinct from key policy indicators such as the Monetary Policy Rate; instead, it serves as a reference for pricing financial instruments and contracts across the system.
The document further states that the benchmark is published daily at 10:00 a.m. on the next business day after transactions are recorded, reinforcing transparency and consistency in market pricing. For financial institutions, only naira-denominated overnight secured transactions in the interbank market that meet defined thresholds are eligible for inclusion. The rate is computed using a volume-weighted trimmed mean methodology that removes extreme values to ensure accuracy.
In cases where transaction data is insufficient, the previous day’s rate is retained and clearly disclosed—a safeguard intended to maintain continuity in the benchmark. The FAQs note that while the new rate may serve as a reference for certain corporate and structured loans, it does not directly determine borrowing costs, which remain influenced by credit risk, tenor, and the contractual terms agreed between lenders and borrowers.
For investors, the rate is expected to play a key role in pricing, valuation, discounting, and risk management of naira-denominated financial instruments, further deepening activity in the domestic money market. Retail customers, however, will not see direct changes to their savings or loan rates, as those continue to be determined by banks based on broader cost and risk considerations. Still, the improved transparency is expected to strengthen overall confidence in the financial system.
On governance, the document states that any correction to the benchmark would occur only in the case of a material error and must be fully disclosed. The methodology underpinning the rate will be reviewed at least annually by the CBN to ensure it remains robust and aligned with market realities.
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