The Central Bank of Nigeria (CBN) has officially launched the Nigerian Overnight Financing Rate (NOFR) as the new standardized benchmark for the country’s money market. Announced on Friday, the transition aims to enhance transparency, improve price discovery, and align Nigeria’s financial system with global best practices for short-term interest rates.
Developed in collaboration with the Financial Markets Dealers Association (FMDA), the NOFR serves as a risk-free reference rate reflecting the cost of secured overnight Naira funding among financial institutions. The apex bank confirmed that the rate is now operational, with the CBN acting as the benchmark administrator responsible for its governance and daily publication.
The introduction of the NOFR follows a formal adoption process by market participants during a stakeholder engagement session held on February 27, 2026. By implementing this transition, the CBN seeks to strengthen the effectiveness of monetary policy transmission and boost investor confidence by providing a more consistent pricing mechanism for money market instruments.
This shift marks a significant departure from the previous reliance on the Nigerian Inter-Bank Offered Rate (NIBOR), which was often criticized for being based on expert judgment rather than actual transaction data. Historically, the Nigerian financial market has struggled with volatility and opaque pricing in inter-bank lending; the NOFR addresses this by utilizing a “transaction-based” methodology, using the actual rates at which banks borrow and lend to one another overnight.
By adopting a risk-free rate (RFR) model, the CBN is following the global “LIBOR transition” movement that began after the 2012 price-fixing scandals exposed vulnerabilities in quote-based benchmarks. The NOFR is designed to function similarly to the Secured Overnight Financing Rate (SOFR) in the United States and the Sterling Overnight Index Average (SONIA) in the United Kingdom, providing a data-driven anchor that reduces the risk of market manipulation and ensures that interest rates more accurately reflect the liquidity conditions of the Naira.
According to a statement from the bank’s Acting Director of Corporate Communications, Hakama Sidi Ali, the new benchmark positions Nigeria alongside leading international standards. Financial analysts expect the move to deepen the local money market and provide a robust foundation for financial innovation, particularly in the derivatives and hedging sectors.
“It is expected to improve price discovery and transparency while promoting consistent pricing of money market instruments. It will enhance the effectiveness of monetary policy, support financial innovation, boost investor confidence, and strengthen risk management across the financial system.” CBN noted. The CBN reiterated its com
