The Central Bank of Nigeria, in collaboration with the Financial Markets Dealers Association, has officially launched the Nigerian Overnight Financing Rate as the country’s new benchmark interest rate for the money market, a move that brings Nigeria in line with international financial standards .
The CBN announced the introduction of the NOFR on Friday in a statement signed by the acting Director of Corporate Communications, Mrs Hakama Sidi Ali.
According to the apex bank, the new rate is a transaction-based benchmark designed to enhance transparency, strengthen monetary policy transmission, and deepen Nigeria’s financial markets .
Unlike the outgoing Open Buy Back and Overnight rates, which were based on estimates and faced limitations in transaction depth, the NOFR will reflect the actual cost of secured overnight funding in the interbank market, derived from real market transactions rather than dealer quotations .
This methodological shift is expected to reduce the risk of manipulation and provide a more accurate picture of liquidity conditions in the banking system.
Mrs Ali stated that the NOFR was developed to align Nigeria with global best practices in short-term interest rate benchmarks.
The introduction positions Nigeria alongside leading international benchmarks such as the Secured Overnight Financing Rate in the United States, the Sterling Overnight Index Average in the United Kingdom, the Euro Short-Term Rate in the Eurozone, and the Tokyo Overnight Average Rate in Japan .
The rate also complements the Johannesburg Interbank Average Rate in South Africa, reinforcing Nigeria’s integration into African and global financial markets.
According to the CBN, the new benchmark is expected to improve price discovery and promote 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 .
The development of the NOFR followed a structured engagement process with market stakeholders. A strategic meeting was held at the CBN Head Office in Abuja on February 27, 2026, where treasurers from Deposit Money Banks and other key industry participants formally adopted the benchmark .
The process was supported by the European Bank for Reconstruction and Development, which provided technical assistance in reviewing the benchmark methodology to ensure alignment with domestic market realities while maintaining international best practices .
Following regulatory approval, the NOFR is now in use, with the CBN serving as the benchmark administrator. The bank stated that it would ensure proper governance, transparency, and regular publication of the rate . According to guidelines released by the CBN, the rate will be published daily at 10:00 a.m. Lagos time on the next working day after transactions are recorded. It will be calculated using a method that averages transaction rates while removing extreme values to ensure accuracy .
To qualify for inclusion in the NOFR calculation, transactions must involve overnight lending in naira, be backed by securities such as government bonds or Treasury bills, and meet a minimum size of N5 billion. Where there are insufficient qualifying transactions on any given day, the previous day’s rate will be used, with clear disclosure to the market .
Market participants have welcomed the initiative. The Financial Markets Dealers Association noted that the transition towards a secured, transaction-based benchmark could support the development of Nigeria’s repo market, improve pricing transparency, and enhance monetary policy transmission .
The CBN described the introduction of the NOFR as a major step toward strengthening Nigeria’s financial system with a modern, transparent, and transaction-based benchmark for the money market .
Dr Okey Umeano, Deputy Director in the CBN’s Financial Markets Department, had earlier stated that the initiative underscores the bank’s commitment to maintaining the credibility and efficiency of Nigeria’s money market . The CBN has assured that the methodology for calculating the rate will be reviewed regularly and that corrections will only be made in rare cases of significant error, with any changes clearly communicated to the market .
With the NOFR framework now operational, the benchmark is expected to gradually evolve into the primary reference rate for overnight funding, marking a significant milestone in the modernisation of Nigeria’s financial market infrastructure .
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