The Central Bank of Nigeria (CBN) on Friday announced the introduction of the Nigerian Overnight Financing Rate as a new benchmark for the country’s money market, aimed at enhancing transparency and strengthening monetary policy transmission.
The disclosure was contained in a statement issued by the apex bank’s Acting Director of Corporate Communications, Hakama Sidi-Ali.
According to the statement, the initiative was developed in collaboration with the Financial Markets Dealers Association to deepen Nigeria’s financial system.
It read, “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.”
The CBN explained that the new rate is designed to align Nigeria with global standards for short-term interest rate benchmarks.
“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 statement added.
The apex bank noted that the benchmark would improve the effectiveness of monetary policy, support financial innovation, and enhance investor confidence.
It also stated that the initiative would strengthen risk management practices across the financial system.
The CBN said the introduction of NOFR positions Nigeria alongside global benchmarks such as SOFR in the United States, SONIA in the United Kingdom, €STR in the Eurozone, and TONA in Japan, as well as Africa’s JIBAR benchmark in South Africa.
The bank disclosed that the benchmark followed a stakeholder engagement held on February 27, 2026, where market participants adopted the rate, alongside regulatory approval.
“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 noted.
PrimeTimes Nigeria reports that details released in a Frequently Asked Questions (FAQs) document showed that the Nigerian Overnight Financing Rate is designed as a risk-free benchmark reflecting the cost of overnight secured funding in the interbank market.
The rate is based strictly on actual transactions rather than estimates, improving credibility and accuracy in pricing.
It is published daily at 10:00 a.m. on the next business day after transactions are recorded, ensuring consistency and transparency.
The framework specifies that only naira-denominated overnight secured interbank transactions meeting defined thresholds are eligible for inclusion.
The rate is computed using a volume-weighted trimmed mean methodology to eliminate extreme values and ensure reliability.
In cases where transaction data is insufficient, the previous day’s rate is retained and clearly disclosed to maintain continuity.
The CBN clarified that NOFR is not a monetary policy tool and does not replace key indicators such as the Monetary Policy Rate.
Instead, it serves as a reference point for pricing financial instruments, contracts, and certain corporate loans.
For investors, the benchmark is expected to enhance pricing, valuation, discounting, and risk management of naira-denominated assets, thereby deepening activity in the domestic money market.
The apex bank noted that retail customers are unlikely to see immediate changes in savings or loan rates, as these remain influenced by broader cost and risk factors.
However, it added that improved transparency from the new benchmark is expected to strengthen overall confidence in the financial system.
On governance, the CBN stated that any corrections to the benchmark would only be made in cases of material error and must be fully disclosed.
It added that the methodology underpinning the rate would be reviewed at least annually to ensure it remains robust and aligned with market realities.