Economy
By Anthony Isibor
THE Nigerian financial market is set for a significant shift as the Central Bank of Nigeria, CBN, in partnership with the Financial Markets Dealers Association, FMDA, has introduced a new benchmark interest rate known as the Nigerian Overnight Financing Rate, NOFR.
The new rate is designed to improve transparency in the country’s money market, strengthen the effectiveness of monetary policy and bring Nigeria in line with global financial standards.
Announcing the development in a statement signed by Hakama Sidi Ali, Ag. Director, Corporate Communications on Friday, the CBN said that NOFR would serve as Nigeria’s official overnight risk-free interest rate benchmark. Unlike the traditional reference rates that may rely on estimates, NOFR is based strictly on actual transactions in the interbank market, specifically overnight secured lending between banks.
According to the apex bank, the move is expected to improve how financial instruments are priced, reduce the risk of manipulation and boost investor confidence in Nigeria’s financial system.
With this development, Nigeria joins other major economies that have adopted similar benchmarks, including the United States with SOFR, the United Kingdom’s SONIA, the Eurozone’s €STR, and Japan’s TONA. In Africa, South Africa operates a comparable system known as JIBAR.
The introduction of NOFR follows months of consultations with market stakeholders. At a key engagement session held on February 27, 2026, the participants formally adopted the benchmark, paving the way for regulatory approval and its eventual rollout.
The CBN will act as the administrator of the rate, ensuring proper governance, transparency and regular publication. NOFR will be published daily at 10:00 a.m. Lagos time, reflecting the cost of overnight funding from the previous business day.
Financial experts say the new benchmark could have far-reaching implications across the economy. For banks and financial institutions, NOFR will serve as a reliable reference for pricing loans and managing risk. For corporates, it may increasingly be used in structuring loans and financial contracts, although it will not directly determine borrowing costs, which still depend on factors like credit risk and loan terms.
Investors are also expected to benefit, as NOFR provides a clearer and more credible basis for valuing financial assets and managing portfolios.
For everyday banking customers, the impact may not be immediately visible. The CBN clarified that NOFR will not directly set savings or loan rates for individuals. However, it is expected to improve overall confidence in the financial system by ensuring greater transparency and consistency.
The methodology behind NOFR is also designed to ensure accuracy and fairness. It is calculated using a volume-weighted average of eligible transactions, with extreme values excluded to prevent distortions. In cases where there is insufficient data, the previous day’s rate will be used, with full disclosure.
The central bank added that the framework will be reviewed regularly to ensure it remains effective and aligned with global best practices.
The introduction of NOFR marks an important step in modernising Nigeria’s financial architecture, particularly at a time when the country is seeking to attract more investment and deepen its capital markets.
A.I
April 18, 2026
Tags: CBN Central Bank of Nigeria Financial Markets Dealers Association FMDA Hakama Sidi Ali NOFR