The Central Bank of Nigeria (CBN), in collaboration with the Financial Markets Dealers Association (FMDA), has introduced the Nigerian Overnight Financing Rate (NOFR) as a new benchmark aimed at enhancing transparency, improving price discovery, and strengthening the country’s money market.
The apex bank in a statement issued by its Ag. Director, Corporate Communications, Mrs Hakama Ali, on Friday, said the introduction of NOFR marks a significant step in aligning Nigeria’s financial system with global best practices in short-term interest rate benchmarks. It added that the rate, which reflects the cost of overnight secured funding in the interbank market, is based on actual transactions rather than estimates, thereby reducing the risk of manipulation and improving market confidence.
According to the CBN, the new benchmark is expected to deepen the money market by promoting consistent pricing of financial instruments, supporting financial innovation, and strengthening risk management across the financial system. It is also expected to enhance the effectiveness of monetary policy transmission, ensuring that policy decisions have a more direct impact on market rates.
The bank noted that NOFR positions Nigeria alongside leading global benchmarks such as SOFR in the United States, SONIA in the United Kingdom, €STR in the Eurozone, and TONA in Japan, while also complementing Africa’s JIBAR in South Africa.
The CBN, in its Comprehensive Frequently Asked Questions (FAQs) For All Stakeholders clarified that NOFR is not a monetary policy rate and is distinct from existing policy tools such as the Monetary Policy Rate (MPR).
According to the bank, “The introduction of the Nigerian Overnight Financing Rate represents a major milestone in our ongoing efforts to deepen the Nigerian financial markets. By anchoring the benchmark on actual transactions, we are promoting transparency, credibility, and global alignment.
“NOFR will significantly improve price discovery and ensure more efficient transmission of monetary policy. This will ultimately strengthen market confidence and support sustainable growth across the financial system.
“As the benchmark administrator, the Central Bank of Nigeria is committed to ensuring robust governance, transparency, and the consistent publication of the rate in line with international best practices.
“This initiative positions Nigeria alongside leading global markets that have adopted risk-free reference rates, reinforcing our commitment to building a resilient, transparent, and investor-friendly financial ecosystem.
“The adoption of NOFR by market participants reflects strong industry collaboration and a shared commitment to modernising Nigeria’s financial architecture. It provides a reliable benchmark that institutions can confidently reference in pricing and risk management.
“Over time, NOFR is expected to support financial innovation and the development of new products in the money market, while reducing reliance on less transparent benchmarks and strengthening overall market integrity.”
