NIGERIA ALIGNS WITH GLOBAL FINANCIAL STANDARDS AS CBN INTRODUCES NOFR
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By: Balogun Ibrahim
The Central Bank of Nigeria (CBN) on Friday announced the introduction of the Nigerian Overnight Financing Rate (NOFR), a new benchmark for the country’s money market designed to improve transparency and enhance the transmission of monetary policy.
The announcement was made in a statement issued by the Acting Director of Corporate Communications, Hakama Sidi-Ali.
According to the CBN, the initiative was developed in partnership with the Financial Markets Dealers Association as part of efforts to deepen and modernise Nigeria’s financial system.
The apex bank explained that NOFR is a standardised benchmark intended to strengthen monetary policy effectiveness, improve price discovery, and promote greater transparency in the money market.
It added that the new rate aligns Nigeria with global best practices in short-term interest rate benchmarks, similar to SOFR in the United States, SONIA in the United Kingdom, €STR in the Eurozone, and TONA in Japan, as well as complementing South Africa’s JIBAR.
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The CBN disclosed that the benchmark was adopted following a stakeholder engagement held on February 27, 2026, where market participants formally approved its use, after which regulatory clearance was granted. The rate is now operational, with the CBN acting as its administrator responsible for governance, transparency, and daily publication.
The bank further stated that NOFR is designed as a risk-free rate reflecting the cost of overnight secured funding in the interbank market, based strictly on actual transactions rather than estimates. It is intended for use as a reference rate in pricing financial instruments, rather than as a monetary policy tool like the Monetary Policy Rate.
According to the framework, the rate will be published daily at 10:00 a.m. on the next business day after transactions are recorded to ensure consistency and transparency.
Only naira-denominated overnight secured interbank transactions that meet defined criteria will be included in its calculation, which uses a volume-weighted trimmed mean methodology to reduce the impact of outliers.
In instances where transaction data is insufficient, the previous day’s rate will be carried over and clearly disclosed to maintain continuity.
The CBN also clarified that while NOFR may serve as a reference for some corporate and structured lending products, it does not directly determine borrowing costs, which remain dependent on credit risk, tenor, and contractual agreements.
For investors, the benchmark is expected to improve pricing, valuation, discounting, and risk management of naira-denominated assets, thereby enhancing activity in the domestic money market. Retail lending and savings rates, however, are not expected to change directly, as banks will continue to set them based on broader cost and risk factors.
On governance, the apex bank said any corrections to the benchmark would only be made in cases of material error and would be fully disclosed, while the methodology will be reviewed annually to ensure it remains robust and aligned with market conditions.
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