The Central Bank of Nigeria (CBN) has unveiled the Nigerian Overnight Financing Rate (NOFR), a new benchmark designed to enhance transparency, improve pricing efficiency, and strengthen monetary policy transmission within the country’s financial system.
The development was disclosed in a press statement issued by the Acting Director of Corporate Communications, Hakama Sidi-Ali.
According to the apex bank, the initiative was developed in collaboration with the Financial Markets Dealers Association as part of broader efforts to deepen Nigeria’s money market and align it with international standards.
“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 statement partly read.
The CBN noted that the introduction of NOFR places Nigeria alongside major global financial systems that utilise similar benchmarks, such as SOFR in the United States, SONIA in the United Kingdom, €STR in the Eurozone, and TONA in Japan.
It further explained that the rate is expected to improve how financial instruments are priced and traded by providing a reliable reference point based on actual market transactions rather than estimates.
“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,” it added.
Additional details released in a set of Frequently Asked Questions clarified that NOFR is designed as a risk-free benchmark reflecting the cost of overnight secured lending in the interbank market. The rate is calculated using real transaction data and employs a volume-weighted trimmed mean methodology to ensure accuracy by removing extreme values.
The benchmark will be published daily at 10:00 a.m. on the next business day after transactions are recorded, reinforcing transparency and consistency in market operations.
The CBN emphasized that NOFR is not a monetary policy tool and should not be confused with key policy indicators such as the Monetary Policy Rate. Instead, it serves as a reference for pricing financial instruments, contracts, and other market activities.
The bank also highlighted governance measures, stating that any corrections to the rate would only occur in cases of material error and would be fully disclosed. In addition, the methodology underpinning the benchmark will be reviewed at least annually to ensure it remains aligned with market conditions.
While the introduction of NOFR is expected to enhance investor confidence, support financial innovation, and strengthen risk management across the system, retail customers are unlikely to see immediate changes to savings or loan rates. These will continue to be determined by financial institutions based on broader cost and risk considerations.
The CBN confirmed that the benchmark became operational following a stakeholder engagement session held on February 27, 2026, where market participants formally 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.
The introduction of NOFR marks a significant step in modernizing Nigeria’s financial market infrastructure and improving the overall efficiency of its monetary system.
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