The Central Bank of Nigeria (CBN), in collaboration with the Financial Markets Dealers Association (FMDA), has unveiled a new money market benchmark aimed at curbing pricing manipulation and strengthening investor confidence in Nigeria’s financial system.
The benchmark, known as the Nigerian Overnight Financing Rate (NOFR), was formally announced on Friday as a transaction-based reference rate designed to enhance transparency, improve price discovery, and align Nigeria’s financial markets with global standards.
In a statement issued by the CBN’s Acting Director of Corporate Communications, Hakama Sidi Ali, the apex bank said the introduction of NOFR marks a shift away from estimate-driven pricing frameworks to a system anchored on actual market transactions.
According to the statement, “NOFR was developed to align Nigeria with global best practices in short-term interest rate benchmarks.” It added that the rate “is expected to improve price discovery and transparency while promoting consistent pricing of money market instruments.”
The CBN further noted that the new benchmark “will enhance the effectiveness of monetary policy, support financial innovation, boost investor confidence, and strengthen risk management across the financial system.”
NOFR reflects the cost of overnight secured funding in Nigeria’s interbank market and is derived strictly from real transactions, not projections. Under the framework, only naira-denominated overnight secured repo transactions with a minimum size of N5 billion are considered in its calculation.
To ensure credibility, the rate is computed using a volume-weighted trimmed mean methodology, which excludes the lowest and highest 10 percent of transaction volumes before averaging the remaining rates. Where transaction data is insufficient, the benchmark defaults to the previous business day’s rate, with full disclosure.
The CBN clarified that NOFR is not a monetary policy rate and is distinct from instruments such as the Monetary Policy Rate. Instead, it serves as a market-based reference rate that can be used for pricing, valuation, discounting, and risk management of financial instruments.
The introduction follows a stakeholder engagement session held on February 27, 2026, where market participants formally adopted the benchmark before receiving regulatory approval.
With the rollout, Nigeria joins a growing list of jurisdictions that have embraced transaction-based benchmarks, including the United States’ SOFR, the United Kingdom’s SONIA, and the Eurozone’s €STR. In Africa, it complements South Africa’s JIBAR.
For corporates and investors, the CBN explained that while NOFR may be referenced in certain loans and financial contracts, it does not directly determine borrowing costs, which remain influenced by credit risk, tenor, and contractual terms.
Retail customers, the bank added, will benefit indirectly through improved transparency and increased confidence in the financial system, even though the benchmark does not set savings or consumer loan rates.
The apex bank also assured that it will oversee the governance and daily publication of the rate, with reviews of its methodology conducted at least once a year to ensure continued relevance and integrity.
With NOFR now operational, analysts say the move could mark a turning point in Nigeria’s money market, helping to reduce manipulation risks while reinforcing investor trust in the country’s financial architecture.
