In a significant step toward modernising Nigeria’s financial system, the Central Bank of Nigeria (CBN), in partnership with the Financial Markets Dealers Association (FMDA), has formally introduced the Nigerian Overnight Financing Rate (NOFR) as the country’s new standard benchmark for the money market.
The development marks a major shift in how short-term interest rates are determined in Nigeria, with the NOFR designed to serve as a transparent, transaction-based reference rate for overnight lending activities between financial institutions. It is expected to strengthen the credibility of market pricing while improving the overall efficiency of monetary policy transmission.
The CBN explained that the new benchmark was developed in line with global best practices already adopted in advanced financial markets. Internationally recognised equivalents include the Secured Overnight Financing Rate (SOFR) in the United States, SONIA in the United Kingdom, the Euro Short-Term Rate (€STR) in the Eurozone, and the Tokyo Overnight Average Rate (TONA) in Japan. Within Africa, South Africa’s Johannesburg Interbank Average Rate (JIBAR) has served a similar role in its own market structure.
By aligning with these global standards, the NOFR is expected to enhance price discovery in Nigeria’s financial system, reduce reliance on less transparent rate-setting mechanisms, and promote more consistent valuation of money market instruments. Market observers also expect it to support innovation in financial products and strengthen risk management practices across banks and other financial institutions.
According to the CBN, the introduction of NOFR will also reinforce investor confidence by providing a more reliable and transparent benchmark for short-term interest rates. This, in turn, is expected to improve liquidity conditions and deepen activity in Nigeria’s money market over time.
The adoption of the benchmark followed an extensive stakeholder engagement process, including a key consultation session held on February 27, 2026, where financial market participants formally endorsed the initiative. Subsequent regulatory approval paved the way for its immediate implementation.
Under the new framework, the Central Bank of Nigeria will act as the official benchmark administrator, responsible for governance, oversight, and the daily publication of the rate. The bank also pledged to ensure that the methodology remains transparent, robust, and aligned with evolving market conditions.
With NOFR now in active use, policymakers view it as a foundational reform aimed at strengthening Nigeria’s financial architecture and improving the overall functioning of its money market ecosystem.