The Central Bank of Nigeria (CBN) has introduced the Nigeria Overnight Financing Rate (NOFR), a new benchmark interest rate designed to improve transparency, strengthen confidence in the financial system, and support the growth of Nigeria’s capital markets.
The unveiling, which took place in Abuja on Monday, marks another major step in the CBN’s efforts to modernize the country’s financial market structure and align it with international standards.
Speaking during the launch, CBN Governor Olayemi Cardoso described the NOFR as an important foundation for a stronger and more efficient financial system. According to him, benchmark interest rates play a vital role in financial markets because they influence the pricing of loans, bonds, derivatives, and other financial products.
Cardoso explained that a benchmark rate reflects the actual cost of money at a given time and serves as a key reference point for financial transactions. He stressed that for any benchmark rate to be effective, it must be transparent, well-governed, and protected from manipulation.
The NOFR was developed through a collaboration between the CBN and the Financial Markets Dealers Association (FMDA), with technical support from the European Bank for Reconstruction and Development (EBRD).
Unlike some traditional benchmark rates that rely partly on estimates or submissions from market participants, the NOFR is based entirely on real overnight transactions carried out in Nigeria’s interbank market. This means the rate reflects the true cost of short-term funding among financial institutions.
The launch follows a global trend toward transaction-based benchmark rates. Many countries adopted similar systems after concerns emerged over the reliability of the London Interbank Offered Rate (LIBOR), which was widely used around the world for decades before being phased out. In its place, countries introduced more transparent alternatives such as the Secured Overnight Financing Rate (SOFR) in the United States, the Sterling Overnight Index Average (SONIA) in the United Kingdom, and the Euro Short-Term Rate (€STR) in Europe.
Cardoso said Nigeria’s adoption of the NOFR places the country among nations embracing these international reforms. He noted that the new benchmark will improve market integrity by ensuring interest rate calculations are based on actual transactions rather than estimates.
According to him, the initiative will also increase investor confidence by providing reliable and transparent pricing information for both local and foreign investors.
Financial experts believe the NOFR could have a significant impact on Nigeria’s financial markets. A trusted benchmark rate helps determine the pricing of loans, bonds, repurchase agreements, and other financial products. It also gives investors a clearer understanding of liquidity and funding conditions in the banking system.
As Nigeria seeks to attract more foreign investment and deepen its financial markets, analysts say transparent benchmark rates are becoming increasingly important.
Cardoso added that the NOFR is part of the CBN’s broader strategy to build a modern financial system capable of supporting economic growth and innovation. He emphasized that strong financial infrastructure will be critical as global financial markets become more digital and interconnected.
Deputy Governor for Economic Policy, Philip Ikeazor, described the launch as a new chapter in the development of Nigeria’s financial market. He called for continued cooperation among regulators, banks, investors, and other stakeholders to ensure the success of the initiative.
Also speaking at the event, David Enilolobo, representing Access Bank Plc, said reliable market infrastructure is essential for attracting investment and facilitating international financial transactions.
Market participants welcomed the introduction of the NOFR, describing it as a major milestone that will improve transparency, encourage efficient capital allocation, strengthen investor confidence, and support future financial innovation.
For the CBN, the launch represents more than just a new benchmark rate. It is a strategic move aimed at building a stronger, more competitive financial market that can support Nigeria’s long-term economic development goals.
