CBN Rolls Out New Benchmark for Money Market

The Central Bank of Nigeria (CBN) has introduced the Nigerian Overnight Financing Rate (NOFR) as a new benchmark for the country’s money market, aimed at improving transparency and strengthening monetary policy transmission.

The announcement was made on Friday in a statement issued by the CBN’s 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 to deepen Nigeria’s financial system and improve the pricing of short-term financial instruments.

The CBN said the new benchmark aligns Nigeria with international best practices for short-term interest rate benchmarks and is expected to enhance price discovery, transparency and consistent pricing across the money market.

“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.” 

It added that the rate would also improve the effectiveness of monetary policy, encourage financial innovation, boost investor confidence and strengthen risk management within the financial system.

Press Release

Central Bank Of Nigeria And Financial Market Dealers’ Association Announce The Nigerian Overnight Financing Rate (NOFR) As New Money Market Benchmark pic.twitter.com/1p9mnjkYk8

— Central Bank of Nigeria (@cenbank) April 17, 2026

The bank noted that the NOFR places Nigeria alongside countries using similar benchmarks such as the Secured Overnight Financing Rate (SOFR) in the United States, the Sterling Overnight Index Average (SONIA) in the United Kingdom, the Euro Short-Term Rate (€STR) in the Eurozone and the Tokyo Overnight Average Rate (TONA) in Japan. It also complements South Africa’s Johannesburg Interbank Average Rate (JIBAR).

According to the statement, the benchmark followed a stakeholder engagement held on February 27, 2026, during which market participants adopted the rate before receiving 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 CBN said the rate is now operational, with the bank serving as benchmark administrator responsible for governance, transparency and regular publication.

Details released in an accompanying Frequently Asked Questions document explained that the NOFR is designed as a risk-free benchmark reflecting the cost of overnight secured funding in the interbank market. It is based on actual transactions rather than estimates.

The CBN clarified that the rate is not a monetary policy tool and is separate from indicators such as the Monetary Policy Rate (MPR). Instead, it is intended to serve as a reference point for pricing financial instruments and contracts.

The benchmark will be published daily at 10:00 a.m. on the next business day after transactions are recorded.

Only naira-denominated overnight secured interbank transactions that meet set thresholds will qualify for inclusion. The rate will be calculated using a volume-weighted trimmed mean methodology designed to remove extreme values and improve accuracy.

Where transaction volumes are insufficient, the previous day’s rate will be retained and clearly disclosed to ensure continuity.

The CBN added that while the benchmark may be used as a reference for some corporate and structured loans, it will not directly determine borrowing costs, which will still depend on credit risk, tenor and terms agreed between lenders and borrowers.

For investors, the new rate is expected to support pricing, valuation, discounting and risk management of naira-denominated assets, helping to deepen the domestic money market.

Retail banking customers are not expected to see immediate changes to savings or loan rates, as banks will continue to determine those based on broader funding and risk considerations, although the CBN said improved transparency should strengthen confidence in the financial system.

On governance, the bank said any corrections to the benchmark would only be made in cases of material error and must be fully disclosed, while the methodology would be reviewed at least once a year to ensure it remains effective and aligned with market conditions.