The Central Bank of Nigeria (CBN) on Monday unveiled the Nigeria Overnight Financing Rate (NOFR), a landmark reform expected to strengthen transparency in the financial system, improve price discovery and position the country for deeper participation in global capital markets.
The launch marks a step in Nigeria’s ongoing efforts to modernise its financial market infrastructure and align domestic practices with international standards that increasingly favour transaction-based benchmark rates.
Speaking at the unveiling ceremony in Abuja, CBN Governor Olayemi Cardoso described the new benchmark as a critical building block for a more resilient and efficient financial system.
According to him, benchmark interest rates serve as the foundation upon which modern financial markets operate because they influence the pricing of loans, bonds, derivatives and other financial instruments.
“A benchmark interest rate represents the true price of money at a particular point in time. It is the backbone of any modern financial system,” Cardoso said.
He noted that the credibility of any benchmark depends on its transparency, governance framework and resistance to manipulation.
The NOFR was developed by the CBN in partnership with the Financial Markets Dealers Association (FMDA), with technical support from the European Bank for Reconstruction and Development (EBRD).
Unlike traditional reference rates that may rely partly on estimates or market submissions, the NOFR is derived from actual overnight transactions in the interbank market. This makes it a transaction-based benchmark that reflects the real cost of short-term funding among financial institutions.
The development mirrors a broader global shift that followed the gradual replacement of the London Interbank Offered Rate (LIBOR), which for decades served as a key global benchmark before concerns emerged over its susceptibility to manipulation.
In response, major economies adopted alternative transaction-based reference rates 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 the Eurozone.
Cardoso said Nigeria’s adoption of the NOFR places the country firmly within this global reform movement.
According to him, the new benchmark will improve market integrity by reducing reliance on subjective estimates and ensuring that interest rate calculations are based on verifiable market transactions.
He added that the rate would also improve transparency and strengthen confidence among domestic and international investors seeking reliable market indicators.
“This is a fundamental shift that aligns Nigeria with global best practices in benchmark rate reform and strengthens confidence in our financial markets,” he said.
Market analysts believe the introduction of the NOFR could have far-reaching implications for the development of Nigeria’s fixed-income and money markets.
A credible benchmark rate serves as a reference point for pricing a wide range of financial products, including loans, bonds, repurchase agreements and derivatives. It also provides investors with a clearer picture of liquidity conditions and funding costs within the financial system.
As Nigeria seeks to attract long-term capital and deepen its financial markets, the availability of transparent and trusted benchmark rates is increasingly viewed as essential.
Cardoso said the reform forms part of the CBN’s broader agenda to create a modern financial architecture capable of supporting innovation and economic growth.
He noted that as financial systems become more digital and interconnected, the quality of market infrastructure will increasingly determine a country’s competitiveness.
“The institutions we build today will determine our ability to compete tomorrow,” he said. “NOFR is not only about today’s market needs but also about preparing for future developments.”
Also speaking at the event, Deputy Governor in charge of Economic Policy, Philip Ikeazor, described the launch as the beginning of a new phase in Nigeria’s financial market evolution.
He stressed the need for continued collaboration among regulators, banks, dealers and investors to ensure the success of the initiative.
Representing the Group Managing Director of Access Bank Plc, David Enilolobo said strong market infrastructure remains critical to attracting investment and supporting cross-border financial transactions.
According to him, transparent benchmark rates help reduce uncertainty, lower transaction risks and provide offshore investors with reliable pricing references.
“Nigeria’s ambition to deepen its financial markets and increase its participation in global capital flows cannot be achieved without this kind of infrastructure, and NOFR is a critical component of that journey,” he said.
Financial market participants at the event welcomed the initiative, describing it as a major milestone in the evolution of Nigeria’s money market.
Beyond improving transparency, they said the new benchmark is expected to support more efficient capital allocation, enhance investor confidence and strengthen the foundation for future financial innovation.
For the CBN, the launch of the NOFR represents more than the introduction of a new interest rate benchmark. It is a strategic move aimed at creating a deeper, more credible and globally competitive financial market capable of supporting Nigeria’s long-term economic ambitions.
