CBN launches new benchmark rate to boost market transparency
The Central Bank of Nigeria (CBN), working with the Financial Markets Dealers Association (FMDA), has introduced a new benchmark interest rate known as the Nigerian Overnight Financing Rate (NOFR), in
The Central Bank of Nigeria (CBN), working with the Financial Markets Dealers Association (FMDA), has introduced a new benchmark interest rate known as the Nigerian Overnight Financing Rate (NOFR), in a move aimed at improving transparency and efficiency in the country’s financial system.
The CBN, in a statement issued on Friday by its Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali, said the new rate is designed to bring Nigeria in line with global standards for short-term interest rate benchmarks.
According to the statement, the NOFR will serve as the country’s official reference rate for overnight lending between banks, reflecting the real cost of short-term funding in the interbank market. Unlike policy rates set by the apex bank, the new benchmark is based strictly on actual market transactions.
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“This benchmark is expected to improve price discovery and ensure more transparency in the money market, while also supporting better pricing of financial instruments,” the statement said.
The CBN explained that the introduction of the rate would strengthen the transmission of monetary policy, encourage financial innovation, and boost investor confidence, while also improving how financial institutions manage risks.
With the launch, Nigeria joins other major economies that already operate similar benchmarks, including the United States, the United Kingdom, the Eurozone, and Japan. The new rate also aligns with existing benchmarks in Africa, such as South Africa’s interbank rate.
The NOFR follows a stakeholder engagement held in February 2026, where market participants agreed on its adoption, after which it received regulatory approval. The Central Bank will act as the administrator, ensuring proper governance, transparency, and regular publication of the rate.
The bank stated that the rate will be published daily at 10:00 a.m. Lagos time on the next working day after transactions are recorded. It will be calculated using a method that averages transaction rates while removing extreme values to ensure accuracy.
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To qualify for inclusion, transactions must involve overnight lending in naira, be backed by securities, and meet a minimum size of N5 billion. Where there are not enough qualifying transactions, the previous day’s rate will be used, with clear disclosure to the market.
The CBN also noted that while the new benchmark may be used in pricing loans and financial contracts, it does not determine the full cost of borrowing, which will still depend on factors such as credit risk and loan duration.
It added that banks will continue to set retail interest rates based on their own operating costs and risk considerations, though customers are expected to benefit indirectly through improved transparency and stronger confidence in the system.
The regulator stated that corrections to the rate will only be made in rare cases where there is a significant error, and any changes will be clearly communicated. It also ensured that the methodology for calculating the rate would be reviewed regularly.
The introduction of NOFR is expected to promote fairness and stability in Nigeria’s financial market, while bringing the country’s benchmark framework in line with international best practices.
