The Central Bank of Nigeria has introduced the Nigerian Overnight Financing Rate (NOFR). This is in collaboration with the Financial Markets Dealers Association (FMDA), positioning it as the country’s official risk-free benchmark for overnight interest rates in the interbank market. The move is part of ongoing efforts to enhance transparency, strengthen market integrity, and align Nigeria’s financial system with global standards.
NOFR reflects the cost of overnight secured funding between banks and is derived from actual transaction data rather than estimates. The rate is published daily at 10:00 a.m. Lagos time on the business day following the fixing day, providing market participants with a credible and consistent reference point for pricing financial instruments.
Unlike the Monetary Policy Rate, NOFR is not a policy tool but a market-based benchmark. It is calculated using a volume-weighted trimmed mean methodology, which excludes the highest and lowest 10 percent of transaction volumes to ensure accuracy and reduce distortions.
Eligible transactions for the calculation include naira-denominated overnight secured repo deals of at least ₦5 billion, reported by participating banks. Where transaction volumes are insufficient, the previous day’s rate is retained, with full disclosure to maintain transparency.
For financial institutions, NOFR is expected to play a central role in pricing, valuation, and risk management of naira-denominated instruments. Corporates may also see the benchmark referenced in structured or syndicated loans, although borrowing costs will continue to depend on credit risk, tenor, and contractual terms.
Retail customers are not directly impacted, as banks will continue to set savings and loan rates based on broader cost and risk considerations. However, the introduction of NOFR is expected to improve overall confidence in the financial system through greater transparency and benchmark credibility.
The CBN noted that NOFR aligns with global benchmark reforms, drawing parallels with established rates such as the SOFR, SONIA, and €STR.
To ensure governance and reliability, the methodology underpinning NOFR will be reviewed annually, while corrections will only be made in exceptional cases involving material errors of at least five basis points, with full disclosure.
The introduction of NOFR positions Nigeria alongside leading global benchmarks such as SOFR (United States), SONIA (United Kingdom), €STR (Eurozone), and TONA (Japan). It also complements African benchmarks such as JIBAR (South Africa).
