Central Bank of Nigeria introduces new overnight financing rate to enhance money market transparency
via Punch Nigeria3 min read
The Central Bank of Nigeria CBN has launched the Nigerian Overnight Financing Rate NOFR, a new benchmark for the country's money market. This initiative, developed in collaboration with the Financial Markets Dealers Association, aims to improve transparency, strengthen monetary policy transmission, and deepen Nigeria's financial system. The CBN's Acting Director of Corporate Communications, Hakama Sidi-Ali, stated that NOFR aligns Nigeria with global standards for short-term interest rate benchmarks, similar to SOFR in the United States and SONIA in the United Kingdom. The rate is expected to enhance price discovery, promote consistent pricing of money market instruments, and support financial innovation. NOFR is a risk-free benchmark reflecting the cost of overnight secured funding in the interbank market, based on actual transactions. It is not a monetary policy tool but serves as a reference for pricing financial instruments. The benchmark is published daily and its methodology will be reviewed annually by the CBN. While it will play a key role for investors in pricing and risk management of naira-denominated financial instruments, retail customers will not see direct changes to savings or loan rates.
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