CBN Launches Overnight Financing Rate To Boost Market Integrity

Nigeria’s financial market recorded a major milestone on Monday as the Central Bank of Nigeria (CBN) formally launched the Nigeria Overnight Financing Rate (NOFR), a new benchmark designed to strengthen market integrity and deepen financial system efficiency.

The initiative, unveiled by CBN Governor Mr. Olayemi Cardoso in Abuja, was described as a “fundamental shift” that aligns Nigeria’s financial architecture with global best practices in benchmark interest rate formulation.

The development was undertaken in collaboration with the Financial Markets Dealers Association (FMDA), with technical support from the European Bank for Reconstruction and Development (EBRD). The NOFR is a transaction-based benchmark derived from actual market activity, aimed at improving credibility and transparency in the money market.

Cardoso said the evolution of benchmark rates is necessary for any modern financial system, noting that economies must continuously adapt to changing realities and emerging opportunities.

“Benchmark interest rates represent a true reflection of the price of money at a particular point in time. It is the backbone of any modern financial system,” he said. “But for any benchmark to be widely accepted, it must emerge from a trusted, well-governed and transparent framework, with safeguards against manipulation.”

He added that recent global reforms in financial markets have made a strong case for shifting from judgment-based or indicative rates to transaction-based benchmarks that better reflect underlying market conditions.

According to him, the NOFR has been structured as a secured overnight interbank financing rate anchored on observable transactions, ensuring it reflects the true cost of overnight funding in Nigeria’s money market.

Cardoso highlighted key benefits of the new benchmark, including improved market integrity, reduced reliance on subjective estimates, lower manipulation risks, and enhanced price discovery and transparency.

“This is a fundamental shift that aligns Nigeria with global best practices in benchmark reform and strengthens confidence in our financial markets,” he said. “Ultimately, it deepens our financial market, and that is what we all aspire to achieve.”

He added that the initiative is part of a broader reform agenda aimed at building a stronger financial system capable of supporting innovation in an increasingly digital and interconnected global economy.

“The institutions we build today will determine our ability to compete tomorrow,” he added, noting that the NOFR is designed not just for present market needs but also for future financial developments.

Also speaking, Deputy Governor of the CBN, Economic Policy Directorate, Mr. Philip Ikeazor, said global markets are increasingly shifting toward robust, transaction-based reference rates, adding that Nigeria must position itself not only to adapt but to help shape such changes.

“Today is not the destination, but the beginning of another chapter—one that will require continued collaboration, adaptability, market discipline and sustained commitment from all stakeholders,” he said.

Representing the Group Managing Director of Access Bank Plc, Mr. David Enilolobo said strong market infrastructure was essential for attracting capital and improving investor confidence.

He noted that a well-structured benchmark system reduces cross-currency risks, enhances pricing efficiency, and provides offshore investors with a reliable reference point.

“Nigeria’s ambition to deepen its financial market and strengthen its position in global capital flows cannot be achieved without this kind of infrastructure,” he said, describing the reform as a critical step toward market development.