In April 2026, the Central Bank of Nigeria (CBN) collaborated with the Financial Markets Dealers Association (FMDA) to introduce the Nigerian Overnight Financing Rate (NOFR), a new transaction-based benchmark for the money market.

NOFR replaces the old Nigerian Inter-Bank Offered Rate (NIBOR), which many criticised for lacking transparency because it relied on quote-based submissions.

Unlike NIBOR, which required banks to submit estimated rates, NOFR calculates based on actual overnight transactions between banks and other financial institutions. This approach makes it more reliable, harder to manipulate, and better at reflecting the true cost of short-term borrowing in Nigeria.

The move aligns Nigeria’s money market with global best practices. It mirrors the Secured Overnight Financing Rate (SOFR) in the United States and the Sterling Overnight Index Average (SONIA) in the United Kingdom, benchmarks that major economies adopted years ago to restore trust after scandals involving Libor rate-fixing.

For years, Nigeria’s money-market benchmark carried an “optics” problem. NIBOR relied on banks’ submissions rather than actual deals, making it vulnerable to manipulation and failing to reflect market conditions.

This situation created uncertainty for lenders and borrowers and prevented the CBN from effectively transmitting monetary policy.

NOFR, with its transparent, transaction-based rate, solves this issue. It gives the market, regulators, and businesses a clearer, more honest picture of overnight funding costs. This approach should lead to better pricing of financial products, improved risk management, and stronger monetary policy transmission.

For business owners, particularly those with overdraft facilities, NOFR will directly influence how their interest rates are set, providing a more accurate reflection of the cost of overnight funds.