Monetary Shake-Up! Central Bank of Nigeria Unveils New Interest Rate Benchmark

The announcement was made in a statement by the bank’s Acting Director of Corporate Communications, Hakama Sidi-Ali, who noted that the initiative was developed in partnership with the Financial Markets Dealers Association to strengthen Nigeria’s financial system.

According to the apex bank, the new benchmark is designed to bring Nigeria in line with global standards for short-term interest rates, while enhancing price discovery and ensuring more consistent pricing across money market instruments.

The CBN explained that NOFR is expected to improve monetary policy transmission, encourage financial innovation, and boost investor confidence, while also reinforcing risk management practices within the financial system.

With the introduction of NOFR, Nigeria joins other economies that use similar benchmarks, such as SOFR in the United States, SONIA in the United Kingdom, €STR in the Eurozone, TONA in Japan, and JIBAR in South Africa.

The bank disclosed that the rate followed a stakeholder engagement held on February 27, 2026, where market participants adopted the framework before receiving regulatory approval. NOFR is now operational, with the CBN serving as its administrator and responsible for ensuring transparency, governance, and regular publication.

Further details provided in an FAQ document show that NOFR is a risk-free benchmark reflecting the cost of overnight secured lending in the interbank market. Unlike estimates, it is based strictly on actual transactions, improving accuracy and credibility.

The rate is published daily at 10:00 a.m. on the next business day and applies only to naira-denominated overnight secured interbank transactions that meet specified criteria. It is calculated using a volume-weighted trimmed mean approach to remove outliers and ensure reliability.

Where there is insufficient transaction data, the previous day’s rate will be retained and clearly disclosed to maintain consistency.

The CBN clarified that NOFR is not a replacement for key monetary policy tools such as the Monetary Policy Rate but will serve as a reference for pricing financial instruments, contracts, and some corporate loans.

For investors, the benchmark is expected to improve valuation, pricing, and risk management of naira assets, thereby deepening activity in the domestic money market.

While retail customers may not see immediate changes in loan or savings rates, the bank noted that increased transparency from the new system should strengthen overall confidence in Nigeria’s financial sector.

On governance, the CBN stated that any adjustments to the rate would only occur in cases of significant errors and would be fully disclosed, adding that the methodology will be reviewed at least once a year to keep it aligned with market realities.