CBN to transition from OBB and OVN as NOFR emerges as new benchmark
CBN to transition from OBB and OVN as NOFR emerges as new benchmark
The Central Bank of Nigeria (CBN) has signalled a transition in Nigeria’s money market framework with the introduction of the Nigerian Overnight Financing Rate (NOFR), a new transaction-based benchmark designed to enhance transparency and market integrity.
The move, undertaken in collaboration with the Financial Markets Dealers Association (FMDA) and supported by the European Bank for Reconstruction and Development (EBRD), reflects ongoing efforts to align Nigeria’s financial markets with evolving global standards.
According to the CBN, the initiative aims to establish a modern benchmark that more accurately reflects actual market conditions, particularly within the secured overnight funding segment of the interbank market.
In its March publication, the apex bank noted that the development of NOFR represents “a major step toward strengthening Nigeria’s financial system with a modern, transparent, and transaction-based benchmark for the money market.”
The proposed benchmark is expected to improve upon existing reference rates such as the Open Buy Back (OBB) and Overnight (OVN) rates, which have historically served as key indicators of short-term liquidity conditions but face limitations in terms of transaction depth and methodological robustness.
At a strategic stakeholder meeting held at the CBN Head Office in Abuja, key industry participants, including treasurers from Deposit Money Banks, engaged with the CBN and EBRD to ensure that the new benchmark accurately reflects real market transactions.
Reinforcing the Bank’s commitment to market development, Dr. Okey Umeano, Deputy Director in the Financial Markets Department, stated that the initiative underscores the CBN’s focus on maintaining the credibility and efficiency of Nigeria’s money market.
The process also involved extensive engagement with market stakeholders. Following an initial diagnostic phase, the FMDA constituted a Technical Committee to work closely with the EBRD in reviewing the benchmark methodology, ensuring that it aligns with domestic market realities while maintaining international best practice.
Market participants have welcomed the initiative, noting that a transition toward a secured, transaction-based benchmark could support the development of Nigeria’s repo market, improve pricing transparency, and enhance monetary policy transmission.
With the NOFR framework nearing final ratification, the benchmark is expected to gradually evolve into the primary reference rate for overnight funding, marking a significant step in the modernisation of Nigeria’s financial market infrastructure.
Source: CBN UPDATE MARCH 2026 EDITION
