Central Bank Introduces Revised Base Interest Rate to Enhance Trust in Financial Sector

The Central Bank of Nigeria launched the Nigerian Overnight Financing Rate on Monday, a transaction-based benchmark interest rate aimed at enhancing transparency, improving monetary policy transmission, and deepening the country's financial markets.

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This new benchmark is part of the bank's broader efforts to build a more resilient, efficient, and credible financial system, according to the Governor of the Central Bank of Nigeria, Mr Olayemi Cardoso, who spoke at the launch at the CBN headquarters in Abuja.

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Cardoso described the Nigerian Overnight Financing Rate, known as NOFR, as a significant reform that would align Nigeria's financial markets with global best practices and provide a reliable reference rate for banks, investors, and other market participants.

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The introduction of NOFR reinforces the Central Bank of Nigeria's commitment to building a more resilient, efficient, and credible financial services sector, Cardoso said, explaining that benchmark interest rates serve as the backbone of modern financial systems.

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According to Cardoso, global financial markets have moved away from judgment-based benchmarks towards transaction-based rates derived from actual market activities to reduce the risk of manipulation and improve transparency.

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The CBN developed NOFR in collaboration with the Financial Markets Dealers Association and with technical support from the European Bank for Reconstruction and Development, Cardoso noted.

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The benchmark was designed as a transaction-based overnight secured interbank financing rate that reflects the true cost of overnight funding in Nigeria's money market, he said.

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By anchoring the benchmark on observable transactions, NOFR enhances market integrity and credibility, reduces reliance on subjective estimates, minimises the risk of manipulation, and improves price discovery and transparency, Cardoso stated.

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The new framework would strengthen confidence in Nigeria's financial markets and support efforts to deepen market activities, he added, noting that markets get deeper when they are trusted and credible.

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The CBN governor said the benchmark would serve as a transparent and reliable reference rate for treasury operations, liquidity management, pricing of financial contracts and securities, development of derivatives and structured products, and enhancement of risk management frameworks.

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The initiative would support the future development of more sophisticated financial products and benchmark rates required for a dynamic financial market, he added.

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For businesses and borrowers, Cardoso said NOFR would introduce greater transparency into the pricing of loans and wholesale deposits within the banking system.

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One of the most important benefits of the benchmark is its role in strengthening monetary policy transmission and supporting the central bank's price stability mandate, he said.

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Cardoso reflected on the early days of his administration, saying weaknesses in the monetary policy transmission mechanism influenced the bank's decision-making process when he assumed office.

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Holding monetary policy meetings without an effective transmission mechanism would not have delivered the desired outcomes for the economy, he argued.

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Cardoso expressed confidence that the successful implementation of the benchmark would strengthen domestic and foreign investor confidence and contribute to sustainable economic growth.

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The successful implementation of NOFR will reinforce domestic and international investor confidence, thereby contributing to sustainable economic growth, he stated.

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Deputy Governor, Economic Policy Directorate, Philip Ikeazor, described the launch as a major milestone in the evolution of Nigeria's financial markets, saying it represented more than a market reform.

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Ikeazor noted that the benchmark reflected progress, modernisation, and the country's commitment to building stronger financial infrastructure, adding that the journey to this moment demanded a clear vision, technical rigour, collaboration, resilience, and a shared conviction.

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He said the launch marks the beginning of another phase of financial market development that will require sustained collaboration, discipline, and commitment from stakeholders, as global markets increasingly adopt transaction-based reference rates.

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Representing the Managing Director of Access Bank Plc, Roosevelt Ogbonna, the bank's Group Head of Treasury, David Enilolobo, described the launch as a structural reform rather than a ceremonial event.

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Enilolobo argued that transaction-based benchmarks provide stronger market credibility than rates based on estimates or market opinions, saying the credibility of such rates is critical to the financial system.

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He noted that stronger market infrastructure attracts investment, reduces financial risks, and improves confidence among international investors, adding that Nigeria's ambition to deepen its financial market and grow its standing in global capital flows cannot be realised without this kind of infrastructure.

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Enilolobo pledged Access Bank's support for the new benchmark and urged financial institutions to integrate it into money market instruments, floating-rate products, and repurchase agreement transactions.

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Earlier in April 2026, the CBN announced the introduction of the Nigerian Overnight Financing Rate as a new benchmark for the country's money market, aimed at improving transparency and strengthening monetary policy transmission.