Cardoso Introduces Nigeria Overnight Financing Rate to Strengthen Confidence, Price Discovery, and Market Stability

• Global financial markets are shifting from subjective, judgment‑based benchmarks to transaction‑based reference rates that mirror actual market activity

• Philip Ikeazor calls the initiative a milestone in financial market modernisation

Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, launched the Nigeria Overnight Financing Rate (NOFR) yesterday, aiming to deepen foreign‑exchange (FX) market stability, strengthen price discovery, and boost investor confidence.

The initiative is a joint effort by the CBN, the Financial Markets Dealers Association (FMDA), and the European Bank for Reconstruction and Development, designed to anchor the financial system on a more transparent, transaction‑based benchmark.

Speaking at the ceremony held at the apex bank’s headquarters in Abuja, Cardoso described the reform as a defining step in the country’s financial market evolution. He said it reinforced the central bank’s broader agenda of building a more resilient, efficient and credible financial system capable of supporting sustainable economic growth.

He stated, “The introduction of NOFR represents a significant milestone that reinforces the central bank’s continuous commitment to building a more resilient, efficient and credible financial services sector.”

Cardoso explained that benchmark interest rates are central to any modern financial system, serving as reference points for pricing financial instruments, guiding investment decisions, and ensuring effective transmission of monetary policy across the economy.

He noted that global financial markets are increasingly moving away from subjective, judgment‑based benchmarks toward transaction‑based reference rates that reflect actual market activity—a shift Nigeria must fully align with to maintain credibility and competitiveness.

Explaining the design of the new benchmark, he said NOFR was developed in collaboration with market stakeholders to reflect real‑time transactions in the Nigerian interbank market, thereby ensuring greater accuracy and reliability.

Cardoso said, “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.”

He added that the reforms are critical to strengthening investor trust and deepening financial markets, noting that confidence remains the foundation of liquidity and stability in any financial system.

He said, “The result of all of that is deeper financial markets, and that is what we all crave for. Markets get deeper when they are trusted and when they are transparent.”

On monetary‑policy effectiveness, the CBN governor said NOFR would significantly enhance the transmission of policy decisions across financial markets, thereby strengthening the central bank’s ability to maintain price stability.

He said, “What we are attempting to do here is to ensure that we have an effective monetary policy transmission mechanism supporting the delivery of the price stability mandate of the central bank.”

“If you don’t have that, then there is a very major missing piece.”

The governor explained that the reform is part of a wider transformation of the country’s financial architecture aimed at supporting innovation, digitalisation, and the development of more sophisticated financial instruments, including derivatives and term benchmark products.

He said NOFR was not only designed for current market needs but also to prepare Nigeria for future financial complexity.

Cardoso said modern economies require forward‑looking institutions capable of supporting evolving market structures.

Earlier, CBN Deputy Governor, Economic Policy Directorate, Mr. Philip Ikeazor, described the launch as a major milestone in the country’s journey toward a more modern, resilient and globally aligned financial system.

Ikeazor said the introduction of a credible transaction‑based benchmark reflected Nigeria’s commitment not only to reform but also to actively shape global best practices in financial market development.

He stated, “Today is an important milestone, not simply because we are introducing a new benchmark, but because we are collectively taking another step toward stronger markets.”

He added that the financial system had consistently demonstrated resilience in the face of domestic and global shocks while continuing to evolve through improved infrastructure and institutional strengthening.

According to him, the shift toward transaction‑based reference rates reflects a broader global transition that Nigeria is embracing with deliberate intent and coordination rather than passive adjustment.

Ikeazor said, “As global markets increasingly move toward more robust transaction‑based reference rates, we have chosen not merely to follow change but to shape it.”

“Today is not the destination. Rather, it is the beginning of another chapter, one that will require continued collaboration, adaptability and sustained commitment from all stakeholders.”

He stated that the NOFR launch marks the beginning of a new phase in market development that will require sustained collaboration, adaptability, and shared responsibility among all financial market participants.

He urged market participants to actively engage with the new benchmark and contribute to its successful adoption across the financial system.