1. Introduction and Context
The introduction of the Nigerian Overnight Financing Rate (NOFR) as Nigeria’s official overnight risk-free benchmark by the Central Bank of Nigeria (CBN), in collaboration with the Financial Markets Dealers Association (FMDA), represents a significant structural reform within Nigeria’s money market architecture. At its core, every modern financial system depends on a credible and transparent reference rate, one that provides a reliable answer to a fundamental question: at what rate does money actually transact in the market?
Until recently, Nigeria relied mainly on quoted or indicative rates, especially Nigerian Inter-Bank Offered Rate (NIBOR), which were based largely on what banks said they would charge one another, not necessarily what they did charge in real transactions. This model, while useful in earlier stages of market development, has become increasingly insufficient in a global environment that now prioritises transaction‑based evidence, transparency, and resistance to manipulation.
At its most fundamental
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