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BANKING AND FINANCE REGULATION IN NIGERIA – INTEREST RATE DETERMINATION, NOFR BENCHMARK

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BY SEUN TIMI-KOLEOLU AND PROMISE ITAH

Introduction

On April 17, 2026, the Central Bank of Nigeria (CBN) announced the introduction of the Nigerian Overnight Financing Rate (NOFR) in collaboration with the Financial Markets Dealers Association (FMDA). The NOFR is a daily benchmark designed to reflect the actual cost of short-term borrowing between banks, based on real market transactions. According to the CBN, the introduction of the NOFR is aimed at enhancing transparency, strengthening monetary policy transmission, and deepening Nigeria’s money market.

In this newsletter, we highlight the rationale and framework of the NOFR, as well as its implications for the market.

What is the Rationale behind the NOFR?

Nigeria’s short-term interest rates have traditionally been guided by the Monetary Policy Rate (MPR) and interbank indicators such as the Open Buy Back (OBB) and Overnight (OVN) rates, which are meant to reflect the cost of overnight borrowing between banks.

However, these indicators do not always reflect actual transactions, as they may be influenced by estimates, limited trading activity, or inconsistent reporting. As a result, they may not accurately capture the true cost of short-term funding.

The Nigerian Overnight Financing Rate (NOFR) was introduced to address this gap by replacing indicative pricing with a benchmark based on actual transactions, thereby improving reliability and market confidence.

What is the Framework of the NOFR?

The NOFR is an average interest rate that reflects the actual cost of overnight lending between banks in naira, where the loans are secured by collateral, and based on real market transactions. The rate is calculated by giving more weight to larger transactions and removing unusually high or low rates (the higher 10% and the lower 10% percent volumes are excluded from the calculation), so that the final figure reflects normal market conditions and provides a more accurate picture of how banks actually price short-term funding.

The transactions used to calculate the NOFR must meet the following conditions:

  1. they must be carried out on the specific day the rate is being calculated (the fixing day);
  2. they must be reported by approved banks;
  3. Each transaction must be at least ₦5 billion, so that only significant market activity is included.

The rate is published daily at 10:00 a.m. for the preceding business day. Where there is insufficient qualifying transaction data, the previous day’s rate is retained and published to ensure continuity and stability. The CBN is responsible for the governance and regular publication of the NOFR. The rate can be accessed on the CBN website.

 

What are the Key Market Implications?

Some key market implications of the introduction of the NOFR are set out below:

  1. Corporate Borrowers: While the NOFR may not immediately reduce borrowing costs, it provides a clear and transparent base rate for floating-rate loans. This makes loan pricing more consistent and easier to compare. Borrowers may seek to review existing loan agreements, especially floating-rate clauses, as pricing will gradually shift to NOFR-based benchmarks, making interest costs more responsive to overall market conditions.
  2. Banks and Financial Institutions: In view of the improved accuracy in pricing short-term loans, banks will have a clearer view of funding costs, enabling more effective day-to-day liquidity management.
  3. Investors: The greater transparency and reliability of the NOFR may make it easier to price and value instruments such as treasury bills and bonds. This is expected to improve pricing consistency across the market and give both local and foreign investors greater confidence in expected returns.
  4. Legal/Contractual Considerations: The introduction of the NOFR means that existing financial agreements referencing older interbank rates or bank-specific pricing may need to be reviewed and updated to reflect the new benchmark. Going forward, new agreements are likely to adopt NOFR as the base rate, with an added margin. This makes it important to include clear provisions on benchmark use and replacement in new agreements.

Conclusion

The introduction of the NOFR marks a significant shift in how interest rates are determined in Nigeria and aligns the country with global benchmarks best practices such as the Secured Overnight Financing Rate (SOFR) in the United States and the Sterling Overnight Index Average (SONIA) in the United Kingdom. While the CBN expects the NOFR to enhance transparency, strengthen monetary policy transmission, and deepen Nigeria’s money market, its impact will ultimately depend on adoption and effective administration.

NIGERIA–UNITED KINGDOM STATE VISIT – LEGAL AND REGULATORY IMPLICATIONS FOR CROSS-BORDER INVESTMENT

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By Seun Timi-Koleolu and Eniola Sogbesan

Introduction

The recent State visit by President Bola Ahmed Tinubu to the United Kingdom on March 18, 2026 marks a significant moment in the evolution of Nigeria–UK relations, being the first such visit in nearly four decades. While the visit carried considerable diplomatic weight, its true import lies in the legal, regulatory, and commercial signals it sends to investors, and multinational operators engaged in cross-border transactions between both jurisdictions.

At the heart of this visit was the renewed commitment to the Enhanced Trade and Investment Partnership (ETIP). This cooperation framework is designed to facilitate dialogue, harmonize legal standards, and provide a secure environment for cross-border capital flow. For Nigerian businesses, the ETIP presents a new opportunity which demands a deep understanding of international trade law, intellectual property rights, and bilateral investment treaties.

This newsletter examines the practical legal and business implications of the visit, with a focus on investment structuring, regulatory alignment, emerging opportunities and how Nigerian businesses can strategically position to benefit.

Legal and Business Implications

  1. Renewed Bilateral Frameworks and Investor Confidence

A central takeaway from the visit is the renewed commitment to deepening economic cooperation under existing bilateral frameworks, particularly the ETIP. The  ETIP functions as a policy coordination framework facilitating regulatory dialogue, market access initiatives and investment promotion efforts.

For investors, this represents a more predictable policy environment, which is critical in jurisdictions where regulatory uncertainty has been a concern. This is expected to drive incremental regulatory reforms and administrative alignment in both jurisdictions, particularly in sectors prioritized for UK–Nigeria collaboration such as infrastructure, finance, energy, and technology.

  1. Infrastructure Investment and Financing Structures

One of the most concrete outcomes of the State visit was the announcement of a £746 million investment by the UK in the Nigerian ports. Although the full transaction documentation is not yet public, the structure is likely to involve; Export Credit Agency (ECA) support, Sovereign or quasi-sovereign guarantees and Public–Private Partnership (PPP) frameworks.

  1. Regulatory Alignment and Market Access

The visit highlights a broader effort to reduce friction in cross-border trade and investment flows. While Nigeria and the UK operate fundamentally different regulatory systems, ongoing engagement within the ETIP framework may drive improved customs processes, greater transparency in licensing and approvals and enhanced cooperation between regulatory agencies

In the coming months, Nigeria businesses should closely monitor sector-specific regulatory developments, as reforms may be implemented through subordinate legislation, guidelines, or administrative action, rather than primary statutes.

  1. Dispute Resolution and Legal Risk Management

Cross-border investments inevitably raise questions around dispute resolution mechanisms. While the visit did not produce a new bilateral investment treaty, the strengthening of relations may encourage a greater reliance on international arbitration and more robust contractual protections against regulatory changes.

 

While Nigeria remains a signatory to key international arbitration conventions, and its courts have shown increasing willingness to uphold arbitral awards, enforcement timelines can still present challenges. Therefore, investors should prioritize carefully drafting the dispute resolution clauses in key cross-border transaction documentation.

 

Strategic Opportunities for Nigerian Businesses

While much focus is typically placed on inbound foreign investment, the outcomes of the State visit present significant opportunities for Nigerian businesses to actively participate and benefit from the ETIP. Some of these opportunities include;

  1. opportunities for Public Private Partnership projects and Infrastructure Value Chains;
  2. enhanced corporate governance and compliance standards;
  3. access to financing and investment partnerships;
  4. structuring for cross-border expansion and
  5. increased access to trade and export opportunities.

Conclusion

While the visit has set a strong diplomatic tone, the true test will lie not in policy articulation, but in execution—creating a critical window for investors and Nigerian businesses to position early and strategically under the ETIP.

For foreign investors and Nigerian businesses, the key takeaways are clear:

  1. a more structured and coordinated investment environment is emerging;
  2. infrastructure and trade-related sectors present immediate opportunities and
  3. legal and regulatory diligence remains critical to successful market entry and participation

Ultimately, Nigerian businesses that proactively align with these global standards, build strategic public-private partnerships, and position within emerging value chains will be best placed to capture value from this renewed bilateral engagement.