Nigeria’s overnight funding market recorded a significant increase in trading activity in May and June 2026, with total traded volume approaching the ₦100 trillion mark even as short-term funding costs remained remarkably stable.
Analysis of Nigerian Overnight Financing Rate (NOFR) data published by the Central Bank of Nigeria (CBN) shows that total overnight market turnover increased by 42.58% to ₦96.36 trillion in May, up from ₦67.58 trillion recorded in April. Trading activity strengthened further in June, rising 1.13% to ₦97.45 trillion.
Despite the sharp increase in liquidity and trading volumes, the NOFR remained virtually unchanged at 22.00% throughout the review period.
What the data is saying
The data points to a highly liquid money market where increased trading activity has not translated into higher short-term borrowing costs.
Between April 13 and July 9, 2026, the overnight funding rate closed at exactly 22.00% on 59 out of 62 trading days, highlighting an unusual level of stability despite significantly higher transaction volumes.
Average daily turnover also increased during the period. Daily market activity rose to ₦5.35 trillion in May, representing a 10.9% increase from the ₦4.83 trillion average recorded in April. This suggests that banks and other market participants became more active in managing short-term liquidity positions.
Ordinarily, a sharp increase in demand for overnight funds could place upward pressure on funding costs. However, the stable NOFR indicates that liquidity conditions remained sufficiently balanced, allowing financial institutions to access short-term funds without triggering significant rate volatility.
The consistency of the benchmark rate also reflects the effectiveness of the CBN’s liquidity management operations. Through instruments such as Open Market Operations (OMO), Treasury Bills, Standing Lending Facilities (SLF), and Standing Deposit Facilities (SDF), the apex bank has been able to keep overnight funding conditions broadly aligned with its monetary policy objectives.
For banks, a stable overnight funding rate improves short-term funding predictability, supports treasury operations, and reduces uncertainty in liquidity management. For the broader financial system, it signals orderly money market conditions despite elevated trading volumes.
More insights
The near-constant 22% NOFR suggests that Nigeria’s interbank money market is currently operating within a well-defined liquidity corridor established by the Central Bank.
The increase in trading volumes indicates stronger participation among banks as institutions actively borrow and lend surplus funds to meet daily liquidity requirements. Higher turnover generally reflects improved market efficiency and confidence in the overnight funding market.
The data also shows that liquidity circulation has increased without creating excessive pressure on borrowing costs, suggesting that available system liquidity has remained adequate even as transaction volumes expanded significantly.
From a monetary policy perspective, the stability of the overnight rate demonstrates that the CBN has largely succeeded in anchoring short-term interest rates despite broader macroeconomic challenges, including inflationary pressures and evolving government borrowing requirements.
What you should know
The Nigerian Overnight Financing Rate (NOFR) is the benchmark interest rate for unsecured overnight borrowing between financial institutions and serves as a key indicator of liquidity conditions in Nigeria’s money market.
Banks rely on the overnight market to manage daily liquidity needs, borrowing excess funds from other institutions to meet regulatory reserve requirements and payment obligations.
While trading volumes have expanded sharply over recent months, the sustained stability of the NOFR indicates that liquidity conditions have remained well-balanced, with the CBN successfully maintaining short-term market rates close to its desired policy corridor despite increased market activity.
