Nigeria NOFR volume hits N97.45trn as flat rate signals liquidity

Nigeria’s overnight funding market recorded a record N97.45 trillion in traded volume in June, capping a sharp two-month expansion in activity. The June figure represented a 1.13% increase from May's N96.36 trillion, which itself was a 42.58% surge from April's N67.58 trillion. Despite this massive expansion in turnover, the benchmark borrowing cost barely moved.

The Nigerian Overnight Financing Rate (NOFR) closed at exactly 22.00% on 59 of the 62 trading days between April 13 and July 9. The rare deviations were clustered early in the period, with the rate hitting 22.04% on April 15, 22.01% on April 16, and 22.02% on April 29. By July 9, the rate was back at exactly 22.00%, with individual transactions on that day ranging between 21.00% and 22.00%.

While individual trade rates occasionally swung as wide as 20.00% to 32.00% across the period, these isolated transactions failed to shift the weighted overnight benchmark. This dynamic indicates that Nigeria's interbank market maintained a deep, well-balanced short-term liquidity environment even as trading intensity accelerated.

Average daily volume rose 10.9% to N5.35 trillion in May before moderating slightly to roughly N4.64 trillion in June. The surge was punctuated by heavy trading sessions in May, peaking at N7.32 trillion on May 6, followed by N6.77 trillion on May 19 and N6.67 trillion on May 5. April’s busiest day was April 30 at N6.16 trillion, while June peaked at N5.61 trillion on June 3.

Early July figures point to sustained momentum. The market recorded N28.03 trillion in traded volume across the month's first seven sessions, including a robust N5.02 trillion on July 9. Even the period's lowest daily volume, N2.99 trillion on July 3, represented substantial overnight turnover.

The disconnect between surging volumes and stagnant rates carries direct implications for bank treasuries and institutional investors. It demonstrates that financial institutions can execute substantially larger blocks of unsecured overnight transactions without exerting upward pressure on short-term funding costs.

This stability also provides an early vindication for the NOFR framework itself. The Central Bank of Nigeria formally introduced the benchmark on April 17 following a February 27 stakeholder engagement with the Financial Markets Dealers Association, before holding a public launch on June 15.

CBN Governor Olayemi Cardoso described the NOFR as a crucial reform to enhance transparency, improve monetary policy transmission, and align Nigeria’s money markets with global standards like the U.S. SOFR, the U.K. SONIA, the Eurozone’s €STR, and Japan’s TONA. The initial trading data suggests the new benchmark is successfully capturing market liquidity without introducing artificial volatility.