 has assessed that the naira remains undervalued by 25.6%, despite recent gains.){kind=link}
Naira Undervalued by 25.6% Despite Reforms – IMF
The International Monetary Fund (IMF) has assessed that the naira remains undervalued by 25.6%, despite recent gains following Nigeria’s foreign exchange reforms.
In its latest Article IV consultation report, the IMF said its Real Effective Exchange Rate (REER) model showed the naira trading below levels justified by economic fundamentals.
The REER measures a currency’s value against major trading partners, adjusted for inflation.
The Fund noted that Nigeria’s REER appreciated by 32% in 2025, even though the Nominal Effective Exchange Rate (NEER) depreciated by 5.2%.
“Despite the REER appreciation that has already taken place in 2025, the EBA-lite REER model indicates a REER gap of -25.6%,” the IMF stated.
According to the report, the official exchange rate appreciated from ₦1,535/$ at end-2024 to ₦1,435/$ at end-2025, a gain of 6.5%. However, the annual average weakened from ₦1,479/$ in 2024 to ₦1,520/$ in 2025, a 2.8% depreciation.
Based on fundamentals, the IMF believes the naira should be trading at around ₦1,142/$ (end-2025) or ₦1,131/$ (annual average), compared with the official rate of ₦1,356/$ as of June 2026.
The assessment comes three years after the Tinubu administration’s FX reforms, which collapsed the multiple exchange-rate system and allowed freer trading.
While the reforms triggered sharp depreciation, they were aimed at attracting foreign capital and improving liquidity.
The IMF advised the Central Bank of Nigeria (CBN) to maintain exchange rate flexibility, slow the pace of foreign reserve accumulation, and allow two-way movement of the naira. It also urged reforms to strengthen fiscal management and support non-oil sectors.
The Fund concluded that continued reforms in market functioning and structural policies would help close the exchange rate gap, improve Nigeria’s external balance, and strengthen investor confidence.