The International Monetary Fund (IMF) has stated that Nigeria’s naira is still undervalued by about 25.6 percent, even though it has recently gained some strength against the US dollar following ongoing foreign exchange reforms.
The Fund explained in its latest Article IV consultation report on Nigeria that its Real Effective Exchange Rate (REER) analysis shows the naira is still weaker than what economic fundamentals suggest it should be.
REER is a measure that compares a country’s currency value against those of its major trading partners while adjusting for inflation differences.
According to the IMF, the naira appreciated in real terms by 32 percent in 2025, even though the nominal exchange rate still recorded a 5.2 percent depreciation within the same period.
The report noted that Nigeria’s official exchange rate improved from about ₦1,535 per dollar at the end of 2024 to around ₦1,435 per dollar by the end of 2025, representing roughly a 6.5 percent gain. However, on average across the year, the naira weakened slightly.
The IMF further estimated that, based on economic fundamentals, the naira should be trading closer to around ₦1,130–₦1,142 per dollar, compared to current market levels.
Despite reforms introduced since 2023 that allowed more flexibility in the foreign exchange market and ended multiple exchange rate systems, the IMF said the currency adjustment process is still ongoing.
The Fund advised the Central Bank of Nigeria to slow the pace of foreign reserves accumulation and maintain a flexible exchange rate system that allows movement in both directions. It added that further improvements in fiscal policy and stronger non-oil sector performance would help reduce the current imbalance.
