The International Monetary Fund (IMF) has said that the Nigerian naira remains undervalued by 25.6 per cent despite recent gains recorded following ongoing foreign exchange reforms in the country.
The Fund made the assessment in its latest Article IV Consultation Report on Nigeria, where it evaluated the country’s exchange rate performance using its Real Effective Exchange Rate (REER) model.
According to the IMF, the REER model suggests that the naira is still trading below levels justified by Nigeria’s economic fundamentals.
The REER measures a country’s currency value against those of its major trading partners, adjusted for inflation differences.
The IMF noted that Nigeria’s REER appreciated by 32 per cent in 2025, even though the Nominal Effective Exchange Rate depreciated by 5.2 per cent within the same period.
“Despite the REER appreciation that has already taken place in 2025, the EBA-lite REER model indicates a REER gap of -25.6 per cent,” the Fund stated.
The report showed that the official exchange rate strengthened from N1,535 per dollar at the end of 2024 to N1,435 per dollar at the end of 2025, representing an appreciation of about 6.5 per cent.
However, on an annual average basis, the naira weakened from N1,479 per dollar in 2024 to N1,520 per dollar in 2025, indicating a depreciation of 2.8 per cent.
Based on the IMF’s assessment, the naira should have traded at about N1,142.04 per dollar at the end of 2025 or N1,130.88 per dollar on an average basis for the year.
The IMF said Nigeria’s ongoing foreign exchange reforms, introduced in 2023, have helped improve market transparency but stressed the need for continued policy adjustments.
It advised Nigeria to maintain exchange rate flexibility, strengthen foreign exchange market operations, and pursue fiscal and structural reforms to address existing imbalances.
“Given the assessed REER undervaluation, slowing the pace of reserve accumulation and continuing to allow two-way movement of the naira exchange rate, combined with strengthening FX market functioning and advancing fiscal and structural reforms, would help close the gap,” the Fund said.
The IMF also urged Nigeria to deepen reforms aimed at boosting non-oil exports and improving foreign exchange inflows.
It said such measures would help reduce exchange rate misalignment over time and strengthen Nigeria’s external economic position.
The Fund’s assessment comes nearly three years after major foreign exchange reforms were introduced in Nigeria under the current administration.
