The International Monetary Fund (IMF) has said that the Nigerian naira remains undervalued by 25.6 per cent despite recent gains against the United States dollar following the Federal Government’s foreign exchange reforms.
In its latest Article IV consultation report on Nigeria, the IMF noted that while the naira has recovered some ground, it is still trading below levels justified by the country’s economic fundamentals.
According to the report, Nigeria’s Real Effective Exchange Rate (REER), a measure that compares a currency’s value against those of major trading partners while adjusting for inflation — appreciated by 32 per cent in 2025.
This came even as the Nominal Effective Exchange Rate (NEER) depreciated by 5.2 per cent during the same period.
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“Despite the REER appreciation that has already taken place in 2025, the EBA-lite REER model indicates a REER gap of -25.6 percent,” the IMF stated.
Based on the IMF’s assessment, the naira should have traded around N1,142/$ using the end-of-2025 exchange rate and about N1,131/$ based on the average rate for the year. However, the official exchange rate stood at N1,356.27/$ as of Monday.
The fund noted that the official exchange rate strengthened from N1,535/$ at the end of 2024 to N1,435/$ at the end of 2025, representing a gain of about 6.5 per cent. On an annual average basis, however, the naira weakened from N1,479/$ in 2024 to N1,520/$ in 2025.
The IMF’s assessment comes nearly three years after the Tinubu administration introduced major FX reforms, including the unification of exchange rates and a more market-driven system aimed at boosting liquidity and attracting foreign investment.
The institution urged the Central Bank of Nigeria (CBN) to maintain exchange-rate flexibility and slow the pace of foreign reserve accumulation.
According to the IMF, allowing greater two-way movement in the FX market, alongside fiscal and structural reforms and support for non-oil sectors, would help reduce the naira’s undervaluation and stren
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