Despite Reforms, Naira Still Undervalued by 25.6% — IMF


 

By Abdulahi Musa 

The International Monetary Fund (IMF) has stated that the Nigerian naira remains undervalued by 25.6 percent despite ongoing foreign exchange reforms implemented by the Federal Government and the Central Bank of Nigeria.

In its latest Article IV Consultation Report on Nigeria, the Washington-based lender said its Real Effective Exchange Rate (REER) model indicates that the naira is still trading below the level justified by the country's economic fundamentals. The REER measures a currency's value against those of major trading partners after adjusting for inflation.

According to the IMF, Nigeria's REER appreciated by 32 percent in 2025, even as the Nominal Effective Exchange Rate (NEER) depreciated by 5.2 percent during the same period. Despite this improvement, the Fund noted that the currency remains significantly undervalued.

“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 said in the report.

The report revealed that the official exchange rate strengthened from about N1,535 per dollar at the end of 2024 to N1,435 per dollar by the end of 2025, representing an appreciation of approximately 6.5 percent. However, on an annual average basis, the naira weakened from N1,479 per dollar in 2024 to N1,520 per dollar in 2025, amounting to a depreciation of 2.8 percent.

The IMF's assessment comes amid continued reforms aimed at stabilising Nigeria's foreign exchange market, including exchange-rate unification and efforts to improve liquidity and investor confidence. The Fund has previously commended the reforms, noting that they have helped align the official and parallel market rates while improving market transparency.

The latest findings suggest that although the naira has recorded some gains and market distortions have reduced, the currency is yet to fully reflect Nigeria's underlying economic conditions.


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