Lagos, June 17, 2026 – The International Monetary Fund (IMF) says Nigeria’s currency, Naira, is grossly undervalued in spite of the country’s foreign exchange reforms.
The IMF said this in its latest Article IV consultation report on Nigeria.
It said its Real Effective Exchange Rate (REER) assessment showed the naira was still trading below levels supported by the country’s economic fundamentals.
The IMF said Nigeria’s REER appreciated by 32 percent in 2025, even as the nominal effective exchange rate (NEER) weakened by 5.2 percent during 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 percent,” the fund said.
It noted that the official exchange rate strengthened from N1,535/$ at the end of 2024 to N1,435/$ by the close of 2025, representing an appreciation of about 6.5 percent.
The IMF, however, said on an annual average basis, the naira weakened from N1,479/$ in 2024 to N1,520/$ in 2025, amounting to a depreciation of 2.8 percent.
It said the naira should have traded around N1,142.04/$ using the end-of-2025 exchange rate benchmark, or N1,130.88/$ when calculated using the average exchange rate for the year based on its assessment.
The IMF said this assessment contrasts with the official foreign exchange rate of N1,356.27/$ recorded on Monday.
The IMF said continued exchange rate flexibility would be crucial to correcting the naira’s undervaluation and improving Nigeria’s external balance over time.
It advised the Central Bank of Nigeria (CBN) to moderate the pace of foreign reserve accumulation, while sustaining a more flexible exchange rate regime.
“Given the assessed REER undervaluation, slowing the pace of reserve accumulation and continuing to allow 2-way movement of the naira exchange rate combined with strengthening FX market functioning and advancing and supporting fiscal and structural reforms, particularly those that can improve non-oil/gas imports, would help close the gap,” the fund said.
