IMF Says Naira Still 25% Undervalued Despite 2025 Rally
Last update: June 16, 2026
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Naira has clawed back some ground, but the IMF reckons we are still getting a discount on our own currency.
The International Monetary Fund has just finished its latest Article IV health-check on Nigeria, and its verdict is pretty blunt. Even with all the FX reforms, the naira is still trading well below where the fundamentals say it should be.
Their measure of choice is the Real Effective Exchange Rate, or REER, which basically tracks our currency against our big trading partners after you strip out inflation. The IMF says Nigeria's REER jumped by 32 per cent in 2025, while the nominal rate actually slipped by 5.2 per cent. Sounds good, until you read the fine print.
Despite that bounce, their model still shows a REER gap of minus 25.6 per cent. In plain English, the naira is about a quarter undervalued.
The numbers they gave are quite telling:
The official rate moved from N1,535/$ at the end of 2024 to about N1,435/$ by end-2025. That is roughly a 6.5 per cent appreciation.
But on average for the whole year, we actually went backwards, from N1,479/$ in 2024 to N1,520/$ in 2025, a 2.8 per cent depreciation.
So what should it be? The IMF reckons fair value was closer to N1,142.04/ ** on the end-year basis, or **N1,130.88/ on the average. That is miles away from the N1,356.27/$ the market printed on Monday.
This is nearly three years on from President Bola Tinubu's big FX shake-up in June 2023, when the multiple exchange-rate window was scrapped for a more market-driven system. Yes, it triggered that initial sharp fall, but the idea was to boost transparency, pull in foreign investment and get liquidity moving again.
What next? The IMF is not calling for a return to controls. It wants the Central Bank of Nigeria to keep the exchange rate flexible, slow down a bit on piling up reserves, and let the naira move both ways. Pair that with better FX market functioning and proper fiscal and structural reforms, especially to cut our reliance on oil and gas imports, and that 25 per cent gap should start to close.
In short, we have made progress, but according to the Fund we are not there yet.
Source: cbinews.tv, based on IMF Article IV Consultation on Nigeria
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