IMF Says Naira Still Undervalued, Should Trade Below N1,150/$
By Aboki Forex —
The International Monetary Fund says the naira remains undervalued despite recent gains. In its latest Article IV consultation report on Nigeria, the IMF said its Real Effective Exchange Rate model shows the local currency is still trading below levels justified by economic fundamentals.
The REER measures a currency's value against major trading partners after adjusting for inflation. The IMF said Nigeria's REER appreciated by 32 percent in 2025. But the nominal effective exchange rate depreciated 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.
According to the report, the official exchange rate appreciated from N1,535 per dollar at the end of 2024 to N1,435 per dollar at the end of 2025. That is a gain of about 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. That is a depreciation of 2.8 percent.
This means the IMF believes the naira should trade at N1,142.04 per dollar based on the end of 2025 exchange rate. Or at N1,130.88 per dollar based on the average rate for last year. The official FX rate was N1,356.27 per dollar as of Monday.
The IMF assessment comes about three years after President Bola Tinubu's administration started foreign exchange reforms in June 2023.