IMF Says Naira Still Undervalued Despite 2025 Gains
By Aboki Forex —
The International Monetary Fund has said the naira remains significantly undervalued even after recent gains against the dollar. In its latest Article IV consultation report on Nigeria, the IMF stated that its Real Effective Exchange Rate assessment shows the local currency is still trading below levels supported by economic fundamentals.
The REER measures a currency’s value against major trading partners after adjusting for inflation. According to the fund, Nigeria’s REER appreciated by 32 percent in 2025. But the nominal effective exchange rate 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 IMF said.
The report noted that the official exchange rate strengthened from N1,535 per dollar at the end of 2024 to N1,435 per dollar by the close of 2025. That represents an appreciation 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 amounts to a depreciation of 2.8 percent.
Based on the IMF assessment, the naira should have traded around N1,142.04 per dollar using the end-of-2025 exchange rate benchmark. Or N1,130.88 per dollar when calculated using the average exchange rate for the year. The assessment contrasts with the official foreign exchange rate of N1,356.27 per dollar recorded at the time.