IMF Says Naira is 25.6% Undervalued; Estimates REER Fair Value at N1,142/$

The International Monetary Fund (IMF) has said the Nigerian naira remains significantly undervalued, trading about 25.6% below the level implied by economic fundamentals despite recent gains against the dollar in official and parallel markets.

In its latest Article IV Consultation Report, the IMF said the naira’s current exchange rate does not fully reflect improvements in Nigeria’s external position and macroeconomic adjustments. The Fund’s Real Effective Exchange Rate (REER) model — which compares a currency against major trading partners while adjusting for inflation — points to a REER gap of -25.6%.

Based on that assessment, the IMF estimated the naira’s fair value at approximately N1,142.04 per dollar using the exchange rate at the end of 2025, and at about N1,130.88 per dollar on an average annual basis for the year. Those levels are stronger than the prevailing official rate of N1,356.27/$ as of Monday, June 14, 2026.

The IMF acknowledged progress following Nigeria’s foreign exchange reforms. The official rate improved from N1,535/$ at the end of 2024 to N1,435/$ at the end of 2025, an appreciation of about 6.5%. On an average annual basis, the naira still weakened slightly, from N1,479/$ in 2024 to N1,520/$ in 2025, a depreciation of about 2.8%.

The Fund noted Nigeria’s Real Effective Exchange Rate appreciated by 32% in 2025, even as the Nominal Effective Exchange Rate depreciated by 5.2%, suggesting underlying strength is improving faster than the nominal rate indicates.

IMF advises CBN to slow reserve accumulation

The IMF urged the Central Bank of Nigeria to maintain exchange rate flexibility and avoid excessive accumulation of foreign reserves.

“Given the assessed REER undervaluation, slowing the pace of reserve accumulation and continuing to allow two-way movement of the naira exchange rate, combined with strengthening FX market functioning and advancing fiscal and structural reforms, would help close the gap,” the IMF said.

The assessment comes nearly three years after President Bola Tinubu’s administration abolished multiple exchange-rate windows in June 2023 and allowed the naira to trade more freely. While the move initially triggered sharp depreciation and higher inflation, authorities argued it was necessary to restore investor confidence, improve market liquidity and attract foreign capital.

External reserves sustain above $50 billion

Nigeria’s external reserves crossed $50 billion, rising to $50.11 billion on June 5, 2026. The CBN said reserves continue to strengthen due to higher oil earnings, diaspora inflows and the return of foreign portfolio investments.

The IMF’s latest assessment is likely to fuel fresh debates over the naira’s true value and whether ongoing reforms will ultimately deliver a stronger, more stable currency.