Reported by: Ijeoma G | Edited by: Oravbiere Osayomore Promise.
The International Monetary Fund has warned that the Nigerian naira remains significantly undervalued, despite three years of foreign exchange reforms that have improved the currency’s official performance against the United States dollar. In its latest Article IV Consultation report on Nigeria, the Washington‑based lender stated that the naira is still trading 25.6 per cent below levels supported by the country’s economic fundamentals, suggesting that the government’s reform agenda has yet to fully correct the currency’s long‑standing misalignment.
The assessment, released on June 9, 2026, comes nearly three years after President Bola Tinubu’s administration embarked on sweeping foreign exchange reforms in June 2023. The reforms included the abolition of the multiple exchange‑rate regime and the adoption of a more market‑driven currency system, which initially triggered a sharp depreciation of the naira but was defended by authorities as necessary to attract foreign investment, improve transparency and boost liquidity in the foreign exchange market.
The IMF’s Real Effective Exchange Rate (REER) model, which measures a currency’s value against those of major trading partners after adjusting for inflation, showed that Nigeria’s REER appreciated by 32 per cent in 2025, even as the Nominal Effective Exchange Rate (NEER) weakened by 5.2 per cent during the same period. Despite this appreciation, the fund noted that the naira was still trading below equilibrium levels, estimating a REER gap of ‑25.6 per cent.
According to the IMF, 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, representing an appreciation of approximately 6.5 per cent. However, on an annual average basis, the naira weakened from N1,479 per dollar in 2024 to N1,520 per dollar in 2025, amounting to a depreciation of about 2.8 per cent. Based on the fund’s 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. These figures contrast sharply with the official exchange rate of N1,356.27 per dollar recorded on Monday, June 15, 2026.
The IMF’s assessment places the naira’s fair value at a level that would represent a significant strengthening from current official rates, suggesting that the currency remains undervalued by over 25 per cent despite the reforms implemented by the Tinubu administration. The fund attributed the undervaluation to persistent structural challenges, including weak non‑oil sector performance, limited foreign exchange market depth, and continued reliance on oil revenues.
To correct the misalignment, the IMF advised the Central Bank of Nigeria to maintain exchange‑rate flexibility and slow the pace of foreign reserve accumulation. “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 and supporting fiscal and structural reforms, particularly those that can improve non‑oil/gas imports, would help close the gap,” the fund said.
The IMF further warned that dollar‑denominated stablecoins could undermine demand for the naira and reduce the effectiveness of the country’s monetary policy framework. According to the fund, Nigeria recorded approximately $59 billion in crypto‑asset inflows between July 2023 and June 2024, with the rapid penetration of stablecoins threatening to weaken the transmission of domestic monetary policy.
The Centre for the Promotion of Private Enterprise (CPPE), a Nigerian think tank, described the IMF’s Article IV Consultation report as an “objective assessment” of the ongoing reforms but stressed that a strong policy balance is needed to ensure the reforms translate into welfare gains for citizens. The CPPE’s comments underscore the tension between macroeconomic stability and the lived realities of Nigerians, who continue to grapple with high inflation, rising food prices and persistent poverty.
The IMF’s report also raised concerns about Nigeria’s fiscal position, noting that the consolidated government deficit widened to 4.4 per cent of GDP in 2025 from 2.4 per cent in 2024. The fund projected Nigeria’s economy to grow by 4.1 per cent in 2026, compared with an estimated 4 per cent in 2025, but warned that rising debt service costs are limiting the government’s ability to fund health, education and social welfare.
The IMF’s latest position comes at a critical juncture for Nigeria’s economy, as the country prepares for the 2027 general elections and faces mounting pressure from citizens over the rising cost of living. While the Tinubu administration has pointed to the naira’s official appreciation as evidence of reform success, the IMF’s assessment suggests that the currency’s gains have been insufficient to correct its deep‑seated undervaluation. For Nigerian households and businesses, the naira’s continued undervaluation translates into higher import costs, persistent inflationary pressures and a prolonged squeeze on purchasing power – a reality that no amount of official optimism can obscure.
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