The International Monetary Fund (IMF) has stated that Nigeria’s currency, the naira, remains significantly undervalued despite ongoing foreign exchange reforms introduced by the federal government.
According to the IMF’s latest assessment of the Nigerian economy, the naira is estimated to be about 25.6 percent below its fair value, even after notable improvements in the foreign exchange market.
The Fund explained that while the naira recorded some gains in 2025, its value still does not fully reflect Nigeria’s underlying economic fundamentals. The IMF’s analysis showed that the currency appreciated in real terms during the year, although it continued to experience fluctuations against major international currencies.
Official figures cited in the report indicate that the exchange rate improved from about ₦1,535 per dollar at the end of 2024 to ₦1,435 per dollar by the end of 2025. However, on average, the naira remained weaker compared to the previous year.
The IMF suggested that the currency should be trading at a stronger level than its current market rate. The institution therefore recommended that Nigeria continue implementing reforms aimed at improving the efficiency and transparency of the foreign exchange market.
The report also advised the Central Bank of Nigeria (CBN) to maintain exchange rate flexibility while allowing market forces to play a greater role in determining the value of the naira. According to the IMF, strengthening market operations and pursuing broader fiscal and structural reforms would help reduce the currency’s undervaluation over time.
The assessment comes several years after the federal government introduced major foreign exchange reforms designed to unify exchange rates, attract foreign investment, and improve liquidity in the market.
Expert Calls for Balanced Approach
Reacting to the IMF’s recommendations, financial economist Professor Uche Uwaleke argued that Nigeria’s economic realities require a more balanced policy approach.
He noted that much of the country's inflation is driven by structural factors such as insecurity, rising energy costs, poor infrastructure, transportation challenges, and low agricultural productivity rather than excessive consumer demand.
According to him, overly tight monetary policies could increase borrowing costs, discourage investment, and slow economic growth without addressing the root causes of inflation.
Uwaleke also expressed reservations about a completely free-floating exchange rate system, saying Nigeria’s heavy dependence on oil revenue makes the economy vulnerable to global price fluctuations.
He suggested that a managed float system, where market forces determine exchange rates while the central bank intervenes when necessary to prevent excessive volatility, may be more suitable for Nigeria’s economic conditions.
Economists say the debate over exchange rate management remains central to Nigeria’s efforts to stabilize prices, attract investment, and strengthen long-term economic growth.
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