External reserves near CBN target as IMF urges slower dollar stockpiling

… Says naira remains 26% below fair value

Nigeria’s external reserves have moved closer to the Central Bank of Nigeria’s (CBN) 2026 target of $51.04 billion, prompting the International Monetary Fund (IMF) to recommend a slower pace of reserve accumulation to allow the naira to move closer to its estimated fair value.

Data published by the CBN showed that the country’s gross external reserves rose to $50.81 billion as of June 15, 2026, providing the apex bank with a stronger buffer to support foreign exchange market stability and defend the naira when necessary.

The latest reserve level represents an increase of $12.99 billion, or 34.35 percent, from $37.82 billion recorded on June 16, 2025. It is also the highest reserve position in about 17 years.

The reserve build-up has brought Nigeria within touching distance of the CBN’s 2026 year-end target of $51.04 billion. The target represents an increase from the $45.01 billion benchmark set for 2025 and is expected to be supported by higher oil revenues, foreign exchange reforms and stronger diaspora remittance inflows.

The IMF, however, believes that continued reserve accumulation may be slowing the pace at which the naira adjusts toward its equilibrium value.

In its latest assessment of Nigeria’s external position, the Fund said the country’s Real Effective Exchange Rate (REER) appreciated by 32 percent in 2025 despite a 5.2 percent depreciation in the Nominal Effective Exchange Rate (NEER).

The NEER measures the value of the naira against a basket of currencies of Nigeria’s major trading partners without adjusting for inflation. The REER, by contrast, adjusts for inflation differentials and is widely regarded as a more comprehensive measure of international competitiveness.

According to the IMF, the official naira exchange rate depreciated on an annual average basis from about N1,479 per dollar in 2024 to N1,520 per dollar in 2025, representing a 2.8 percent decline. However, on an end-of-period basis, the currency appreciated from N1,535 per dollar at the end of 2024 to N1,435 per dollar at the end of 2025, a gain of about 6.5 percent.

Despite the significant appreciation in the inflation-adjusted exchange rate, the IMF said its External Balance Assessment (EBA-lite) model still points to a substantial undervaluation of the naira.

“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.

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A negative REER gap suggests that the naira remains weaker than economic fundamentals would imply.

“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 exports, would help close the gap,” the IMF added.

The recommendation signals the Fund’s preference for a more flexible exchange-rate regime in which the naira is allowed to appreciate and depreciate according to market forces while reserve accumulation proceeds at a slower pace.

Meanwhile, the naira traded largely unchanged on Tuesday at the Nigerian Foreign Exchange Market (NFEM).

CBN data showed the local currency closed at N1,357.18 per dollar, representing a marginal depreciation of 91 kobo from N1,356.27 recorded on Monday.

At the parallel market, commonly referred to as the black market, the naira traded between N1,395 and N1,400 per dollar, unchanged from the previous session.

The IMF also noted that Nigeria’s de jure and de facto exchange-rate arrangement remains classified as floating.

According to the Fund, Nigeria continues to maintain five exchange restrictions that require IMF approval under Article VIII, Section 2(a) of the IMF Articles of Agreement. These include limits on foreign exchange access for business and personal travel allowances, restrictions on foreign currency access for certain international transactions, limitations on foreign exchange purchases for family living expenses abroad, and instances where access to foreign exchange remains subject to discretionary approval by the CBN.

The Fund further said Nigeria maintains two multiple currency practices that are inconsistent with Article VIII, Section 3 of the IMF Articles of Agreement. These relate to the exchange rates used by the CBN for certain foreign exchange transactions involving government agencies and oil-related companies.

According to the IMF, the most recent impermissible spread under one of the practices was observed on March 23, 2026, while the latest occurrence under the second practice was recorded on April 22, 2026.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.