The value of the Naira is typically compared to the U.S. dollar, which is the most widely used currency for trade and other international transactions and the world’s primary reserve currency.
Luckily for the Naira, the dollar is losing its value. In 2025, the dollar had lost about 11 per cent of its value against major currencies, dropping to its lowest value in over 50 years. Analysts describe it as one of the biggest falls since the 1970s. However, the dollar will recover; even the blind can see that.
But the issue is, what will Nigeria do when that happens? Before we answer that, we must know the value of the Naira at the moment.
Few things stir as much debate in Nigeria as the value of the Naira. It is true that, after years of relentless devaluation due to World Bank and IMF policy prescriptions tied to their loan conditions, the Naira has gained about 11 per cent against the dollar over the past year. The result is a rare moment when the Naira, long seen as perpetually weak, has appreciated even as the world’s reserve currency has stumbled.
Some say it is too strong, kept afloat by Central Bank trickery. Others insist it is too weak, beaten down by years of inflation and policy blunders. Both sides cannot be right. So, is the Naira overvalued or undervalued?
For clarity, when the Naira is overvalued, it means when it trades stronger than its true worth-say the Naira sells at N500 per USD while the fair value is actually N1,000. This will lead to exports suffering as goods will be costly abroad, but imports will become cheaper. On the other hand, the Naira is undervalued when it trades at a price weaker than its fair value-say N1,500 per USD against a fair value of N500. It will gain from exports with cheaper prices abroad, but imports grow costly, fuelling local inflation. For the record, an import-dependent economy should always seek to have cheaper imports.
As of late September, the official market places the Naira at roughly N1,500 to the dollar. On the streets, the going rate is only slightly worse, about N1,515. Compared to the chaos of a few years ago, when the gap between official and parallel rates was wide, this looks like progress on paper.
But the calm on paper only hides a real storm. The cost of the merger is being passed on to the final consumer, resulting in inflation on imported goods. Headline inflation is still punishing, running at over 21 per cent, but the 2025 budget estimated it to be 15 per cent. External debt service this year alone amounts to $5.4 billion. Foreign reserves are recovering but remain fragile. Oil still makes up more than 50 per cent of export earnings in 2025. In short, the fundamentals remain unsteady, but it is not for me to say.
A simple way to check the value of the Naira is by comparing what money buys at home and abroad. The Big Mac Index can be used here because it is a global symbol of standardisation. Assume the Big Mac burger sells for $5.79 in the U.S., while the same burger costs N3900 in Abuja. We can get the ‘implied’ exchange rate by dividing the Abuja price by the American price, which will mean about N1029 to the dollar. If we compare it with the current selling rate of N1,500, the Naira is 31 per cent, or almost three times, weaker than it ‘should’ be. That is the definition of undervaluation.
Another approach comes from the World Bank. Its figures, which compare the purchasing power of whole economies, tell a similar story. In 2023, when the dollar was around N950, the World Bank’s PPP index classified the Naira as undervalued by about 35 per cent. With soaring inflation despite rebasing and multiple devaluations since then, the gap today is probably closer to 200 per cent. In plain words, Nigerian goods and services are three times cheaper than their fair global value-this supports the result from our burger maths.
Of course, not everyone agrees. But in the reality of average Nigerians, where every imported good-from petrol to paracetamol-costs more than ever, most local analysts side with the view that the Naira is undervalued, though perhaps not as dramatically as our burger calculations show.
But let’s be clear, undervaluation is not all bad, especially for an export-oriented economy. A weaker currency makes exports more competitive. Oil, cocoa, sesame, and even manufactured goods all become cheaper to foreign buyers. That is useful for a government keen to diversify beyond oil.
But undervaluation has a dark side, especially for an import-dependent economy. Imports become painfully expensive. Nigerians rely on imports for fuel, pharmaceuticals, spare parts, and machinery. When the Naira trades at a steep discount, these goods cost far more than they should. Inflation rises, wages lose their purchasing power, and the average family feels poorer.
This is the cruel trade-off. What helps the exporter hurts the consumer. A cheap Naira may look good on paper, but on the ground, it is hardship and the cost-of-living crisis. Thanks to the deliberate, imperialist conditions imposed by the World Bank and the IMF, which devalued the Naira, among other reckless policies adopted by administrators of this administration.
So, what next? Much depends on the Central Bank’s ability to reconsider its policies. Dollar reserves are edging back towards $42 billion in 2025 from $33 billion in 2023. Surely, this is some breathing space. As long as the reserves continue to rise and the monetary policy is right, the Naira could even appreciate towards N750 per dollar. That would ease import costs and give consumers some relief.
However, this is pure blue-sky thinking. There are risks everywhere. The scariest part is that with one external action, everything will take the Naira back to its highly volatile position. A shift in US monetary policy, and this is inevitable, will make the dollar stronger. Speculation will likely increase dollar demand, and the Naira will likely be in free fall, with the dollar possibly reaching N2000 or higher. Given the heavy debt service burden, the CBN will have limited firepower to defend the Naira ‘when’ the pressure builds. Of course, we can borrow a leaf from Argentina and see how the US is planning to rescue it.
However we read it, the lesson will be grim. For households, the currency debate is not abstract economics. It is the daily reality of prices in the market. For businesses, it is the difference between competitiveness and collapse. For policymakers, it is a warning: patchwork reforms will not do.
One way to recover the Naira’s value is to address the structural problems-such as blindly accepting World Bank and IMF loan conditions, reliance on imports, overdependence on oil, and a lack of confidence among both local and foreign investors.
Until then, the Naira will remain what it is today: undervalued, unpredictable, and the image of our economic contradictions.