Despite efforts by the Central Bank of Nigeria (CBN) to stabilize the Naira, the bank officially devalued the currency.
According to Informationhood, the Naira lost value on June 15, 2016 due to increasing pressure in the foreign exchange market. Earlier, on February 21, 2016, President Muhammadu Buhari had opposed any further devaluation. He warned that Nigeria, as a non-exporting nation, would suffer if the Naira fell.
What Changed on June 15, 2016
On June 15, 2016, CBN Governor Godwin Emefiele announced a flexible foreign exchange regime. This policy ended the dual exchange rate system. It lets market forces determine the Naira’s value against other currencies.
Governor Emefiele explained several measures to maintain stability:
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Appoint Forex Primary Dealers to manage trading.
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Launch a Futures Market to allow end-users to lock in rates.
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Implement 12 additional measures to regulate and stabilize the market.
He said the CBN would operate a single trading window from June 20, 2016, and only intervene occasionally to stabilize the market.
Key Points of the New Forex Policy
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Primary Dealers: Fewer than a dozen dealers now manage foreign exchange trading.
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Banned Items: The 41 restricted items remain banned from the forex window.
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Market-Driven Naira: The Naira’s official value now reflects supply and demand, ending months of speculation.
Why Devaluation Happened
President Buhari initially opposed devaluation while on medical leave in the United Kingdom. However, Nigeria faced a budget shortfall due to declining oil revenue. Devaluing the Naira became necessary to access foreign funds and stabilize the economy.
The June 15, 2016 devaluation marked a shift toward a market-driven currency policy. It showed the government’s readiness to adopt measures needed to maintain economic stability.
