Cedi depreciation bites hard – Businesses call for urgent interventions

Businesses which bear the brunt of the local currency have called on the government and the Bank of Ghana (BoG) to act urgently to save the falling Ghana cedi.

Companies in manufacturing, commerce and other sectors said the persistent depreciation of the Ghana cedi against major international currencies, especially the US dollar, must be checked immediately because it was slowing their businesses and pushing a lot of cost on the consumer who must pay higher for products whether essential or luxury.

The Ghana Union Traders Association (GUTA) and the Chamber of Automobile Dealership Ghana (CADEG) said the depreciating cedi had pushed the cost of goods and services to rise, making it difficult for businesses to stay afloat.

The Ghana cedi is in a record-breaking weakening cycle, depreciating 14 per cent against the dollar this year, fuelled partly by foreign exchange (forex) supply shortfalls. The local currency, which was trading in January at GH¢11.97 to a dollar on the interbank market and at GH¢12.33 in the retail market, is currently being bought at GH¢13.9000 and sold at GH¢13.9140 to the dollar at the interbank rate as of yesterday.

Hiring Marketing Manager
At some forex bureaux in Accra, the dollar is being bought at GH¢15.00 and sold for GH¢15.30. According to the Bank of Ghana’s (BoG’s) January 2024 Summary of Economic and Financial Data, the cedi started 2024 better than the same time in 2023, when it lost 20.6 per cent to the US currency, and in 2022, the cedi depreciated by 30 per cent against the dollar.

But the Governor of the Bank of Ghana, Dr Ernest Addison, told the Daily Graphic that the central bank was keeping a vigilant eye on the developments on the foreign exchange market.

The businesses want the government to take urgent steps to salvage the situation. The cost of vehicles, their parts, building materials and hardware, imported semi-finished and raw materials, electrical appliances, materials for the printing industry, among others, have all taken a hit in the recent spiral of cedi’s depreciation.

Growing concerns
GUTA in a statement signed by its President, Joseph Obeng, said the cedi’s depreciation had created a big mess for the business community, especially the trading sector. “The purchasing power of the consuming public has been affected, thereby reducing the turnover of businesses,” he said.

Dollar benchmarking
Both GUTA and CADEG cited the rising freight charges, compounded by customs duties benchmarked to the dollar at the port as part of the conditions crippling trade and commerce, leading to untold hardships for businesses and consumers.

The National Chairman of CADEG, Eddie Kusi Ankomah, decried challenges facing the automobile industry following the depreciation of the cedi. He said the vehicle dealerships were facing collapse as businesses were struggling to keep up with the frequent depreciation of the cedi to US dollar which currently stood at GH¢15 for a US dollar.

“The car dealership business is on the verge of collapse, and the reason is the dollar rate increasingly shooting up; it is unbearable. Something you bought at $10,000 which was equivalent to GH¢120,000 is now equivalent to GH¢150,000,” he explained.

Mr Ankomah, who is also the Chief Executive Officer (CEO) of Erata Motors in Accra, told the Daily Graphic that “this difference is not attributed to only the buying but to all other things in connection with import duties and clearing fees”. “These figures go up because the customs use the dollar rate to calculate duties at the port,” he added.

Import duties
Citing instances, Mr Ankomah said import duties paid by importers on some vehicles had increased by nearly 19 per cent. He stated that importers used to pay GH¢45,000 for every imported Toyota Prado vehicle in 2020. That had, however, changed significantly to GH¢229,000 this year which was quite outrageous.

The CADEG president said prior to 2017, the car dealership business flourished as he sold about 20 to 35 cars monthly. However, that has drastically changed as he could now only manage to sell three cars on the average in a month, due to the increase in prices.

On the changes in the price of vehicles, Mr Ankomah stated that a 2010-2016 Toyota Highlander which was sold for GH¢500,000, was now selling at a staggering GH¢900,000 due to the combined effect of the exchange rate, import duties and clearing fee.

He said although the business community had held meetings with the Ministry of Finance and the BoG on the way forward in making the cedi stronger, there seemed to be no serious interest from them in that regard.

“Ghana Union of Traders Association (GUTA) and the business community have sat several times with the Ministry of Finance and the Bank of Ghana to give them ideas on how to protect our currency but no one seems to take us seriously”.

“If this continues, the country will be very bankrupt and only the rich would survive; businesses would fold up because they won’t get the capital to work,” he said. Mr Ankomah said if the trend persisted into the nearest future “foreigners will take over the country because they get loans at very little interest rates, for as low as three per cent; whereas Ghanaians deal with as high as over 30 per cent interest rate. We can’t compete with them; that’s why we need the government to sit up,” Mr Ankomah stressed.

He appealed to the President and the Vice-President to take the necessary actions in ensuring that banks stopped selling dollars to businessmen from neighbouring countries and tackle the challenges head-on for businesses to flourish in the country.

At the First Bank Ghana Gala Night in Accra earlier this month, Dr Addison said it was impossible for inflation to trend downwards while the exchange rate was unstable. “I am sure you know that the exchange rate stability will be sustained.


“It is not possible to continue the disinflation process with exchange rates that are not stable, so implicit in that statement is to give assurance to you all about the stability of the cedi going forward.”

Analysts say the unsustainable levels of public debt and fiscal deficit, the depletion of foreign exchange reserves to less than three months of import cover, and the high double-digit inflation since 2021 underlie the sharp depreciation of the Ghana Cedi.

An economist and markets analyst suggested that business owners could reduce the impact of the exchange rate fluctuations on their businesses if they utilised the Forwards Forex market and increased the use of local raw materials (or supplies), where possible.

The use of forward forex markets would help businesses to lock in exchange rates during times of uncertainty, especially as the Ghanaian cedi appears to be a depreciation-bias currency, the analyst said.


“This, for many, will cushion traders from extreme Forex uncertainty, minimise the risk of capital erosion and ultimately deepen Ghana’s forward forex market,” the analyst who pleaded anonymity stated.

Again, the analyst said the increased reliance on local raw materials would also cushion working capital against unanticipated shocks to the exchange rate and limit disruptions to business continuity.

Furthermore, businesses could explore the option of bypassing the US dollar and going directly through the currency of import origin. For instance, businesses that import from China but continue to go through the US dollar could minimise that cost by directly trading in the Chinese Renminbi. However, that required a sufficient supply of the Renminbi to support its trade ability.

Fintech companies
Banking Consultant, Dr Richmond Atuahene, said the short-term measure to curb the rapid depreciation of Ghana’s cedi was to revisit the laws that mandated some financial technology (Fintech) companies holding remittances to Ghanaians.


The consultant recommended in a research paper that the government should take a second look at the laws that allowed some Fintech companies to hold foreign currencies from hitting the country’s balance sheet.

“According to the World Bank, in 2022, the country received $4.7 billion but it will shock you to know that what came into the balance sheet of the government at the Bank of Ghana was $2.6 billion,” the paper pointed out.

The report suggested that the difference between the two had gone to some Fintech companies or some companies that were licensed in 2019 under the Service and Payment Act 987 who were not allowing the foreign exchange to hit the country’s balance sheet.

“As you sit, your wallet is credited but nobody is tracking the dollar or Euro that was used. Nobody seems to be tracking it so it falls in the hands of some companies, I know them. I don’t want to mention their names. It falls into their hands and these monies do not come to Ghana,” Dr Atuahene told the Daily Graphic when he was reached to comment on the report.

IEA suggests
The Institute of Economic Affairs (IEA), a political economy think tank, has proposed 17 practical short, medium and long-term measures to stabilise the Ghana cedi against the US dollar.

The proposals, which cut across measures, include the Ghanaian ownership of the economy, industrialisation, acceleration of external debt restructuring, the enforcement of foreign exchange (forex) market regulations, checks on illegal forex dealings, repatriation of company profits and dividends, regulation of forward forex market trading and the maintenance of fiscal discipline.

The rest are limitations of monetary financing, promotion of remittances, issue of diaspora bonds, building up reserves, dollarisation, adoption of a currency board, industrialisation and expansion of export earnings.

In a statement issued in Accra last Sunday, the think tank charged the BoG to use its Economic Intelligence Unit (EIU) to collaborate with the security agencies to monitor acts of illegal forex transfers through banks, forex bureaux and other channels as well as money laundering to reduce the demand for it.

Checking the illegal forex dealings, it said, would help stem the demand tide, thereby helping to address the cedi’s depreciation against the US dollar.

The IEA’s most significant suggestion is the need for a strategic local ownership strategy to ensure that major sectors of the economy were owned by Ghanaians so that earnings from those companies would stay in the country and contribute to the development of the economy.

That, it said, would ultimately boost the country’s forex supply from exports and reduce payments for imports, with a potentially positive impact on the exchange rate.

Writer’s email:

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Oh bossu you get Ad blocker for your browser? How man fit chop? I beg disable am make we fit run advert kakra na man make hot!