Business News of Thursday, 6 February 2014
Last week, there was a heated debate on the depreciation of the cedi and its effect on local businesses in the media.
While traders in the Central Business District (CBD) complained that business was not good because customers were not able to afford some of the items on the market, the Minister of Finance, Mr Seth Terkper, promised to strengthen existing foreign exchange laws to help halt the free fall of the value of Ghana’s currency.
The cedi depreciated against the US dollar by 8.3 per cent during the first quarter of 2012, compared with two per cent depreciation in the same period in 2011. The performance of the cedi is, therefore, worse than the prediction of the Economic Intelligence Unit in 2012 which stated that by 2016, GH¢2.10 would be equal to $1 due to the persistent inflation and strong import demand.
State of the various currencies
Presently, the United States Dollar, which used to sell on the local foreign exchange market for GH¢2.20 before the 2013 Christmas, is now selling at GH¢2.60, while the British Pound, which used to be sold at about GH¢3, is now selling at GH¢4.20.
The same goes for the euro and CFA, with the euro now selling at GH¢3.50, while the CFA is going for GH¢4.80. The cedi is said to have already depreciated by three per cent against the major international currencies in January, 2014. In 2013, the local currency suffered 17 per cent depreciation.
Also, the year-on-year depreciation shows a 21.96 per cent depreciation of the cedi against the dollar; 28.88 per cent against the pound sterling; 23.98 per cent against the euro and 25.54 per cent against the Swiss franc.
AGI’s view on currency
In an interview with the Daily Graphic, the Executive Director of the Association of Ghanaian Industries (AGI), Nana Owusu-Afari, said the increased demand for the major foreign trading currencies had been the actual cause of the cedis’ depreciation, which has impacts on various aspects of Ghana’s economy.
He also said Ghanaian industries imported most of their raw materials for production and, therefore, the demand for major foreign trading currencies was high. He suggested that there should be an increase in local production to avert the importation of raw materials, hence the reduction in demand for the foreign currencies.
Bank of Ghana’s action
However, the Bank of Ghana (BoG), in an effort to save the cedi, has injected $20 million into critical areas of the economy. The Governor of the Bank of Ghana, Dr Henry Kofi Wampah, said the BoG would roll out more stringent measures to fend off mounting inflation and stabilise the cedi.
He said the decline in the value of currencies was not peculiar to Ghana but was pervasive in many parts of the world. Also, to curb the situation, Mr Wampah said the central bank had issued new regulations to improve liquidity on the interbank currency and shore up the local currency.
The regulations require all commercial banks in the country to quote a two-way pricing of currency exchange and limit the spread on corporate transactions to a maximum of 200 percentage points. But it appears that not only the currency and economy experts are suggesting a solution to the depreciation of the cedi; individuals and some religious leaders have in their own way voiced out their opinions on the issue.
Intervention from God
The General Overseer of the Christian Action Faith Ministries (CAFM), Archbishop Duncan-Williams, is reported to have led his congregation last Sunday to pray fervently for the recovery of the fast depreciating Ghana Cedi.
“…I hold up the cedi with prayer and I command the cedi to recover and I declare the cedi will not fall; it will not fall any further. I command the cedi to climb. I command the resurrection of the cedi. I command and release a miracle for the economy,” he said
However, the Head of Policy Monitoring and Evaluation at the Presidency, Dr Tony Aidoo, said the act by the Archbishop "is a big problem for us because it goes to enforce the [un-developmental] attitude of Ghanaians". He said for the economy to change, there was the need to cultivate a developmental culture.
Dr Tony Aidoo shared his conviction that attitudinal change and a change in the structure of the economy were the requirements for the stabilisation of the cedi and not prayers.
We, therefore, ask, how do we halt the cedi‘s fall? Is it by hard work, prayers, protecting our local industries, halt to the importation of all manner of merchandise including toothpick? Here are some views of the members of the public.