The CEO of the Ghana Association of Banks, John Awuah, has stated that the cedi’s performance in recent years has largely been driven by speculation rather than actual market forces.

According to him, some individuals deliberately hoard dollars to profit from the depreciation of the local currency.

He estimated that speculation accounts for about 20 to 30% of the cedi's depreciation.

“I once stated, with no proper research behind it, that I could clearly see that the extent of speculation in the currency's movement was between 20 and 30%,” he said.

“So, if there is a depreciation, about 20 to 30% of that is not backed by any effective transaction, but rather by people who are simply playing the currency for temporary price adjustments to profit from the movement,” he was quoted by myjoyonline.com.

Awuah explained that the depreciation of the cedi makes it more attractive to those seeking to exploit the situation for financial gain.

“If the currency is able to hold its own, what you are doing is making that trade unattractive. Now, the cedi is more attractive. So, people holding cedis are looking for cedi-denominated investments because the currency is not depreciating as aggressively as we’ve seen in the past,” he said.

However, he cautioned that significant appreciation of the cedi should not be overly celebrated if it is not sustainable.

“We should not be too excited about a significant appreciation. That is not exactly what the business community is looking for. The business community wants predictability, not a situation where the currency moves from GH¢5 to the dollar today, GH¢10 tomorrow, and GH¢9 the next time,” he added.

Awuah also expressed some uncertainty about the long-term stability of the currency.

“I don’t want to say ‘wait and see,’ because I have no reason to doubt the currency’s ability to hold its own. But coming down to single digits, I’m not sure,” he said.

SSD/MA