Cedi in a free fall: businesses call for swift action

The fast depreciation of the cedi is gradually hurting local businesses. As a result of the depreciation, goods imported into the country have become expensive on the local market.

The situation has also slowed down businesses, as producers face challenges in procuring raw materials, while customers are unable to buy the goods on the market.

The US 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 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 has already depreciated by three per cent against the major international currencies this month.
In 2013, the local currency suffered a 17-per cent depreciation.

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.

Central Business District (CBD) of Accra

In separate interviews, traders within the Central Business District (CBD) in Accra told the Daily Graphic that the depreciation of the cedi was gradually affecting their businesses.

They complained that business was now moving slowly, as customers were not able to afford some of the items on the market.

When the Daily Graphic visited the Aflao Station in Accra, Mr Asare Konadu, a shop attendant, said after the Christmas festivities, business had slowed down, with little or no sales.

“Nowadays people no longer buy the goods as expected because they complain that their money can’t afford the prices we offer them,” he said.

“But it is not our fault. When we go out to buy the goods, the prices there are different because we pay in dollars and we need to sell at prices that can give us profit,” he added.

Asked whether he had any idea why the cost of the dollar had gone up, Mr Konadu said part of the reason was the rising cost of living which did not adequately match the salary of the ordinary Ghanaian.

“Day in, day out there is an increase in the tariff of one utility or another, but there is no corresponding increase in salaries and so people are left behind,” he said.

He, therefore, urged the government to work hard to stop the fall of the cedi and also to stabilise the economy for the benefit of Ghanaians.

Madam Ruth Adabla, a cashier at the Broadway Forex Bureau in Accra, said there was a high demand for the dollar but it was difficult for the company to get it on the market.

She could not immediately say why there was an increase in the demand but expressed optimism that the coming months would be much better.

At the Fads Forex Bureau at Adabraka, Mr Adam Aziz said $100 now sold at GH¢250, while it was bought at GH¢240 last December.

AGI on cedis’ depreciation
The Executive Director of the Association of Ghanaian Industries (AGI), Mr Seth Twum-Akwaboah, in an interview, said the increase in demand for the major foreign trading currencies had been the cause of the cedi’s depreciation, which had effects on various aspects of the economy.

He said Ghanaian industries imported most of their raw materials for production and, therefore, the demand for the major foreign currencies had become high.

Mr Twum-Akwaboah explained that when the high demand for foreign currencies was without a corresponding increase in supply, then the cedi would definitely depreciate.

He said the shortage of and irregular access to the major foreign currencies are also a major factor.
“Increasing local production will, in the long term, address the effects of the cedi’s depreciation against the major foreign currencies, especially in the industrial sector,” he added.

Way forward
Mr Twum-Akwaboah said increasing local production would mean less importation of raw materials, hence a reduction in demand for foreign currencies.

He, therefore, called on all stakeholders, including the government, to ensure that local production was increased to control the demand and supply of foreign currencies.

Bank of Ghana (BoG) intervention
Meanwhile, the Bank of Ghana will, next week, outline measures to arrest the fast decline of the cedi.
A source close to the BoG told the Daily Graphic that the bank would take action against those who violated foreign exchange regulations.

It described the dollarisation of the economy as a major problem.

Some commercial banks are complaining they do not have enough dollars to aid their operations, attributing the shortfall to the limited supply of the currency by the BoG.

But the source at the BoG said there had been an increase in demand from the commercial banks.

It, however, said the BoG needed to manage the situation, so that the country’s reserve was not depleted.