The Ghanaian cedi’s recent performance has once again thrown the economy into the spotlight, as it continues to struggle against major international currencies.
Last week, the cedi depreciated heavily, settling at GH¢12.70 per US dollar at retail forex bureaus, a development that has raised concerns among businesses, importers, and consumers alike. According to market data, the cedi fell by 6.58% against the US dollar, 6.20% against the pound sterling, and 6.51% against the euro on the interbank market.
On the retail front, the local currency slipped by 5.80% to the dollar, 5.44% to the pound, and 4.53% to the euro, closing at GH¢12.50, GH¢16.55, and GH¢13.35, respectively. The latest fall marks a continuation of a worrying trend that has seen the cedi lose 7.89% month-on-month against the dollar, significantly eroding the gains made earlier this year.
Databank Research, a respected financial analysis institution, has issued a stark warning over the local currency’s trajectory. According to their assessment, the cedi’s woes are being driven by strong corporate demand pressures, thin forex inflows, and a resilient US dollar.
“Mirroring our expectation, strong corporate demand pressures amid thin FX support and a resilient US dollar intensified nominal depreciations of the cedi,” the report stated. The note further pointed to adverse regulatory tightening and weaker forex flows as compounding factors. These issues have heightened market expectations of continued weakness in the short term.
The timing of the cedi’s depreciation could not be worse. Importers are ramping up activity ahead of the festive season, driving up bids in the forex market. The heightened demand is expected to sustain pressure on the cedi in the coming weeks.
Databank Research forecasts that the currency will remain under siege until stronger forex support materializes. While the Bank of Ghana (BoG) has introduced tight measures to curb forex leakages, analysts believe these interventions will take time to yield tangible results.
Possible Relief on the Horizon
Despite the gloomy short-term outlook, some potential relief measures could slow the cedi’s slide. Databank Research highlighted that any rebound by the end of the fortnight will hinge on several factors.
A stronger flow of forex from external sources would be critical in injecting liquidity into the market. In addition, expectations of a possible rate cut by the US Federal Reserve could help ease pressure from the resilient dollar. Finally, the anticipated inflows of about US$4 billion to finance cocoa purchases are expected to provide significant support.
These developments, if realized, could inject much-needed liquidity into the forex market and ease the supply-demand imbalance currently driving the cedi’s depreciation.
Meanwhile, at the beginning of 2025, the cedi was one of Africa’s top-performing currencies, buoyed by strong investor confidence and macroeconomic stability measures. By July, the currency had recorded a remarkable 40% gain against the dollar on a year-to-date basis. However, the latest losses have trimmed those gains to 28.95%, reflecting how quickly external shocks and market pressures can reverse fortunes.
The depreciation of the cedi has wide-ranging implications for Ghana’s economy. Import-dependent businesses face rising costs as the value of their dollar-denominated invoices climbs, while ordinary consumers brace for higher prices of goods and services, especially imported products. Fuel prices, transportation costs, and food inflation are likely to intensify if the trend continues, further straining household incomes.
Policy Dilemma for BoG
The Bank of Ghana finds itself in a policy dilemma. While it has taken steps to tighten forex market regulations and curb speculative activities, it must balance these measures with the need to ensure sufficient liquidity in the system. Failure to act decisively could risk further weakening investor confidence, while overly harsh restrictions may choke off legitimate business activity.
The coming weeks will be crucial in determining the cedi’s stability. Importers’ seasonal demands, coupled with lingering global uncertainties, will keep the local currency under pressure. The government and central bank will be under increasing pressure to secure inflows and reassure markets of their ability to stabilize the situation.
For now, the cedi remains vulnerable, and as Databank Research warns, more pain may be on the horizon unless swift and sustained forex support materializes.
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