Courage Martey, Senior Currency Analyst at Databank Research, has disclosed that the cedi’s trend in 2021 points to the fact that the local currency’s performance this year has been mixed.
According to the researcher, comparing the local currency’s performance in last year 2020 and that of this year, only confirms the trend.
“The cedi’s performance in 2021 can be said to be that of a mixed performance; If you look at the trend in 2021 and if you compare the full year performance in 2021 and full year performance in 2020.”
Courage Martey
Mr. Martey pointed out that there is a small divergence in this year’s performance compared to the previous one. He revealed that the cedi depreciated the highest in the retail market compared to the interbank market.
“Now in 2020, the average depreciation across the interbank and retail market was about 3%. This year, we’ve had a bit of divergence in this performance levels. On the interbank market, average performance currently is around 3 percent, but on the retail market it depreciated significantly and we are doing currently 9 percent year-to-date”.
Courage Martey
With few days to end the year, the Ghana cedi’s performance has not lived up to the expectations of many analysts, despite increased dollar inflows from the Bank of Ghana as well as remittances from abroad in the last few weeks to end the year.
The Cedi Worst This Year Than Last Year
The analyst reiterated that the local currency depreciating by about 9% to the dollar on the retail market, before losing about 3% in value on the interbank market is not the best for the economy.
Mr Martey noted that comparatively to that of last year, the performance of the cedi has been slightly worse, beating analysts and research institutions forecast, marginally.
According to Mr. Martey, the volatility of the currency this year makes it difficult to predict the outlook of the local currency. He attributed it to the pressure the cedi endured in the second half year of the year.
“So that divergent, that spread emphasizes the volatility or the pressure that the currency endured in the second half of this year and mostly the 4th quarter of this year. And that made it very difficult for us to see clearly what the outlook is for the cedi.”
Courage Martey
The cedi is presently selling at GH¢5.97 to the dollar on the interbank market but going for GH¢6.37 on the retail market.
It can be recalled that in November, 2021, the Ghana cedi was classified among African currencies with the Worst Spot Returns, according to Bloomberg.
Nonetheless, the Ghanaian Cedi was the best performing currency in Africa in the first quarter of 2021.
A combination of factors including increased corporate demand for the US dollar and the exit of the country’s bond by some foreign investors, however, put pressure on the local currency.
Another culprit for the depreciation of the local currency is the overly dependent on import goods. This singular act puts pressure on the cedi because the demand for the dollar to meet the import demands increases, thereby causing the cedi to depreciate.
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