Ghana is noted for its high consumption of imported goods but the recent poor performance of the local currency (Cedi) especially, against the US dollar makes it very expensive for Ghanaian importers. As such, GUTA advises the government to fast-track plans for Ghanaians trading with China to use the Chinese Yuan instead of the US dollar.
According to GUTA President, Dr. Joseph Obeng, the pressure on the Cedi will reduce when Ghanaians trade with China using the Chinese Yuan. He further emphasized that the way forward in making trade with China easier is to trade with the Chinese currency.
Speaking on an Accra-based TV station, the GUTA President stated that Ghana could reconnoiter a clearing system with China, similar to the Pan African Payment and Settlement System (PAPSS). Like the PAPSS, various barriers plaguing the payments systems of trade with China such as pressure on the Ghanaian Cedi, regulatory requirements, and so on will fall away and if implemented properly, can revolutionize the way Ghana trades with the Asian Giant.
“Ghana could explore a clearing system with China similar to the Pan-African Payment and Settlement System. We can also do a similar clearing system with China where we send our local currency to the local banks, and they have a clearing system with the Chinese banks where they clear with the local currencies.
“I think this is the way forward, and central banks in Africa have started thinking in that manner. I think they have to fast track those initiatives that will lessen the pressure on the US dollar”.Dr. Joseph Obeng
Push for the use of the Chinese Yuan
However, Dr. Obeng mentioned that some banks already have such initiatives which to him, “is the sure way to go”. Some banks like Stanbic Bank have provided easy avenues for trading with China. Dr. Obeng indicated that goods imported from China are cheaper compared to locally manufactured goods. This is because China always leverages its economies of scale that is, it produces on a large scale, leading to a reduction in production cost. Hence prices of goods imported tend to compete with locally manufactured goods.
Over the years, the Bank of Ghana (BoG) has been pushing for the use of the Chinese Yuan as the alternative foreign trading currency to the United States dollar and has consequently made the Yuan available to commercial banks as the alternative settlement currency to businesses who want to trade in the Chinese currency.
It can be recalled that in 2014, Mr. Benjamin Amoah, Head of Stability at the Bank of Ghana (BOG), told the media at a press conference that this was part of new measures governing the operations of foreign exchange and currency accounts in the country.
China has strict government controls on the export of its currency and its use in international transactions. As a result, transactions between Chinese companies and foreign buyers are settled in US dollars. This means that Ghanaian traders need to take dollars with them which would be converted to Yuan when trading with China.