The Ghanaian cedi continues its slide against the US dollar, with financial analysts projecting a challenging year for the local currency.
Financial Market Expert and President of Women in Forex Ghana, Ms. Gifty Annor-Sika Asantewah warned that this trend is unlikely to abate, as she forecasted the cedi to hit GH¢17.5 to the dollar by the end of the first quarter.
Meanwhile, the cedi’s consistent depreciation has raised concerns among financial stakeholders. In the first month of 2025, according to the Bank of Ghana, the currency lost 2.4% of its value against the dollar. This performance highlights a worsening trend compared to the same period in 2024, where depreciation was relatively moderate at 1.3%.
Ms. Gifty Annor-Sika Asantewah, thus attributed the currency’s struggles to past economic policies and decisions. “The BoG and the previous government manipulated the cedi’s exchange rate for electoral purposes, creating a temporary illusion of stability and gains,” she argued.
Ms. Annor-Sika further explained that the cedi is now undergoing an inevitable adjustment to its true market value after months of artificial stabilization. “To lend the popular phrase, an overvalued cedi is just as problematic as a rapidly depreciating one,” she noted, emphasizing that the current situation is a reflection of years of mismanagement.
The analyst further warned that attempts to force the cedi to deviate from its fundamentals only empower speculators.
“Artificially manipulating the cedi’s exchange rate to deviate from its true market fundamentals creates fertile ground for speculative trading. When the currency is mispriced, it provides an opportunity for speculators to capitalize on the disparity, generating significant profits from these distortions.
“Over time, these speculative gains strengthen the financial capacity of traders, enabling them to sustain and even amplify their activities. This vicious cycle not only exacerbates volatility in the foreign exchange market but also undermines efforts to achieve long-term currency stability. By prioritizing short-term fixes over sustainable strategies, the economy becomes more susceptible to speculative attacks, which further erode the cedi’s value and investor confidence.”
Ms. Gifty Annor-Sika Asantewah
The analyst, thus emphasized the need for exchange rate policies grounded in economic fundamentals to ensure a resilient and sustainable currency. “Anything other than that only creates a volatile environment where the local currency becomes vulnerable to external shocks,” she said.
Long-Term Implications and Policy Recommendations
Meanwhile, the projection of GH¢17.5 to the dollar by the end of the first quarter signals tougher times ahead for businesses and households reliant on imports. The analyst explained that a weaker cedi increases the cost of imported goods and services, driving inflation and eroding purchasing power. This could also place further pressure on the government to shore up foreign reserves, potentially increasing the country’s debt burden.
She thus offered several policy recommendations to address the persistent depreciation of the cedi, emphasizing the need for a comprehensive approach.
“One critical solution is strengthening domestic production to reduce Ghana’s reliance on imports. By investing in local industries, particularly in agriculture and manufacturing, the demand for foreign currency can be significantly eased. This approach not only bolsters the local economy but also mitigates the pressure on the cedi caused by the heavy reliance on imported goods and services.”
Ms. Gifty Annor-Sika Asantewah
Another vital strategy Ms Annor-Sika stated involves boosting the country’s foreign exchange reserves to provide a buffer against external shocks. This, she said can be achieved by increasing export volumes and leveraging diaspora remittances to enhance forex inflows.
“Strong reserves would not only stabilize the cedi but also build investor confidence in the Ghanaian economy. In addition, the adoption of market-driven policies, where the cedi reflects its true market value is a sustainable measure. Minimizing unnecessary interventions in the foreign exchange market ensures stability and allows the currency to adjust naturally to prevailing economic conditions.”
Ms. Gifty Annor-Sika Asantewah
Lastly, addressing speculative trading was proposed by the analyst as a crucial step in curbing the cedi’s volatility. Speculation, driven by artificial price distortions, fuels rapid fluctuations and destabilizes the currency. By implementing stringent measures to counter speculative trading, the cedi’s value can be protected from manipulative market activities.
Ms. Annor-Sika’s warning about the dangers of overvaluation and rapid depreciation underscores the need for sound economic policies that prioritize long-term stability over short-term gains.
The coming months will be a test of the new government’s ability to implement reforms that address the underlying issues driving the cedi’s depreciation. Whether these efforts will be enough to stem the slide remains to be seen, but one thing is certain: the road to currency stability will require bold and decisive action.
It can be recalled that according to the Bank of Ghana, in the first month of 2025, the local currency traded at a rate of GH¢15.06 to the American greenback on the interbank market.
Similarly, the cedi depreciated by 3.0% to the euro on the interbank market, going for GH¢15.69 to one euro. For the pound, the cedi lost 0.8% in value. It consequently sold at GH¢18.55 to one pound on the interbank market.
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