The cedi’s remarkable recovery over the past month seems to have stalled as it lost ground on Monday and remained largely stable on Tuesday, despite the Bank of Ghana’s (BoG) injection of over $115.2 million into the interbank market in just two days. This is in addition to some $840 million sold between November 8 and December 11, this year. Market observers are now questioning whether the cedi’s recent rally is nearing its end.
Since November 9, 2024, the cedi had gained against the dollar on a near-daily basis, reversing months of consistent depreciation. The local currency’s strength was largely attributed to the BoG’s aggressive daily sales of foreign currency, often flooding the market with USD to stabilize the cedi. By the end of last week, the cedi had appreciated to levels of GH¢14.67-14.74 per dollar from about GH¢16.55/GH¢16.65 a month earlier.
However, this week’s trend paints a different picture. On Monday, the cedi depreciated slightly, and by Tuesday, it remained stable, even as the BoG continued its efforts to support the currency by selling large amounts of dollars. Analysts point to speculative trading and the potential stabilization of the currency as reasons for the shift, with some indicating that the cedi may have reached its peak for now.
BoG’s efforts are underpinned by a relatively strong external reserve position, which has allowed it to inject dollars consistently into the economy. The Central Bank’s foreign reserves grew from 2.9 months of import cover in May to 3.5 months by the end of September 2024, totaling $7.92 billion by late November. This reserve buildup was supported by a combination of factors, including a higher current account surplus and reduced financial outflows.
Despite the Central Bank’s measures, there are concerns about the future trajectory of the cedi as the country heads into 2025. Fresh demand for dollars from corporate entities in the new year, alongside potential political shifts with a new government and the anticipated completion of Governor Dr. Ernest Addison’s term in January, could impact the market.
Analysts are closely monitoring the situation, anticipating potential volatility in the early months of 2025 as these factors come into play. Whether the cedi can maintain its current position or faces further depreciation remains to be seen.
