The Bank of Ghana’s latest directive could be dealing with a much bigger challenge. The Central Bank has ordered commercial banks to halt the practice of paying out foreign currency cash to large corporations unless the withdrawals are fully backed by equivalent deposits.
The central bank says the move responds to growing concern over large cash movements “not directly funded by prior deposits,” warning that such practices put avoidable pressure on the already fragile foreign exchange market.
But beneath that official line lies a deeper story. In recent months, many businesses complained that when they approached commercial banks, they were turned away in their search for dollars, even as the central bank insisted that foreign currency was available in the system. The mismatch stoked suspicions that cash withdrawals were quietly draining liquidity from formal channels and feeding uses far outside the stated needs of trade and commerce, uses that, in some cases, include slipping past the tax net.
What looked like another routine circular from the regulator is, in fact, a signal of something bigger: how Ghana’s foreign exchange system has been exploited, why some of the country’s biggest firms prefer cash to transfers, and how the regulator is now moving to close a loophole, that, though relatively new, has exposed troubling patterns in corporate finance.
A Dollar Culture in Corporate Ghana
The rules were once simple. Companies presented invoices or import orders, banks verified the paperwork, and payments were settled electronically, often through SWIFT. Every transaction left a digital footprint visible to regulators and tax officials.
But in recent years, cash became king. Corporations began asking not for transfers, but for hard currency. The Bank of Ghana says many of these withdrawals were not backed by prior foreign currency deposits, creating pressure on reserves. And in an economy where the cedi lost more than half its value before recently clawing back over 40%, dollars are no longer just a medium of exchange; they are a hedge, a bargaining chip, and a store of value.
Companies that managed to secure large sums in cash could stash them in vaults as insurance against further depreciation, or deploy them in ways that left no paper trail. The preference has persisted even with the currency’s rebound, demonstrating just how deeply ingrained the instinct to shield wealth from volatility has become.
Hoarding and the Black Market
That instinct, however, goes beyond risk management. Ghana’s thriving parallel market has reinforced the appeal of cash. In Accra’s central business district or border towns like Aflao, dollars fetch a premium over official rates. Corporations with access to bank-issued cash can funnel part of it into the black market, profiting from arbitrage.
The margins may appear slim, just a cedi or two per dollar, but at the scale of multi-million-dollar withdrawals, the gains are immense. This diversion fuels a cycle that weakens the cedi further: as demand shifts underground, reserves come under strain, forcing the Bank of Ghana to intervene. Meanwhile, the black market thrives on corporate-supplied liquidity, creating a parallel system that steadily undermines monetary stability.
And yet, arbitrage is only part of the picture. For many corporates, the real prize lies not just in currency gains but in the freedom cash provides from oversight, especially tax oversight.
Where Taxes Disappear
But the story does not end with hoarding or black-market arbitrage. Perhaps the most consequential motive for demanding cash lies in taxation. When dollars move electronically, they are pinned to invoices, customs forms, and supplier records, creating an audit trail that feeds directly into tax assessments. Cash withdrawals, on the other hand, cut that chain.
A company can pull millions in dollars under the label of “operational expenses,” and from that point, the trail vanishes. Some of the money may genuinely pay suppliers, but much of it may never re-enter the formal economy at all.
The result is yawning discrepancies between declared imports and the forex supposedly spent on them, leaving the taxman chasing shadows. For a country already battling one of the lowest tax-to-GDP ratios in the region, such leakages strike at the very heart of revenue collection and force the state into ever-deeper borrowing.
