The Bank of Ghana’s new directive for forex bureaux to use a centralized foreign exchange platform takes effect today, sparking mixed reactions from the public. While some view the directive as appropriate and in line with practices in various countries in Africa, Europe, and North America, others are skeptical about its potential effectiveness.
The directive, if enforced, will enable the Central Bank to have real-time information on forex transactions, allowing it to take appropriate measures to address any challenges that may arise. It is also expected to curb arbitrary pricing of the dollar, as forex bureaux will be aware that they are being monitored and may have to explain any unusual pricing. Additionally, the directive aims to reduce black market activities. While there are fears that it could drive people to the black market to avoid regulatory scrutiny, market watchers believe the reverse could happen. With the centralized trading platform and the requirement for biometric verification of all customers, it will be easier for the Central Bank to trace most forex transactions. Moving foreign currency out of the banking system or forex bureaux and selling it to black market operators would become more difficult, as the Central Bank should be able to track or suspect such illicit transactions.
It is possible that many people may turn to the black market initially, but if the directive is enforced, the movement of forex to and from the banking system to the black market will become difficult due to the traceability of such transactions. This could potentially slow down black-market activities.
However, there are concerns that influential people, who are suspected to be the main suppliers of foreign currency to black market operators, could undermine the success of this directive. Forex bureaux operators are reportedly not in support of the measures and are seeking to push back. With no public education to explain the benefits of the measures and garner public support, there are fears that these measures could become ineffective, as seen with previous attempts.
Sources indicate that a major reason for issuing the directive, particularly the aspect stating that only licensed dealers can sell forex, is to provide legal backing for the arrest and prosecution of black-market operators. Previously, the Central Bank and security agencies failed to successfully prosecute individuals arrested for illegally trading forex due to a lack of clear regulations. With this new directive, the Bank hopes to have sufficient legal grounds to prosecute black market operators effectively.
Despite the directive, the cedi continued to lose value on the day of the announcement due to an inadequate supply of dollars. Many remain skeptical that the new directive will stabilize the depreciating local currency unless sufficient dollars are made available to meet the demand.
The depreciation of the cedi typically worsens at this time of the year as importers begin placing orders for Christmas sales. Many believe the announcement of the new directive at this time of the year aims to curb the rapid depreciation of the local currency. However, with dwindling export inflows, it is unclear how effective these administrative measures would be when the fundament challenge of low dollar inflow remains unresolved.
