The latest analysis by Reuters describing the Ghana cedi as one of the weakest-performing currencies in Africa has triggered fresh public anxiety over the stability of the country’s exchange rate outlook, but an analyst says there is no cause for alarm.
Despite the persistent slide of the local currency, the economic and data analyst, Alfred Appiah, maintains that there is little reason for panic, at least for now.
According to him, while the recent depreciation of the cedi may appear worrying on the surface, Ghana’s foreign exchange fundamentals remain relatively supported, particularly by strong gold prices and continued gold purchases under the government’s Goldbod programme.
In a public commentary on the back of the renewed pressure on the local currency, Alfred Appiah argued that the country is not facing an immediate foreign exchange supply crisis despite the cedi’s recent weakness against the US dollar.
“No need to panic about the current movements in the exchange rate,” he remarked.
Reuters Report Sparks Concern
The reassurance comes after Reuters, citing market data, reported that the Ghana cedi had recently emerged as the worst-performing currency in West Africa and among the weakest in sub-Saharan Africa in recent weeks. The currency’s decline has renewed fears among businesses and consumers already sensitive to exchange rate instability after years of inflation, fuel price increases, and broader economic pressures.
As many experts argue, Ghana’s economy is highly exchange rate dependent. A slight depreciation in the local currency quickly translates into higher transport fares, rising food prices, increased rent pressure, and more expensive imported goods.
That is why any sign of rapid depreciation tends to trigger widespread concern across markets and households.
Gold May Be Ghana’s Biggest Cushion
However, Alfred Appiah believes Ghana currently has an important buffer that could prevent a full-blown currency crisis, which is gold.
According to him, as long as international gold prices remain elevated and Goldbod continues buying significant volumes of gold from the artisanal and small-scale mining sector, the country should maintain a relatively stable flow of foreign exchange into the economy.
This matters because Ghana’s gold exports remain one of the country’s most important sources of dollar inflows. In practical terms, strong gold earnings help improve the supply of foreign currency in the market, easing pressure on the cedi during periods of seasonal demand for dollars.
The analyst also expressed confidence that the Bank of Ghana still possesses enough capacity to help manage temporary exchange rate pressures if necessary.
He explained that, “As long as gold prices remain elevated and the Goldbod continues to purchase large volumes of gold from the ASM sector, foreign exchange supply to the market is unlikely to be a major challenge. The Bank of Ghana has the capacity to help meet seasonal FX demand pressures.”
Is the Bank of Ghana Allowing the Cedi to “Find Its True Value”?
Alfred Appiah’s analysis further suggests that the central bank may not necessarily be trying to aggressively defend the cedi at current levels.
Instead, he believes the Bank of Ghana may be allowing the currency to gradually adjust toward what he described as its “true value” while simultaneously trying to repair its own balance sheet after years of crisis-related interventions.
“The Bank appears to be allowing the cedi to gradually find its “true value” while at the same time trying to repair its balance sheet as much as possible. At some point, however, more aggressive intervention may be needed to reduce the pass-through effect of cedi depreciation on fuel prices,” he noted.
This suggests that there is a need for a balancing act. Heavy intervention can stabilize the currency temporarily but may rapidly drain foreign reserves. On the other hand, allowing too much depreciation can fuel inflation and weaken public confidence.
The Bottomline
Despite his generally calm outlook, Appiah warned that authorities may eventually need to step in more aggressively if the cedi’s weakness begins significantly affecting fuel prices.
Exchange rate movements remain one of the strongest drivers of petroleum price adjustments in Ghana because the country imports refined fuel products in dollars. A weaker cedi, therefore, increases the local cost of fuel imports, which can then trigger broader inflation across transportation, food distribution, and business operations.
The coming weeks may therefore be critical in determining whether the recent weakening of the cedi is merely a temporary market adjustment, or the beginning of a more sustained period of pressure.
