Dr. John Kwakye, Head of Research at the Institute of Economic Affairs (IEA), has attributed Ghana’s persistent cedi depreciation to the low ownership of key sectors by Ghanaians. He argues that increasing local control in industries like extractives, telecommunications, manufacturing, and banking could stabilize the currency and reduce economic pressures.
The Ghanaian cedi has faced consistent depreciation against the US dollar and other foreign currencies. After redenomination in 2007, the cedi was valued at 92 pesewas to the dollar, but it has since fallen to around 15.55 cedis per dollar, after hitting a low of 17 cedis per dollar in November.
A key factor contributing to the depreciation of the cedi is the repatriation of profits and dividends by multinational companies operating in Ghana. Typically, the first quarter of the year sees an acceleration in cedi depreciation as multinationals send profits abroad, creating high demand for dollars. Economists have pointed out that this outflow of foreign currency is a major driver of the cedi’s volatility.
Dr. Kwakye argues that by increasing local ownership in sectors like extractives, telecoms, and banking, Ghana can reduce the amount of foreign exchange leaving the country each year. With fewer dollars being repatriated, the cedi could become more stable, particularly during high-pressure periods.
In addition to helping stabilize the currency, increased Ghanaian ownership in these sectors could also help address the country’s high unemployment rate. Dr. Kwakye believes that greater indigenous participation in the economy would lead to more job creation, particularly for the many university graduates struggling to find work.
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While previous governments have acknowledged the importance of local ownership in key industries, efforts to compel multinational companies to list shares on the Ghana Stock Exchange have faced challenges. Even in cases where multinational companies have listed, Ghanaian participation has remained low.
As a new government takes office, there is growing anticipation to see what steps will be taken to increase local ownership in sectors vital to Ghana’s economy. Many market watchers will be closely monitoring how the government tackles this long-standing issue and whether these efforts can help stabilize the cedi in the coming years.
