Ghana’s economy is gradually becoming overly dependent on the exchange rate, which is dangerous and misleading, this is the observation of U.S. Finance and Economics Professor at Purdue University, Prof. Pat Obi.
Prof. Obi says the exchange rate is increasingly becoming the fulcrum around which the economy revolves, a situation he describes as very concerning since it has grave consequences.
The views of the finance professor follow the recent appreciation of the cedi, which has taken the centre stage of all national conversations and debates.
In an exclusive interview with The High Street Journal, Prof. Obi, who has served as a visiting professor at the University of Ghana, Legon, and GIMPA since 2006, lamented what he sees as a growing national obsession with the performance of the Ghana cedi, warning that it has now become the unofficial “nucleus of the Ghanaian economy.”
Prof. Obi, who has studied financial markets globally, argues that while exchange rates are important, they should never be the core determinant of economic growth and progress.
He explained that Ghana appears to be slipping into a pattern where the valuation of its currency unduly drives public sentiment, investment behavior, and even policy response, a posture he describes as economically risky and unsustainable.
“Ghana is increasingly becoming an exchange rate-driven economy, which should not be. And it frightens me that whenever the cedi takes a turn, either for the good or for the bad, whichever way people see that to be, there are people who react to it as if it is the nucleus of the Ghanaian economy,” the Purdue University Professor who has served as visiting professor at University of Ghana and GIMPA recounted.
He continued, “I do not know of any country, perhaps with the exception of a few others in Africa, like Nigeria, that is so dependent on the valuation of a currency as a way to determine the nature of its economy. So that’s my fear because currency valuation should never be the determinant of economic growth and progress.”
The fears of Prof. Obi resonate with the views of some experts and institutions such as the IMF and the World Bank.
The IMF and the World Bank warn that tying economic confidence so closely to the strength or weakness of the cedi and creating a huge buzz around it risks creating a volatile economic psyche, where businesses, investors, and the general public make critical decisions based on currency fluctuations.
This means decisions are taken based on the currency movements rather than fundamentals like productivity, innovation, fiscal discipline, or industrial output.
The alarm bell sounded by Prof. Obi is a caution that Ghana needs to break free from this exchange rate fixation.
Ghana needs to focus on building economic resilience through stronger value-added exports, support for domestic manufacturing, disciplined public spending, and productivity-led growth. By anchoring the economy on real sector performance rather than currency speculation, Ghana can better weather external shocks and foster sustainable development.
