Bright Simons, Vice President of IMANI Ghana, has attributed the prolonged volatility of Ghana’s currency, the Cedi, to what he describes as “perverse interventions” in the forex market by the Bank of Ghana (BoG). He highlighted that these measures lead to the mispricing of the currency, exacerbating its instability over time.
“Perverse FX interventions in the market are a key driver of the long-run volatility of the Cedi in my humble view,” Simons stated in a tweet. He explained that manipulating the currency away from its fundamental value creates opportunities for speculators to profit, further fueling instability. Moreover, such actions disrupt demand planning for businesses engaged in international trade, ultimately triggering sharper adjustments and weakening confidence in the domestic currency.
Simons’ remarks echoed those of financial economist Professor Lord Mensah, who argued that the Cedi is currently adjusting to its true market value following manipulations by the BoG in 2024. In an effort to curb the currency’s depreciation, the BoG reportedly sold over $200 million in the final quarter of 2024.
According to Professor Mensah, “The Cedi is now finding its level after it was manipulated to influence the election outcome. First-quarter seasonal demand has also set in. Likely to see some stability from March. There is a need to work quickly to reduce dollar demand activities by government and businesses.”
Meanwhile, the BoG’s January 2025 Summary of Economic and Financial Data reported that the Cedi experienced an average depreciation rate of 2.06% against major trading currencies in January. Specifically, it depreciated by 2.4% against the US dollar, 0.8% against the British pound, and 3% against the euro.
For the entirety of 2024, the Cedi recorded depreciation rates of 19.2% against the dollar, 17.8% against the pound, and 13.7% against the euro. Currently, the currency trades at GHS 15.06 per US dollar, GHS 18.55 per British pound, and GHS 15.69 per euro.
The ongoing challenges with the Cedi underscore the importance of implementing sustainable economic measures to stabilize the currency and bolster investor confidence.
