The Cedi-Dollar Saga! A 62-year Retrospective Analysis.

Entrepreneurs and market institutions rely on accurately forecasting future correlations between the Ghana Cedi and the United States Dollar to an alarming extent. We do this in order to better structure pricing, for optimal asset allocation, risk management, to secure better return on investments, etc. A volatile exchange rate becomes a major obstacle to peak economic growth and performance. Nobody likes that. Many a time have many of us chickened out of potentially lucrative deals because we feared or were almost assured the Cedi would take an unexpected beating at some point in the timeline. Nobody likes that too.

On a macroeconomic level, it signals a red flag for foreign investment and international trade. The relationship between two countries can be largely influenced by the union of their currencies on the forex market. And like in any typical real-life union, one has more power than the other. The dominating currency – and everyone knows which of the two that is – establishes the value of the weaker one. But neither can exist alone because the demand for the stronger one is what gives it its value. And so, a bond of co-dependence is born.

At a time when Ghana is weaning off of international aid, delicately inching more and more towards international collaboration and partnerships, it needs to establish a robust economic atmosphere. It is important to study the past and recent behaviour of the Cedi with the US Dollar for the betterment of the future of Ghana. Correcting the exchange rate system could solve some problems like trade imbalances and slow growth. Inappropriate exchange rate policies in the past have negatively affected imports, exports, investments, technology transfer, and ultimately economic growth.

See that paragraph you just read? Sounds like I have some major key that could connect the dots and patch the cracks in our forex policies huh? At present in this feature article I do not. I find it essential to keep reminding readers that this is an opinion piece. I am giving to my best ability a very unbiased, independent statement of what is, or how common-sense dictates things should be. I only state facts, with very little theory. And the FACT today is that our present and incoming exchange rate policies are essential to the success of the implementation of the macroeconomic overhaul strategies of the current government.

Fun Fact: The name Cedi is the Akan translation for “cowry shell”.  These shells in itself were not native to Ghana but were brought to Ghana by Arab slave traders and merchants, with origins in the Indian Ocean. And the cowry isn’t only associated to Ghana, not at all. The Chinese even used cowry shells or copies of the shells as currency for over 3000 years.

OK now let’s go back, way back.

Ghana at the time of independence

Kwame Nkrumah was a widely popular figure pre-independence and when he led the nation out of colonial rule in 1957, the nation Ghana created its own currency through the new monetary authority, the Bank of Ghana. She called it the “Ghana Pound”. It followed the same methodology as the British denomination, keeping to units such as pound, shillings, and pence.

From 1957-66, the Ghana Pound was fixed to the British Pound, which the Bretton Woods System approved. It was pegged at ¢2=£1, with adjustments being made only to settle any fundamental balance of payments disequilibria. So, keeping to a fixed exchange regime at that time was consistent with the thinking of the colonial era. Ghana had no control over the foreign exchange markets, which back then was in the hands of a few commercial banks. It was back in 1965, with a desire to conform to most of the world, that Ghana opted to leave the British colonial monetary system and adopted the widely accepted decimal system. And that was when a new currency was born, the currency we know now: THE CEDI.

Nkrumah’s days in power were short-lived. His government was ousted in 1967, and so was his newly introduced currency. The name stayed, but because Nkrumah’s portrait was printed on those notes, a new cedi was introduced, literally. New times called for a new currency, or so they thought at the time. The New Cedi (N¢), as it was called, replaced the previous one at a rate of ¢1.20=N¢1.00.

The post-Nkrumah era

Ghana faced numerous leaders over the coming next decades. The country’s terms of trade worsened during the 1960s and the value of the cedi continued to fall. From 1967-72, my very best friend the IMF (read my last article to be in on this pun, then read the article before that article to be in on that pun) experimented with a flexible exchange rate. Successive governments ended up raising the cost of imports and consumer prices. By the 1970s the cedi was in big trouble. Its low value meant that any foreign currency could then be exchanged for plenty cedis at any time, much like the black market for dollars in recent times when the cedi’s value takes a dive.

So, Ghanaians, especially those at the border, would smuggle minerals and produce like cocoa and others across the border to Togo, Burkina Faso and Côte d’Ivoire. They would trade and come back with CFA Francs (let’s call it Cefa as my mum still calls it). This cefa would be exchanged on the black market for the “plenty cedis” I just spoke of and they’d make huge profits. Illegal cedi operations through smuggling and other means became so widespread as the cedi continued to be weak. It got so bad that that by 1981, on the black market, you could get almost ten times the official rate value of the cedi.

The era of Living Presidents

I don’t think it would be appropriate to iterate the cedi’s performance under any living president. For one, that information would be easily attainable. Also, it has become such that the facts of our currency within these periods cannot be separated from the accompanying leaders and my commentary can easily be spun as political criticism. On the other hand, the major parties have traded back and forth the baton of leadership a couple times within this period, enough times to make it not appear unfair to shed light on the facts of each of all of the periods. So, do I go ahead?


Ghana is and has been politically polarised. I like Ghana though, very much. We all complain about something here at some point in time, then I look at most political climates even in Africa and I’m like ‘God Bless Our Homeland Ghaaanaaa!’. Some pundits talk like a political divide is what solely makes us lack development, like it’s a black-man thing. But look at the current state of the Republicans and the Democrats. Some things are as sure as the sunrise. And one sure fact is that a political party in power will always defend its actions while the opposition promises a land of rainbows and roses. This is just fact. NDC did it while NPP was in power before they also took power. NPP did it just a few years back while NDC was in power. And NDC will do it till one of their own is sworn in.

I publicly professed my optimism toward Ghana’s IMF exit. I have always found our recent economic figures validated by the international community as very romantic. And that is what also worried me recently. With figures all pointing to a brighter future (GDP growth reaching 7.6%, inflation decreasing to 9%, low unemployment rate, and the fiscal deficit set to reach its target of 3.7%), the cedi continued to slip against the dollar, even if it was a few pesewas at a time. I mean, how? This should validate my stance when I say that as the currency currently hovers around five cedis per dollar, public unrest should be construed as a natural reaction.

There is good reason why there is very loud public outcry whenever the cedi depreciates materially. This is because it hurts the regular Ghanaian on a personal level. You can feel it in your chest. It hurts the wallet, which consequently hurts everything else. When the cedi depreciates, think of it this way: the student’s chop money buys less provisions for school now; the Abossey-Okine dealer can import less spare parts with the same cedi budget; the office worker pays more for public transport or fuel without a corresponding salary increase; Christmas season brings less brouhaha; the slay queen gets less of … whatever slay queens get for whatever they do. There is a general downgrade in lifestyle and that is very personal. My point remains that it is a trickle-down effect that inadvertently hurts whatever political party in power at the polling stations, almost always. No party likes that. Nobody likes that.

So, when the cedi really picked up some of the lost value recently, I smiled. I hope it stays up for a while longer and you should too regardless of political affiliation.

Reach out on social media and let’s discuss if you will (I should add this line to all my features). Let’s keep the conversation going!

These are all just facts. And this has been an opinion piece.