The Ghana cedi strengthened against major currencies last week, ending 2024 on a positive note, as easing forex demand following the Yuletide season provided support.
As of December 31, 2024, the cedi traded at GH¢15.11 to the dollar, with the Bank of Ghana quoting GH¢14.71 on the interbank market.
The Bank of Ghana sold $20 million to bulk oil distributors at a forward rate of GH¢14.7690/$, down slightly from GH¢14.8133/$ in the previous auction, reflecting reduced demand pressures.
On the retail market, the cedi appreciated by 1.44% against the US dollar to GH¢15.58/$, while also strengthening by 2.86% against the pound and 3.70% against the euro.
However, year-to-date, the cedi has depreciated by 21.58% against the dollar.
The Central Bank’s forex auction calendar for Q1 2025 indicates a consistent allocation of $20 million per auction for the first six auctions, amounting to $120 million.
Analysts expect this, combined with seasonal liquidity and reduced demand, to support the cedi in the short term, with the potential for further strengthening in the coming days.
The Ghana cedi faced significant challenges throughout 2024, culminating in a sharp depreciation of approximately 28% against the US dollar.
This steep decline reflects broader economic pressures, including persistent inflation, fluctuating demand for foreign currency, and ongoing fiscal challenges.
The Cedi’s loss in value exacerbated the cost of imports, heightened the cost of living, and added pressure to businesses reliant on foreign currency for operations.
Several factors contributed to the Cedi’s slump. Among them were external shocks, including global economic uncertainties and rising commodity prices, as well as internal pressures like the country’s debt management issues and fiscal imbalances.
The continued reliance on the US dollar for transactions and Ghana’s significant import dependency also fueled demand for foreign currency, pushing the cedi further down.
Despite attempts by the Bank of Ghana to stabilize the currency through foreign exchange auctions and interventions, the volatility of the cedi has remained a concern.
The central bank’s measures, including regular injections of dollars into the system, helped to moderate the rate of depreciation but could not entirely prevent the cedi’s slide.
As we move into 2025, Ghana will face the task of addressing structural economic issues and restoring confidence in the local currency.
Ensuring a stable cedi will require effective fiscal management, strong foreign exchange reserves, and strategies to reduce external dependencies, all while managing inflationary pressures and promoting economic growth.
