Our good old cedi
Ghanaians have over the past few months witnessed a considerable decline in the value of our dear cedi against the major trading currencies in the country, there have been several attempts by the current and previous governments to stem this tide but the depreciation has persisted unabated.
It appears the issue of the cedi depreciation has been politicized, the main opposing parties seems to be throwing jabs at each other as to who has performed better in managing the free fall of the local currency, the fact remains that the demand for foreign currency in Ghana seems to be insatiable.
The effect of this is telling on the business community, importers exchange more of hard earned cedi for the foreign currencies when buying goods from the outside, prices of goods and services quoted in foreign currencies shoot up in Ghana cedis, export earnings in foreign currencies loose value when translated into the local currency, to make up for the loses businesses increase prices for which the Ghanaian consumer ultimately pays for.
I wish to use this medium to commend the efforts of the central bank at stabilizing the local currency in recent times, to mention, periodic supply of sufficient amount of foreign currencies to boost supply against demand; this seem to help in the short run but it does not in the long run, the root cause still remains that there is a high demand in Ghana’s economy for the foreign papers, especially the American dollar.
Currencies are mediums of exchange of goods and services and so the demand for a particular currency depends on the number and amount of commodities that are traded using that currency,
Ghanaians have a very high taste for foreign products over locally made ones, “we basically import everything”, these are the words of Dr Priscilla Twumasi-Baffour, senior economist at the University of Ghana during the cedi forum organized by Joy FM September last month. Visit our super- markets and the closest shop and you would realize that about 60% of the products on sale are foreign made.
Kwame Nkrumah envisaged an industrial Ghana that could produce basic goods to satisfy the demands of its people, a Ghana that could add value to its raw produce to make them competitive on the international market; we do not see that now despite efforts by current and previous administrations.
Statistics from the Ghana shippers Authority’s maritime trade review for the half year of 2018 indicates a total import of 7,155,724 metric tons as against an export value of 4,026,816 mt, figures for the same period 2017 shows import of 6,755,843 mt against export of 3,015,690 mt of goods, clearly we seem to bring in more than we send to the outside world, exports may have improved significantly but we have a herculean task ahead to bring down the amount of imports or better still improve exports to increase our foreign reserves.
I curiously visited a plush hotel in Accra with a friend to find out the hotel rates and I was greeted with a price list quoted in dollars, properties are not left out, business people quote in dollars in a country that has the cedi as its official currency, take a cursory scan of the dailies and our media space and you will affirm this assertion. Some businesses accept foreign currencies as legal tenders in Ghana; I believe no country in Africa and the rest of the world quotes the prices of goods and services in the Ghanaian cedi.
The basic laws of demand and supply asserts that where demand for any commodity exceeds supply, price increases all factors remaining the same, Ghanaian importers need foreign currencies especially the dollar to bring in the goods we need locally, businesses quote prices in foreign currencies and accept them during payments, on other hand, exports that are supposed to rake in more of the foreign currencies are less; as such, we find local demand outstripping supply of foreign currencies, this forms a huge part of the reason why our cedi remains unstable against the major trading currencies.
The bank of Ghana has supplied a little over 200 million dollars into the economy from the inception of September to increase the availability the dollar, this might prove good in the short run, but the deep-lying cause of excessive imports still remains.
I believe our leaders can do us a great service if the depreciation of the cedi is not politicized, we need to tackle the root cause of the problem, industrialize Ghana, make our products competitive on the international market, more of the containers that visit our ports should leave filled with Ghanaian products to be sold in other countries. Textiles, poultry products, stationery, home items, medicals equipments, cereals, other petty items including tooth picks that can be produced on our soils are imported. Local industries are struggling to compete with foreign goods which come at cheaper prices.
To single out, poultry farmers in Ghana complain bitterly about the importation of poultry and its products, some of which arrive unwholesome for consumption; We must bear in mind that anytime we buy a foreign item over a locally produced one, we keep their producers in business whiles suffocating the Ghanaian producer.
I must state conversely that variety is the spice of life; there are some goods and services which are better priced when imported because of absolute and comparative cost advantages to other nations. However, these advantages can be eroded if we invest into technology and research to produce same items at lower cost on our soils.
Ghana has the lands and favorable weather conditions to produce majority if not all, of the food and animal products we require for consumption locally; unfortunately we still import agricultural produce into our country.
If we want to reduce the free fall of the cedi, there has to be medium to long term efforts by our leaders to reduce the importation of goods that could hitherto be produced in Ghana. In the short to medium term however, the state should protect local players to save them from foreign competition.
We have not utilized agriculture to our absolute advantage; players in the industry should be supported to add more value to our raw products for exports, the one district one factory and planting for food and jobs are brilliant initiatives which will help reduce imports when executed properly.
The agricultural sector has a huge potential if the more attention is given to it, the country earned $70.2 million dollars in sheanut export 2017, I wish to also commend the EXIM bank for its Shea Empowerment initiative through which GH¢9.2 million has been approved for processing sheanuts into cosmetic products and for the much needed exports.
I urge my fellow Ghanaians to patronize our locally made products to help our own businesses survive; otherwise we buy foreign products, importers demand more dollars and then what do we expect, the pressure remains on our good old cedi.
Columnist: Abraham Ofori Gyebi