The Ghanaian cedi has experienced a recent decline due to an increase in corporate demand for foreign currency, particularly for crude oil imports.
In the past week, the cedi depreciated by 1.48 percent against the US dollar, ending the week at a bid/offer rate of 15.75/16 on the retail market. It also saw a decline of 2.80 percent against the British pound and 2.18 percent against the euro.
The rising cost of refined oil imports has been a major factor contributing to the cedi’s depreciation. In June 2024, the cost of refined oil imports rose to US$428.3 million, up from US$422.6 million in May.
Despite efforts by the Bank of Ghana (BoG) to support the currency by selling US$40 million to oil importers through the Bulk Distribution Companies (BDCs) FX auction, the demand for foreign exchange from oil importers remained high, putting further strain on the cedi.
Analysts at Databank Research have expressed concern about the impact of these developments on Ghana’s net foreign reserves, predicting continued pressure on the cedi in the short term. They anticipate the local currency to continue weakening as corporate demand for foreign exchange intensifies.
This situation poses a risk of undoing some of the gains made in the first half of the year, where the trade balance recorded a surplus of US$1.81 billion, driven by increased gold and crude oil exports. However, cocoa exports decreased by 47.4 percent, and the import bill increased by 13.5 percent.
The uncertainty surrounding the cedi’s future remains, with no immediate solution in sight to address the high corporate demand for foreign exchange. As a result, analysts believe the cedi is likely to weaken further in the coming weeks, exacerbating economic challenges in the country.
