Devaluation Expected as Ghana’s Cedi Weakens Amidst Rising Dollar Demand for Imports


Ghana’s cedi is experiencing an unprecedented weakening cycle, driven by surging dollar demand for imports. The currency has failed to gain against the dollar for 22 consecutive trading sessions, marking the longest such streak since data compilation began in 1994, according to Bloomberg. By 1 p.m. in London, the cedi traded 0.3% weaker at 13.9310, having slumped 14% this year, outpaced only by currencies that have been devalued like the Egyptian pound and Nigerian naira.

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The decline is largely attributed to a significant drop in cocoa earnings, with exports plummeting by nearly a third to $508 million in the first two months of the year due to adverse weather, disease, and fertilizer shortages. Additionally, Ghana’s historical current account deficit is resurfacing after a brief surplus in 2023, posing further challenges for the cedi, noted Gergely Urmossy, an emerging market strategist at Societe Generale.

Forecasts suggest that the cedi will continue its downward trend, with the forward curve indicating the currency will breach its record low of 14.6174 per dollar by the third quarter and end the year at 15.98. FX forward pricing is based on the spot rate and the interest rate differentials between the two currencies over the tenor of the forward.

Several risks exacerbate the cedi’s depreciation, including an unsettled debt deal threatened by a punitive anti-LGBTQ law. Furthermore, increased demand for imported goods ahead of December elections is adding pressure on the local currency.

Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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