Ghana Currency Depreciation

The Ghanaian cedi has depreciated sharply against many currencies, in particular the U.S. dollar since the start of 2022. The cedi has declined more than 55% between January and October 2022, among the steepest declines of any currency in the world this year. When a currency falls in value, imports become more expensive.

Effects on Importers: Ghanaian importers are struggling to stay in business due to the high cost of importing and of clearing of goods from Ghanaian ports. Some importers are unable to raise enough money to finance planned shipments. 

Increasingly restricted access to foreign exchange (forex) delays trade: As the Ghana’s balance of payments account is severely constrained, the Bank of Ghana (central bank) is closely managing the distribution of forex. Some importers have reported delays in obtaining foreign exchange to pay for both large and small transactions. The Chamber of Bulk Oil Distributors, for example, cited an acute dollar crunch as the Bank of Ghana is only able to supply its members with 30% of the forex they need to import petroleum products. Further, on November 17, the Bank of Ghana announced that it would no longer provide foreign exchange support for the importation of rice, poultry, vegetable oil, fruit juices, toothpicks, pasta, fruit juice, bottled water, ceramic tiles, and certain other goods. The specific, tariff line list of these goods has not been released at the time of publishing this report. 

Effects of Inflation on Eroding Consumer Demand: The depreciation of the cedi, in turn, is contributing to high inflation rates in the local market. In October 2022, inflation surged to 40.4% year-on-year, driven by higher food and fuel prices, in particular. Inflation for locally produced items was 39.1%, while inflation for imported items was 43.7% in the month in October. 

Inflation is sharply eroding the purchasing power of consumers as prices of most consumables go up almost every other week. The consequence is reduced demand for goods that cost more. A secondary effect is reduced demand for some products that average consumers now consider to be luxuries and no longer see as affordable, not necessarily because the prices of such products have gone up, but because the prices of competing basic needs have increased dramatically.

Affected Sectors: the situation is affecting all sectors of the economy; however, some key sectors that are particularly affected by depreciation affecting consumer demand include:
1. Consumer and household goods
2. Cosmetics
3. Oil and gas (gas and diesel)
4. Agribusiness and processed foods
5. Pharmaceuticals

Depreciation and long-term contracts: CS Ghana also notes that another effect of the continuing sharp depreciation of the cedi vis a vis the dollar is that local clients remain hesitant to commit to long-term, dollar-based contracts. Customers remain concerned about the long-term financial impact of such contracts. 

To learn more about the environment for doing business in Ghana, contact Commercial Service Ghana at Office.Accra@trade.gov or +233(0)30-274-1870 and see our Country Commercial Guide to Ghana for broader context on doing business in Ghana and our market intelligence reports for ongoing updates on specific topics and industries.