The Ghanaian cedi could have earned the title of the world’s best-performing forex in 2025, in response to Bloomberg information, however analysts warning that this isn’t a time for celebration.
Regardless of the seeming power, the appreciation is seen extra as a restoration than an indication of long-term forex stability or financial power.
This yr’s forex rebound, the place the cedi appreciated by over 25 % towards the U.S. greenback, stands in stark distinction to its 2022 disaster, when it misplaced greater than 55 % of its worth amid hovering inflation, rising debt, and monetary mismanagement.
Fitch Scores has since upgraded Ghana’s foreign-currency issuer ranking from ‘Restricted Default’ to ‘B-’, pointing to improved investor confidence.
But, monetary consultants stress {that a} robust forex, particularly in growing economies, isn’t essentially trigger for celebration.
Johnson Chukwu, group managing director/CEO of Cowry Asset Administration, believes the cedi’s appreciation displays a rebound from previous depreciation. “What we’re at the moment seeing is a type of restoration. Nonetheless, it’s vital to grasp this isn’t essentially an indication of sustained power,” he mentioned. “Over the past 4 or 5 years, the cedi has carried out higher than another African currencies, however this have to be seen in context.”
He emphasised that Ghana’s forex power is a correction, not a turnaround. “The cedi has not appreciated to the extent that it negatively impacts exports. In actual fact, it hasn’t reached some extent the place its power turns into a problem to export competitiveness,” he added.
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Ghana’s macroeconomic beneficial properties have been supported by coverage reforms underneath a $3 billion IMF Prolonged Credit score Facility, in addition to improved overseas trade inflows from excessive international costs of gold and oil.
Based on Marvellous Adiele, portfolio supervisor at Parthian Capital, “Ghana’s exterior reserves have steadily grown, supported by elevated gold and oil export earnings. Home insurance policies mandating cedi-based gold purchases have additional enhanced overseas forex provide and helped ease trade fee pressures.”
Regardless of this, the current greenback scarcity in Ghana’s banking system is placing strain on the trade fee once more. The cedi, which reached round GH¢10.28 per greenback by Might 2025, has come underneath stress from surging demand for U.S. {dollars} and declining liquidity, undermining current beneficial properties and reminding traders of the volatility that lingers.
Foreign money stability higher than appreciation
From a broader perspective, Muda Yusuf, CEO of the Centre for the Promotion of Personal Enterprise (CPPE), mentioned forex appreciation in itself isn’t a dependable financial purpose. “For a growing financial system, celebrating a robust forex could also be misplaced,” he famous. “A really robust forex typically results in over-reliance on imports and discourages native manufacturing. It penalises home producers and encourages consumption of overseas items.”
He confused that what needs to be celebrated isn’t power, however stability.
“Focusing solely on having a robust forex isn’t a viable financial technique for a rustic nonetheless constructing its productive capability. What’s price celebrating is forex stability. A secure forex, coupled with liquidity within the overseas trade market, conjures up confidence amongst traders, merchants, and shoppers.”
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Weak forex helps exports
In distinction to Ghana’s forex rebound, Nigeria’s naira has continued to weaken, elevating questions on whether or not this needs to be seen in a optimistic mild. Chukwu argued {that a} weak forex solely helps exports if there’s a stable manufacturing base. “For a forex depreciation to stimulate exports, a rustic should have aggressive, exportable merchandise. Sadly, Nigeria lacks such a base in the present day,” he mentioned.
He mentioned whereas Nigeria exports crude oil, the naira’s weak spot doesn’t have an effect on competitiveness in that sector as oil is priced in {dollars}. “Except we develop a vibrant manufacturing sector producing items in naira which can be enticing internationally, forex depreciation could have restricted advantages for exports,” he famous.
Nonetheless, Yusuf identified that Nigeria is starting to see some optimistic results from the weaker naira. “Ought to Nigeria have fun a weaker naira? To an extent, sure, as a result of it’s encouraging export actions,” he mentioned. “Exporters of agricultural commodities, for instance, are doing higher now. Even some producers are seeing elevated demand for his or her merchandise, particularly throughout the West African sub-region.”
He cited elevated beverage and grain exports as an indication that Nigeria’s producers are gaining traction, though this development has additionally contributed to rising native meals costs. “This enhance in exports can be a part of the explanation for rising meals inflation. With the naira weaker in comparison with the CFA franc, Nigerian merchandise particularly grains are actually cheaper for neighbouring international locations to purchase, creating an outflow of products and contributing to native worth hikes,” he mentioned.
Yusuf warned towards synthetic trade fee controls, advocating as an alternative for a sustainable regime. “Pegging the naira artificially, for instance, at 400 to the greenback with out ample reserves and fundamentals will solely create a thriving parallel market, the place charges might leap to 1,500/$ or extra. That’s not wholesome for the financial system,” he cautioned.
Ultimately, whereas Ghana basks within the glow of a briefly robust cedi and Nigeria grapples with the implications of a weaker naira, consultants agree that neither power nor weak spot needs to be the main focus. The precedence for each international locations needs to be to construct secure, export-driven economies with resilient financial frameworks able to withstanding international shocks and sustaining long-term progress.
