Cedi’s strength isn’t enough, businesses want predictability, says John Awuah

The recent rise of the Ghana cedi seems positive at first glance. However, for businesses, currency strength is not the main concern. What matters most is stability and predictability.

John Awuah, CEO of the Ghana Association of Banks, shared this message. He urged policymakers to remain cautious about the cedi's current performance.

Speaking on PM Express Business Edition on May 29, Mr. Awuah emphasized that businesses prefer stability over fluctuations. “Let us not be too excited about significant appreciation,” he said.

He explained that businesses want predictability in exchange rates. They do not want rates jumping from ¢5 to ¢10 overnight.

His warning comes as the cedi performs strongly lately. This improvement is due to better external inflows and fiscal management.

Mr. Awuah noted that certain variables must remain stable for businesses to thrive. “You need to be able to plan effectively,” he stated.

Instability makes it hard for clients to provide reliable financial projections, he added. If revenue depends on foreign currency, projections become challenging.

He also discussed speculation in Ghana’s currency market. Much of past depreciation was driven by artificial pressures rather than actual trade.

“I once estimated that speculation accounted for 20 to 30% of depreciation,” he revealed. This means some depreciation was not based on real transactions but speculative trading.

Currently, the cedi's appreciation is causing speculators to rethink their strategies. This shift helps reduce artificial pressures in the market.

“If the currency holds its value, speculation becomes less attractive,” he explained. Now, people are looking for investments in cedis because it is more stable than before.

While multiple factors support the cedi now, Mr. Awuah advised caution moving forward. He did not commit to whether the exchange rate could return to single digits but expressed some optimism.

“I don’t want to say wait and see,” he said regarding future stability. “But we must focus on maintaining stability.”