Cedi’s bane is import-addiction

The cedi will continue its slideagainst the major foreign currencies unless Ghanaians curb excessive addiction to foreign goods, says Kenneth Thompson, Chief Executive Officer of Dalex Finance and Leasing Company.

“The cedi will continue to fall, and that is [the] reality. Any remedy through the banks will not work because we have an addiction,” he said. “In our economic behaviour we are addicted to foreign goods and services, and no amount of measures can salvage the rapidly-depreciating cedi against the major foreign currencies.”

He was speaking at the Chartered Institute of Marketing Ghana’s (CIMG) Evening Encounter series under the theme “In a Volatile Economy, Fortune Favours the Bold”.

The cedi has since the beginning of the year depreciated by more than 12 percent against the dollar as demand for the greenback by local firms importing goods to drive the growing economy heavily outstripped supply, worsening the country's inflation outlook.

Mr. Thompson explained that the continuous fall of the cedi can be blamed on the insatiable taste for exotic foods and services, as well as the growing acquisition of luxurious cars.

He said Ghanaians’appetite for imported goods and services such as Chinese furniture, clothes, bags, electronic gadgets, four-wheel drives, holidays abroad, foreign schools for rich kids and other luxuries have skyrocketed, and this has created the effect the economy is experiencing.

He indicated that businesses in the country are today facing challenging times with regard to the economic and business environment. 

“Among these challenges are the steep depreciation of the cedi, decline in business confidence and significant reduction in consumer spending,” he said.

Mr. Thompson cautioned government that any attempt to combat the falling cedi using restrictions and bans is doomed to fail. 

The central bank has already issued new regulations to improve liquidity on the interbank currency market and shore-up the local currency.

The regulations among others outlaw transfers from one foreign exchange account to another, and prohibit over-the-counter withdrawals of foreign currency except for travel purposes. They also require all commercial banks in the country to quote a two-way pricing of currency exchange and limit the spread on corporate transactions to a maximum of 200 percentage points.

Mr. Thompson was doubtful about the effectiveness of the Bank of Ghana’s measures, saying not even President Mahama’s exhortation to Ghanaians to consume locally produced goods will work.

He proposed a trade and economic policy that advocates replacing foreign imports with domestic production, adding that opportunities abound in the current economic environment which business can take advantage of to grow.

“There should be incentive programmes designed to attract more firms into exporting by offering them help. Entrepreneurs need to develop detailed analyses of the turbulent situation and adopt strategies that grow their business to create more jobs.

“Government also needs to take practical steps to promote export and implement import-substitution measures, as well as provide incentives to programmes designed to attract more investment into exports,” he said.