What Is Making the Cedi Appreciate?

While some point to international and others to internal factors, what is making the cedi appreciate? This question dominated a discussion between Alfa Ali and economist Mr. John Akwasi Amponsah. While some observers have attributed the development to international factors, Mr. Amponsah insists that domestic policies and structural changes must not be overlooked.

Mr. Amponsah described international developments as “e-factors”—external influences that are minor but not insignificant. 

According to him, when the cedi appreciates, it usually means the dollar is weakening on the global stage. He identified the ongoing trade tensions between major economies as a contributor to the weakening of the US dollar.

“What is happening at the international front is what we call a trade war,” he said. “Trade war simply means that we are engaging in import and export. I export my goods to your country. You also export goods to my country.”

He continued, “So as much as I pay you dollars for the goods I import from your country, you also pay me dollars for the goods I export to your country.”

Mr. Amponsah pointed to US economic policies, especially under the Trump administration, as a factor behind the weakened dollar.

He explained that because China and Canada have responded with similar tariffs, global trade transactions are slowing, leading to a dip in demand for the dollar. “Transaction is not going on. And that is why Ghana must gear up. Ghana must diversify. Ghana must create import substitution immediately,” he said.

“The United States is saying that for every good that will enter my country, I’m going to put a tax on it in his bid to resurrect his economy,” he said. “So this tax war of 40%, 10% for the rest of the world, and 40% for China is causing the dollar to depreciate.”

Domestic Reforms Must Complement Global Factors

Mr. Amponsah warned that relying solely on what is making the cedi appreciate globally could backfire. “If we don’t do that and things begin to look different on the external side, it could more or less negate whatever we are doing,” he cautioned.

He emphasized that the US is actively working to revive its economy, stating that Trump wants to rebuild America’s economic fortunes. He cited Apple’s shift in production back to the US as an example.

Amponsah said such shifts are not just about trade but about protecting national interests, and therefore Ghana should be finding alternatives, Mr. Amponsah responded.

Import Substitution Is Ghana’s Best Bet

Pressed further, Mr. Amponsah stated that import substitution is the most effective response to what is making the cedi appreciate. He advised that Ghana identify the commodities that are trading higher in terms of imports. He stressed that the trade balance equation is critical. 

“The exports we do are bringing us foreign exchange. Ghana must look at the things we do that take money away from us to depreciate our cedi.”

Mr. Amponsah mentioned rice and chicken as areas Ghana can control. “Some of them, if we are serious, we can reduce them. Like rice and chicken. We can reduce them. And you are reducing them, not banning them, but you are creating a substitute.”

He linked this to the 24-hour economy policy, suggesting that Ghana should industrialize around at least five key commodities.

Mr. Amponsah was confident that Ghana has the capacity to achieve this.  

Policy Innovation and Investment in Agriculture

He highlighted the potential in maize production, citing Ukraine and Russia as examples. “The government will only need to introduce grain, which is corn. Only corn is fetching Ukraine and Russia over four billion US dollars per annum.”

“If the Ghana government just makes a policy that I’m going to buy corn in addition to cocoa, it will drive people to go into maize production. Because the government is buying. There is a market,” he added.

In addition to maize, he recommended innovations in poultry. Responding to the “ ‘Nkoko Nkitinkiti’ policy as a solution, Mr. Amponsah said, although the initiative was a good one, it will generate revenue in the zeros, and therefore Ghana can look towards other policies that will generate bigger contributions to the GDP. “If we are looking at its contribution to the GDP, it will be zero point something. We want something that’s big.”

He suggested granting farmers access to funding. “Grant them loans through the agricultural bank. Let Ghana begin to buy corn from farmers. That forms the major part of the feed,” he said. “Then you create a balance. You create an ecosystem where we will not import the feed. We’ll raise our own chicken in Ghana.”

He concluded that such measures would not only reduce imports but also boost exports. 

With a combined strategy of internal production and policy direction, Mr. Amponsah believes Ghana can shape its own narrative about what is making the cedi appreciate.