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Clamp down on ‘black market’ currency operators — Dr Osei Assibey

By: Emmanuel Bruce
Mr Eric Osei Assibey

As part of the many suggested measures to help halt the depreciation of the Ghana cedi against the major foreign currencies, including the United States (US) dollar, a Senior Adjunct Fellow at the Institute of Economic Affairs (IEA), Dr Eric Osei Assibey, has advised the Bank of Ghana (BoG) to clamp down on the activities of the illegal forex traders, popularly known as ‘Black market operators”.

He said the central bank was gradually losing control over the activities of the ‘black market operators’, a phenomenon which he said was one of the major causes of the depreciation of the cedi.

 At a public forum in Accra, last Thursday, Dr Osei Assibey said aside the country’s over-reliance on imports, one major problem affecting the cedi was the existence of a parallel forex market, which the BoG had failed to clamp down over the years.

Despite a strong economic background underlined by a fiscal consolidation plan which the International Monetary Fund (IM

From GH¢4.42 to a dollar in January 2018, the cedi is now valued at GH¢4.78 to the dollar at the interbank rates but is trading at GH¢4.94 at some forex bureaux in Accra, and selling at GH¢5 on the black market.

Cumulatively, the cedi is said to have depreciated by 6.5 per cent year to date in what some economists describe as reasonable but what importers call unacceptable because of the overall impact on their capital.

Dr Assibey believes the operations of the black market were a major contributory factor to the current depreciation.

“We have a black market system and we have a parallel system going on. This has even created a parallel exchange rate in the market where we have the central bank quoting about GH¢4.7 per dollar but in the parallel market, which is the black market, we have about GH¢5 to one dollar. This is a problem,” he said.

“It is a problem because the central bank seems to be losing control over the informal activities in the forex market,” he added.

 Black market operators

In Accra, for instance, the black market operators are normally found at Tudu and Kawkudi in the central business district (CBD) of Accra and at Nima, among many other places.

The trading is done openly in the market because people who intend to trade are met openly in the streets by unknown individuals.

There have been some allegations that some unscrupulous officials in the formal banking sector buy the dollars supplied to the universal banks by the central bank at a cheaper rate and then supply the black market operators who sell at a profit.

Normally, the shortage of the dollar is sometimes attributed to the deliberate unofficial activities of some persons within the formal banking sector and the black market.

 Tighter regulations

The economist pointed out that huge sums of currency trading were happening on the blind side of the central bank, largely because the regulations of the forex system were not tighter.

“We have allowed the black market to grow without any check,” Dr Osei Assibey stated.

“Has anyone gone to the forex bureau to change money and asked of any documentation or identity? If someone goes to change US$100 million, who is tracking what the money is going to be used for or where it is going? There is no mechanism to track,” he bemoaned.

“In Kenya, South Africa and the rest, you cannot even change one dollar without them asking you for the purpose. If we don’t tighten the regulations and the control and bring more transparency to the transactions, our currency will continue to suffer,” he pointed out.

 Cedi depreciation below average

A senior Research Fellow at the Institute of Fiscal Studies, Dr Said Boakye, however, pointed out that the current depreciation of the cedi was below average.

“We cannot talk about the problem without knowing the intensity of it. We have been saying that the cedi is depreciating this year but the question is to what extent? I have done some calculations and realised that from the beginning of this year, the cedi has depreciated by 6.5 per cent,” he stated.

“When you look at it from a historical perspective, I have done calculations on the cedi depreciation since 1983 to the present, and the average rate of depreciation in the first eight months of every year stands at 11 per cent. This shows that this year’s depreciation is below average,” Dr Boakye added.

He said the hullabaloo around the cedi was, therefore, unnecessary because the currency was not weak.

He, however, added that it did not mean the cedi was fine.

“It has been able to perform below average means it can be better. It could have been much better because there are some years that the cedi depreciation rate for the first eight months has been much lower,” he said.

Although he believed the rate of depreciation could have been better, he maintained that the agitations over the current depreciation was misplaced.

 Traders not interested in percentages

The President of the Ghana Union of Traders Association (GUTA), Dr Joseph Obeng, for his part, said the traders were, however, not interested in the percentage of increase.

“We are talking about how the depreciation is affecting us and not the percentage. If I was buying the dollar at GH¢4.5 and I now have to pay GH¢4.85 for it, which is a loss of capital to me; that is what we are talking about,” he said.

“Four months back if I want to buy US$100,000, I will need GH¢450,000, but now I will need GH¢485,000, which is GH¢35,000 more. If I am unable to get the additional GH¢35,000, then it means I will get only about US$ 93,000 and this will not get me the same quantity of goods I would have got with the US$100,000, meaning my capital has dwindled,” he explained.

He said the depreciation also causes their import duties to rise as some of the duties are priced in dollars. —GB