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GNCCI warns over cedi's performance

By: Maclean Kwofi
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Nana Appiagyei Dankawoso I, President, GNCCI
Nana Appiagyei Dankawoso I, President, GNCCI

THE Ghana National Chamber of Commerce and Industry (GNCCI) has cautioned the government to keep a watch on the cedi as it take steps to get the banks to reduce their interest rate to enable its members to have cheaper sources of funds to finance their operations.

The President of the chamber, Nana Appiagyei Dankawoso I, said: “It is well documented that the depreciation of the domestic currency affects price stability and the general performance of businesses in an economy.

It disrupts business planning, escalates cost of imports, diminishes the value of bank capital in real terms and threatens the solvency of banks, necessitates high lending rate since banks are compelled to charge high in anticipation of future cedi depreciation,” Nana Dankawoso said at an event to inaugurate two different committees of the chamber on February 27 in Accra.

The trend
The nominal exchange rate between the cedi and major trading currencies have been trending upwards since 2006, with volatile rate of depreciation.

Per the available data from the Bank of Ghana (BoG), the year to date depreciation for January 2019 was 2.7 per cent and increased to 4.2 per cent for February 2019.

He indicated that the consistent depreciation of the cedi needed to be addressed to enable businesses to stay competitive, as further depreciation would be detrimental to the business community and the entire economy.

According to him, the chamber commends the BoG for introducing new forex market regulations to better regulate the conduct of forex trading and ensure transparency and integrity in the system.

He said the punitive measures, prosecution and loss of license for breaches were important to instill good practices.

Beyond this, he stated that the central bank should also find innovative ways of ensuring that the exchange rate reflected the market conditions.

“In line with this initiative, operators in the black market could be engaged as was done back in the 1980s to ensure a competitive price for foreign currencies to allow for proper documentation and strengthening of the cedi,” he added.

Nana Dankawoso I also called on the government to continue to support the productive sectors to grow the economy and generate the needed export receipts.

“There is an urgent need to also utilise our international trade agreements such as AGOA and CFTA to rake in more foreign revenue to strengthen the cedi.

“We will continue to engage the government, BoG and other relevant stakeholders towards achieving a low lending rate regime. This will essentially provide affordable long-term credit to enable businesses to grow and create jobs,” he added.

Response
In a contrary view, the Chairman of the Parliamentary Select Committee on Trade and Tourism, Nana Marfo Amaniampong, expressed worry about consistent complaints by traders whose activities contributed to the fall of the cedi.

“We do not need to school at the University of Ghana or the Kwame Nkrumah University of Science and Technology (KNUST) to know why our cedi is depreciating. You want us to find dollars for you to import toothpick and second-hand panties and when we are not able to do that, you think hell must break loose,” he told a hall packed with business operators, firms and industry players.

Instead of complaining, he said the chamber should rather concentrate on initiatives that would encourage economic development in the country.
He, therefore, asked members of the chamber to table their concerns to the government through the Ministry of Finance and it would be addressed.