Cedi’s woes due to diminishing expectations of investors – Finance Professor

US-based Associate Professor of Finance, Williams Peprah has attributed the decline of the Ghana cedi against other international currencies, particularly the US dollar, to the diminishing expectations of investors regarding Ghana’s competitiveness in its main export commodities, namely cocoa and oil.

This, he said, has negatively impacted the country’s trade balance in 2024

“One key issue is the diminishing expectations of investors regarding Ghana’s competitiveness in its main export commodities, namely cocoa and oil. This has negatively impacted the country’s trade balance in 2024”.

He told Joy Business that the output levels for cocoa and oil have not met anticipated monthly targets.

For instance, oil production is only reaching 130,000 barrels per day, far below the expected 500,000 barrels per day.

Additionally, the deteriorating electricity supply is hampering production capacities and, consequently exports.

“Moreover, the disparity between Ghana’s high interest and inflation rates and those predicted by the international Fisher Effect and Purchasing Power Parity theories suggests an arbitrage opportunity”.

To counteract this, Professor Peprah said the Ghanaian currency needs to devalue to an approximate spot rate of GH¢15.5 to a dollar.

Given these critical challenges, it is imperative for the government to implement policy measures aimed at stabilising the national currency, he added.

Since the beginning of the year the cedi has lost 13.45% to a dollar. It is presently going for GH¢14.18 to one American greenback.