The cedi’s rollercoaster year: From record gains to sudden losses

The Ghanaian cedi has experienced one of its most turbulent and unpredictable years in recent memory, swinging between periods of extraordinary strength and abrupt weakness.

What began as a year of renewed optimism has quickly evolved into a case study on the volatility of emerging market currencies and the fragility of investor sentiment.

At the start of 2025, the cedi traded cautiously but steadily. Opening January at GH₵14.70 to the U.S. dollar, it slipped modestly to GH₵15.50 in February before entering one of its most prolonged periods of stability in over a decade.

From February to early April, the exchange rate held firm, restoring a measure of confidence among businesses and households.

Then, in a dramatic turn, the cedi staged a remarkable rally. Between April and May, it strengthened sharply from GH₵15.50 to GH₵10.30 per dollar—a gain so unexpected that even seasoned market observers were caught off guard.

By the end of April, Bloomberg had named the cedi the world’s best-performing currency, with a 16 percent appreciation since the beginning of the year.

The appreciation had tangible economic benefits. Inflation, which had weighed heavily on the economy, began to ease.

By May, consumer inflation had fallen to 21.2 percent, its lowest level in eight months.

Between May and July, the cedi appeared to consolidate its gains, hovering between GH₵10.30 and GH₵10.50.

This period of calm gave businesses room to plan, and many importers used the strong currency to replenish stock ahead of the festive season.

However, this newfound stability proved short-lived.

By mid-August, the currency had reversed course, plunging from GH₵10.30 to GH₵11.90 within weeks.

The more than 13 percent decline not only wiped away much of the earlier rally but also ranked the cedi as the worst-performing currency globally in the third quarter of 2025, according to Bloomberg.

As of September 5, the Bank of Ghana quotes the interbank rate at GH¢11.96, while forex bureaus are selling the dollar at approximately GH¢13.00.

According to IC Research, the analytical wing of IC Securities, market corrections are still underway, and the currency is likely to drift further.

In effect, the gains of April to June, when the cedi had appreciated by nearly 50 percent, have been partially erased.

So, what changed?

Supportive External Environment and Domestic Pressures

The depreciation of the Ghanaian cedi in recent months cannot be attributed primarily to external shocks, as global conditions have remained broadly supportive.

Gold prices have reached record highs of nearly US$3,500 per ounce, the United States dollar has maintained relative weakness, and monetary policy expectations in the United States suggest forthcoming interest rate cuts.

These developments would ordinarily bolster emerging market currencies, including the cedi. The current pressures, however, appear to emanate from domestic factors.

Divergence Between Official and Bureau Rates

A central issue has been the widening divergence between the official interbank exchange rate and that offered by foreign exchange bureaus. While the official rate stood at approximately GH₵10.30 to the dollar, bureau rates ranged between GH₵11 and GH₵12.

This misalignment distorted market expectations and likely compelled the Bank of Ghana (BoG) to permit a measured depreciation of the official rate to narrow the gap. Nevertheless, this adjustment intensified market anxiety, thereby accelerating the cedi’s decline.

Subdued Remittance Flows

Another contributory factor is the slowdown in remittance inflows, a traditionally vital source of foreign exchange for Ghana. The sharp appreciation of the cedi earlier in the year reduced the incentive for Ghanaians abroad to remit funds, as the local currency value of transfers diminished.

For instance, a remittance of US$100 yielded approximately GH₵1,550 in April but only GH₵1,030 in May. Anticipating future depreciation, many potential remitters withheld transfers, further constraining foreign exchange availability at a time when demand was increasing.

Elevated Import Demand

Importers also contributed to the surge in forex demand. With Christmas approaching, many businesses accelerated orders, seeking to take advantage of the temporarily strong cedi. The combined effect of reduced remittances and increased importer activity amplified demand-side pressures on the currency.

Diminished BoG Market Interventions

Simultaneously, the BoG reduced its direct interventions. Having injected an estimated US$1.4 billion into the economy in the first quarter of 2025, the central bank scaled back such measures following concerns expressed by the International Monetary Fund (IMF) regarding their sustainability.

The resulting slowdown in interventions, while consistent with plans to implement a formal framework for foreign exchange management, contributed to market uncertainty.

Regulatory Adjustments

In parallel, the BoG has intensified regulatory measures designed to tighten oversight of foreign exchange flows. These include prohibitions on domestic pricing in foreign currency, stricter documentation requirements for importers, enhanced monitoring at borders and airports, and restrictions on the withdrawal of foreign currency deposits by businesses.

While these measures aim to restore discipline to the market, they have also introduced short-term adjustment costs.

Conclusion

Taken together, these factors reveal that the cedi’s recent depreciation has been driven less by external headwinds than by domestic market dynamics, regulatory transitions, and shifting expectations.

Despite Ghana’s strong buffers—foreign reserves exceeding US$11 billion and favourable gold prices—the events of August underscore the fragility of market sentiment.

The trajectory of the cedi in the coming months will depend critically on the credibility, consistency, and decisiveness with which the Bank of Ghana implements its evolving policy framework.