The Bank of Ghana has debunked claims that the introduction of new denominations of its local cedi was an ‘ambush’, saying it was borne out of a well-thought out currency reform programme.
The bank, in a statement dated January 3, noted that 12 years after the redenomination of the cedi, high inflation and depreciation of the currency have eroded, in real terms, the face value of the existing series of banknotes.
The bank said that the burden of carrying large sums of money for economic transactions was returning, with the practice of carrying currency in plastic bags.
As is the normal practice in all jurisdictions, the bank said it undertook reviews of the structure of the existing currencies.
Ghana and Nigeria had been locked in a subtle diplomatic row following the closure of Nigerian borders by the government last year.
Ghana, through its Foreign Minister and Regional Integration, Shirley Botchwey, had asked Nigeria to re-open its borders, saying its economy had been heavily affected by Nigeria’s decision.
But the Nigerian government has maintained its stance on the continued closure of the border as a means to protect its local economy.
Hameed Ali, the Comptroller General, Nigeria Customs Service (NCS), also said that Nigeria’s borders will remain closed until the country and its neighbours agree on existing ECOWAS protocol on movement.
Amidst the uncertainty, the Ghanaian apex bank in November 2019 introduced higher denominations of its local currency.
The Governor of the central bank, Ernest Addison, announced the introduction of ¢100 and ¢200 notes to the country’s currency denomination. Also, ¢2 coins were introduced.
The new notes which already went into circulation were unveiled at a press conference at the Banking Hall of the Bank of Ghana (BoG).
Weeks after, the Ghanaian government also hailed the resolve by eight member nations of the Economic Community of West African States (ECOWAS) to cut their colonial links with France’s CFA (Communaute Financiere d’Afrique) Franc and adopt ECO as their common currency.
While the Nigerian government, in its reaction, said that it was “studying the situation and would respond in due course”, the Ghanaian government in its statement described the move as a “welcome development”.
Experts are divided on what the decision portends for economic activities and bilateral trade agreements between both countries and among countries across the continent.
In its statement on January 3, the Ghanaian apex bank said there had been statements describing the introduction of new higher Ghana cedi denomination banknotes as an ‘ambush’.
The bank said that international best practices require monetary authorities to review their currency regimes at intervals between five and ten years to ensure that demand for banknotes are well aligned with economic activity, address weaknesses and challenges noted in the management of notes and coins in circulation, among other economic challenges.
“The Bank of Ghana begun the process of a thorough review of the structure of the currency since 2017 including a note/coin boundary, acceptability and use of the individual currency series,” the bank said.
“The review exercise involved a nationwide survey with market operatives, businesses and international stakeholders as well as some empirical exercises. The outcome of the review process indicated a significant increase in the demand for higher denomination banknote. It also came out clearly that the existing high denominations of GH¢50 and GH¢20 accounted for about 70% of the value of currency stock compared to 27% at the time of redenomination.
“At the same time, the volume of banknotes had increased significantly putting pressure on currency processing facilities, storage and logistics. A resetting of the denominational mix of the currencies improves the currency management and reduces costs.”
The bank argued that in line with the objective of efficiency and cost effectiveness, it introduced a new GH¢2 coin, GH¢100 and GH¢200 banknotes denominations into circulation to complement the existing series.
This, it said, will ensure customer convenience, improve efficiency in high value transactions in cash, reduce cost of printing as well as enhance currency management processing, transporting, and storing banknotes to generate savings for the country, and address the significant shift in the coin/note boundary after the redenomination in 2007.
“These are technical decisions taken by the Central Bank as part of its mandate,” the statement said.
Furthermore, the bank said that it has been alleged that the new note expenditure is a waste in the context of a new Eco currency in 2020.
It argued, however, that although the Government of Ghana is committed to do all it can to join the West African common currency arrangement, “there are many unresolved issues regarding the common currency, which would take time to resolve”.
“The Bank of Ghana will be working with ECOWAS Central banks to ensure that any currency arrangement will be viable and sustainable,” it said.
For now, it remains unclear what the position of the Nigerian government is on the various developments across the region.
Last week, a former Nigerian Minister of Agriculture and now President of the African Development Bank, Akinwunmi Adesina, threw his weight behind the ECO currency, describing it as a “great idea”.