Amin Adam Criticizes NDC’s Financial Management: Cocoa, Currency, and Economic Policy

In a significant political and economic critique, former Ghanaian Minister for Finance, Dr. Mohammed Amin Adam, has launched a comprehensive attack on the economic stewardship of the National Democratic Congress (NDC) during its time in government, specifically under President John Mahama. His criticisms, centered on financial technology (“fintech”) implications and broader macroeconomic management, target alleged failures in the cocoa sector, currency valuation, and the use of foreign exchange interventions. This analysis breaks down his claims, provides essential economic context, and examines the validity and implications of his arguments for Ghana’s economic discourse.

Introduction: The Core of the Critique

The political economy of Ghana often sees fierce debate between the two major parties, the New Patriotic Party (NPP) and the National Democratic Congress (NDC). Dr. Amin Adam’s statements, made in the context of an NPP aspirant’s campaign launch, represent a classic opposition critique: holding the incumbent government accountable for economic outcomes. His core thesis is that the NDC’s approach to economic management was fundamentally flawed, driven by short-term populism rather than sound technical policy, leading to tangible harm in critical sectors like cocoa and creating long-term competitive disadvantages for Ghanaian exports.

Key Points of Amin Adam’s Argument

Dr. Adam’s criticism can be distilled into several interconnected pillars:

• Cocoa Sector Mismanagement: The government failed to implement a hedging strategy when global cocoa prices were high, directly reducing farmer incomes.
• Flawed Foreign Exchange Policy: Injecting billions of dollars into the market to prop up the Ghanaian cedi led to an artificial overvaluation, harming export competitiveness.
• Misunderstanding Economic Management: He argues the NDC confused economic management with simply “pumping dollars” into the economy, a practice he warned would cause instability.
• Populist vs. Prudent Policy: Policies were allegedly driven by populist impulses rather than sustainable economic principles, ultimately “building jobs for other nations” by making Ghana’s exports less competitive.
• Contradiction with Inflation Data: He points to a logical inconsistency: with low inflation (3.8%), the currency should naturally depreciate, yet it was appreciating under the NDC, which he calls “wrong economics.”

Background: Context of Ghana’s Economy and the Cocoa Sector

The Importance of Cocoa

Cocoa is more than a cash crop for Ghana; it is a cornerstone of rural livelihoods, a major foreign exchange earner, and a key indicator of agricultural policy success. The producer price set by the government for cocoa farmers is a highly sensitive political and economic issue. A low farm-gate price can trigger widespread discontent among the millions who depend on it.

Currency Valuation and Export Competitiveness

The value of the Ghanaian cedi against major trading currencies, particularly the US dollar, is critical. An overvalued currency makes a country’s exports more expensive on the global market and imports cheaper. This can lead to a trade deficit, pressure on local industries competing with imports, and a loss of market share for export-oriented sectors like cocoa, gold, and timber. Conversely, an undervalued currency can boost exports but increase the cost of imports and foreign debt servicing.

Hedging in Commodity Markets

Hedging is a risk management strategy used by producers and governments to lock in future prices for commodities, protecting against adverse price movements. For a major cocoa exporter like Ghana, a successful hedging program implemented when global prices are high would secure a higher guaranteed revenue stream, allowing for a more stable and potentially higher producer price regardless of subsequent market drops.

The “Dollar Injection” Policy

During periods of cedi depreciation, governments often intervene in the foreign exchange market by selling foreign reserves (like US dollars) to increase supply and support the local currency. While this can provide short-term stability, large, sustained injections can distort the market, create an unsustainable exchange rate level, and deplete precious foreign reserves.

Analysis: Deconstructing the Economic Claims

To assess Amin Adam’s critique, each major claim requires examination through the lens of basic economic principles and observable outcomes.

1. The Cocoa Hedging Failure

The Claim: The NDC government failed to hedge cocoa revenues when prices were high, leading to lower producer prices.

Analysis: This is a substantive policy critique. If global cocoa prices were indeed at a peak during the NDC’s tenure and the government did not engage in forward sales or use financial instruments to lock in those high prices, then subsequent price drops would directly impact the funds available to pay farmers. The link between hedging strategy and farm-gate price is direct and verifiable. Historical data on Ghana’s cocoa hedging programs and producer price announcements would be necessary to fully confirm this sequence, but the economic logic is sound. A failure here represents a missed opportunity to insulate farmers from price volatility.

2. Dollar Injection and Cedi Overvaluation

The Claim: Injecting $10 billion in one year and over $2 billion in two months artificially strengthened the cedi, hurting export competitiveness.

Analysis: This touches on a central debate in development economics. Large-scale, unsterilized foreign exchange interventions increase the domestic money supply (as cedis are sold to buy dollars, those cedis enter the system). This can lead to inflation if not countered. However, the immediate effect is support for the currency. Amin Adam’s argument is that this support created an exchange rate that did not reflect the currency’s true market value (“overvaluation”). An overvalued currency makes Ghana’s cocoa, gold, and other exports more expensive for foreign buyers, potentially reducing demand and volumes. The cited figures of $10 billion and $2 billion are specific and would need verification from the Bank of Ghana’s historical records. The causal chain—intervention → overvaluation → reduced export competitiveness—is economically valid.

3. The Inflation-Cedi Depreciation Paradox

The Claim: With inflation at 3.8%, the cedi should be depreciating, not appreciating. This is “wrong economics.”

Analysis: This is a sophisticated point referencing the Purchasing Power Parity (PPP) theory. PPP suggests that in the long run, exchange rates should adjust to equalize the price of a basket of goods across countries. If Ghana has higher inflation than its trading partners (like the US), its currency should depreciate to maintain purchasing power parity. An appreciating currency alongside higher inflation than the US would indeed violate the absolute PPP hypothesis, suggesting the exchange rate is being artificially supported—precisely the point he makes about dollar injections. However, in the short to medium term, exchange rates are influenced by capital flows, interest rate differentials, investor sentiment, and direct intervention, which can override PPP. His statement is correct as a theoretical critique of a sustained, intervention-supported appreciation during a period of positive inflation differential.

4. “Building Jobs for Other Nations”

The Claim: The policies made Ghana’s exports uncompetitive, effectively creating jobs abroad at Ghana’s expense.

Analysis: This is a political summation of the export competitiveness argument. If Ghanaian goods become too expensive on the world market due to an overvalued cedi, buyers switch to competitors (e.g., Côte d’Ivoire for cocoa). The production, processing, and associated jobs that would have been created in Ghana instead occur in those competitor countries. This is a standard argument against prolonged currency overvaluation and is logically consistent with his prior points.

Practical Advice for Stakeholders

Based on the principles raised in this critique, here is actionable advice for different groups:

For Policymakers and Governments:

• Implement Transparent Hedging Programs: Establish a clear, publicly communicated framework for hedging key export commodities (cocoa, gold, oil). Engage experts and use market-based instruments to lock in favorable prices during peaks, securing revenue for stabilization funds and producer support.
• Allow Market-Determined Exchange Rates: Minimize sustained, large-scale foreign exchange interventions that distort the true value of the cedi. A market-reflective exchange rate, while potentially volatile, provides correct price signals to exporters and importers, fostering long-term competitiveness.
• Sterilize Interventions: If intervention is necessary to prevent disorderly depreciation, sterilize it by issuing government securities to mop up the excess cedis injected, mitigating inflationary pressure and preventing artificial overvaluation.
• Focus on Productivity, Not Just Exchange Rates: Sustainable competitiveness comes from improving productivity, infrastructure, and business environment, not just a weak currency.

For Cocoa Farmers and Cooperatives:

• Understand the Link: Recognize that government policy on hedging and the exchange rate directly impacts the producer price. Advocate for transparency in how the Ghana Cocoa Board (COCOBOD) calculates prices and manages its revenues.
• Diversify: While lobbying for fair prices, explore crop diversification and value-added processing (e.g., local chocolate making) to reduce sole dependence on the volatile bulk commodity market.

For the General Public and Voters:

• Look Beyond Rhetoric: Evaluate parties not just on promises but on their concrete economic management records. Ask: What was the trend in the cedi’s real effective exchange rate? Were commodity revenues hedged? What was the inflation trajectory?
• Understand Basic Economics: Grasping core concepts like the relationship between inflation, interest rates, and exchange rates empowers citizens to discern sound policy from populist measures that may offer short-term relief but long-term pain.

Frequently Asked Questions (FAQ)

Q1: Is it always bad for a government to intervene to strengthen its currency?

A: No. Intervention can be necessary to curb excessive volatility, prevent imported inflation (from a weak currency making imports dearer), or maintain financial stability during a crisis. The problem, as highlighted in the critique, is with sustained, large-scale intervention that creates a persistent misalignment (overvaluation), which then harms export sectors for an extended period. The goal is stability, not a permanently strong exchange rate.

Q2: What is “hedging” in simple terms for cocoa?

A: Imagine a farmer locks in a price for their next harvest today with a buyer, regardless of what the market price does later. If prices fall, the farmer still gets the locked-in (higher) price. If prices rise, the farmer misses out on extra gains but has certainty. For a national cocoa board, hedging means using financial contracts to guarantee a minimum revenue for a portion of the crop, allowing for better budget planning and potentially more stable farmer payments.

Q3: Can a country have low inflation and a strong currency at the same time?

A: Yes, but it’s unusual and often temporary. A strong currency can actually help keep inflation low by making imports cheaper. However, if a country has significantly higher inflation than its main trading partners (like the US), economic theory (PPP) suggests its currency should depreciate to offset that inflation difference. If it’s appreciating instead, it suggests an external force (like heavy dollar sales from the central bank) is overriding market forces, which is the state described by the critic.

Q4: Who is responsible for setting the cocoa producer price in Ghana?

A: The Ghana Cocoa Board (COCOBOD), a state-owned entity, is responsible for determining the producer price for cocoa. It considers factors including the world market price, its own revenue from sales (including any hedging gains), operational costs, and the need to incentivize production. The Ministry of Finance and the overall government fiscal policy influence the resources available to COCOBOD.

Conclusion: The Enduring Debate on Economic Management

Dr. Mohammed Amin Adam’s critique transcends mere political rhetoric; it delves into the technical heart of macroeconomic management. His arguments regarding the failure to hedge cocoa, the consequences of excessive dollar injection leading to cedi overvaluation, and the resulting loss of export competitiveness are rooted in established economic theory. The validity of his specific claims—such as the exact dollar figures injected or the precise missed hedging opportunities—would require a forensic audit of the Mahama-era financial records from the Bank of Ghana and COCOBOD.

However, the framework of his criticism is a powerful one: that true economic management requires foresight (hedging), respect for market signals (allowing the currency to find its level), and policies that enhance productivity rather than distort prices. The assertion that “pumping dollars” is not equivalent to sound management is a debate that resonates in many emerging economies facing currency pressures.

Ultimately, the electorate must weigh such competing narratives. The proof, as they say, is in the economic outcomes: the stability of the cedi, the income of cocoa farmers, the level of foreign reserves, and the health of the export sector during and after a government’s tenure. This episode underscores that in Ghana’s democracy, economic performance remains the ultimate currency of political accountability.

Sources and Further Reading

• Original Statement Source: Life Pulse Daily article titled “Amin Adam slams NDC’s financial tech” (Published 2026-02