Explainer: Why the Cedi Is Slipping in 2025

Introduction

The Ghanaian cedi (GH¢) has experienced one of its most turbulent years to date in 2025. From relative stability in January–April to a steep decline in August, the cedi’s value has defied expectations in a global economy often seen as favorable to African currencies. This article unpacks the cedi’s rollercoaster performance, highlighting the interplay of domestic policies, external pressures, and market psychology.

Analysis: Unraveling the Cedi’s Volatility

External Conditions Remain Favorable

Despite the cedi’s weakening, global dynamics remain positive. Gold prices soared to unprecedented highs, with Ghana—a top producer—benefiting from elevated revenues. The U.S. Federal Reserve’s signals to cut interest rates in 2025 typically bolster developing market currencies, yet the cedi has lagged. This paradox underscores the growing influence of domestic factors over external forces.

Remittances: A Lifeline in Retreat

Remittances from Ghanaians abroad historically stabilize the currency. In April, $100 sent home yielded GH¢1,550. By May, the same amount converted to just GH¢1,030—a 33% drop that discouraged senders. Reduced inflows deprived the economy of critical foreign currency reserves, exacerbating liquidity shortages.

Import Surge and Dollar Pricing

Businesses exploited the cedi’s mid-year strength (GH¢10.30–10.50) to stockpile goods before the festive season. Concurrently, the Bank of Ghana (BoG) tightened regulations: penalizing dollar-denominated domestic pricing and restricting remittance operators’ revenue streams. These measures inadvertently stifled import capacity, widening the supply-demand gap for dollars.

Bank of Ghana’s Contentious Interventions

The IMF warned in early 2025 that the BoG’s aggressive dollar interventions—such as the $1.4 billion injected into markets in Q1—risks destabilizing the cedi. The central bank acknowledged these concerns, committing to a structured intervention framework by September 2025. The August slowdown may test this new policy.

Interbank vs. Forex Market Disconnect

A persistent gap between the cedi’s interbank rate (GH¢10.30) and forex bureau rates (GH¢11–12) created arbitrage opportunities. Allowing controlled depreciation aimed to harmonize these markets, reducing distortions caused by gray market trading.

Summary: Key Drivers of the Cedi’s Decline

The cedi’s late-2025 slump stems from:

• Dropping remittance inflows due to currency strength.
• Import pressure from dollar-denominated businesses.
• Inconsistent BoG intervention policies.
• Divergence between official and parallel exchange rates.

Key Points to Note

Why Growth Areas Should Not Panic

Despite the cedi’s decline, Ghana’s fundamentals remain robust: gold prices at $3,500/ounce and $11 billion+ reserves provide a buffer against freefall. However, sustained volatility risks inflationary spirals and reduced investor confidence.

Practical Advice for Businesses and Individuals

Hedging Against Future Depreciation

Businesses reliant on imports should:

• Lock in forward contracts for critical materials.
• Diversify earnings across currencies, including digital currencies.
• Optimize working capital to reduce USD exposure.

Navigating Remittance Delays

Ghanaians abroad should:

• Monitor BoG policy updates for remittance reforms.
• Use escrow services to minimize transfer risks.
• Consider staggered transfers to offset volatility.

Points of Caution

• Intervention Uncertainty: The BoG’s delayed rollout of its forex policy creates regulatory ambiguity.
• Remittance Dependence: Over 70% of remittance recipients rely on funds for basic needs, per World Bank data.
• Inflation Risks: Imports account for 60% of Ghana’s inflation basket, per 2025 Q2 data.

Comparison: Cedi vs. Regional Peers

| Currency | 2025 Performance | Key Drivers |

|—————-|——————|——————————|

| Cedi (GH¢) | Mixed volatility | Remittance cuts, import surge|

| Naira (NGN) | Gradual depreciation | Nigerian import surge^1 |

| CFA Franc BCEAO | Stable | CFA Bank of Central Africa’s intervention |

*Source: IMF Analytical Department^1 (July 2025)

While the cedi outperformed the naira earlier in 2025, its August slump mirrors regional risks of policy-induced volatility.

Legal Implications

The BoG’s crackdown on dollar pricing and unregistered remittance channels triggers compliance debates. Critics argue that strict enforcement may push informal dollar trading further into black markets. Legal experts highlight:

• Section 7 of Ghana’s Forex Regulation Act (2023) authorizes penalty fees for unauthorized currency conversions.
• Court rulings in early 2025 upheld BoG’s authority to block cross-border transactions linked to unlicensed forex booths.

Conclusion: The Road Ahead for the Cedi

The cedi’s future hinges on the BoG’s structural reforms. While the IMF-supported intervention framework aims to stabilize forex markets, reforms must address root causes: expanding export diversification, reducing energy imports, and digitalizing remittance channels. For now, the currency remains a barometer of Ghana’s economic resilience in conflicting global conditions.

FAQ: Cedi Slippage Queries

Is the cedi’s decline a sign of economic collapse?

No—currency fluctuations are normal. The cedi’s stability in Q1 and resilience post-August signal adaptive capacity. However, sustained depreciation could erode purchasing power.

How do import costs affect the average Ghanaian?

Rising import prices translate to higher costs for staples like rice and fuel, disproportionately impacting low-income households.

Can the BoG reverse the cedi’s decline?

Short-term interventions (e.g., buying dollars) may stabilize rates, but lasting change requires structural reforms in export diversification and fiscal discipline.