Ghana central bank eases restrictions on foreign currencies

Ghana's central bank has eased restrictions on the use of the US dollar and the euro in order to boost foreign exchange supplies and stem the continuing fall of the local currency. Companies have complained that the new rules had not had the desired effect of preventing the fall of the cedi and had, instead, harmed businesses and made dollars and euros harder to obtain.

The previous rules, imposed by the Bank of Ghana (BoG) in February in order to prevent Ghana becoming dependent on foreign currencies, required, among other things, that all companies use the cedi in local transactions; and that exporters convert takings from foreign sales into cedis within five days. They limited the use of dollars and euros to exporters and importers and set limits on who could have accounts denominated in foreign currencies.

BoG governor Henry Kofi Wampah told reporters that the relaxing of the rules means that foreign companies can pay local businesses using non-cedi currencies, and that exporters can keep 60% of proceeds in foreign-denominated accounts; the remaining 40% will have to be converted into cedis within 15 days, rather than five. It is hoped that the new rules will increase the availability of foreign currency on the market.

As a further means of ensuring a regular foreign currency supply, the BoG is recommending that the government compel firms operating in the oil and mining sectors in Ghana to keep part of their profits in the country. It is also encouraging those who do business in China to use the yuan instead of the US dollar as a means of shoring up the cedi.

Already, some of Ghana's commercial banks have established relationships with their Chinese counterparts. Zenith Bank has a representative office in China and Ecobank has a dedicated China desk in several of its branches. Ghanaian traders heading to China currently need to take dollars with them that are later converted to yuan. Doing business in the Chinese currency would ease pressure on the cedi, as well as decreasing the demand for dollars, Dr Wampah said.

Last year, the yuan surpassed the euro to become the world’s second most-used currency in global trade finance after the dollar.

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