Business News of 2014-02-13

Forex Guarantee Market is the answer to the cedi’s woes – MET Capital Group CEO

The Chief Executive of Asset Management Company, MET Capital Group, Eugene Asiamah-Boadi is calling for the establishment of a Foreign Exchange Guarantee Market as a sure way to address the perennial woes of the Ghana cedi. The local currency has since the beginning of the year lost value against the major foreign currencies which led to a short supply of the US dollar on the market.
The US dollar which sold at GH¢ 2.20 on the local foreign exchange market during Christmas last year now sells at GH¢ 2.60. The British Pound which sold at GH¢ 3.00 now sells at GH¢ 4.20 whilst the Euro and the FCA now sell at 3.50 and 4.80 respectively.
This compelled the Bank of Ghana to announce new measures last week to salvage the dwindling fortunes of the local currency. There have been several recommendations before and after the announcement but mostly of medium to long term results.
Eugene Asiamah Boadi believes establishing a Foreign Exchange Guarantee Market in the country is the best way forward to address cedi depreciation. Speaking to Joy Business, he explained that such an organized market should effectively address the issue in both the short and long term.
“This is a market with players and the players here can be banks. So individuals will just walk in there, strike a deal at a particular rate that will be used , let’s say in 3 or 6 months time based on the import schedules of the importers. Irrespective of what happens in three months or six months time, the importer goes out there to change his or her dollars with the agreed rate of say 2.7 in mind. So if the importer approaches a bank out there and the bank says that the rate is now 2.9; they know for sure they’ve agreed on 2.7 so this market will therefore compensate for the extra 0.2. What it then means is that, importers hoarding the dollars will no longer be an issue and that will also see demand for the dollar go down and when that happens, we are sure of stabilizing the Cedi,” he explained.
According to Mr Asiamah Boadi, it should take not more than 3 months to establish the market with the Bank of Ghana as the regulator.
“We can cite that of the stock exchange which operates under the supervision of the Securities and Exchange Commission. So the same way, we could set up this market and take the regulatory umbrella from the central bank. What it therefore means is that, players should start putting in application to the central bank for that kind of approval. That’s important because it’s going to bring credibility and then people will be confident in dealing with these players.
“It’s a short-term measure in the sense that having this market shouldn’t take more than a three-month period. We already have buildings and properties in the country. It’s just a matter of central bank giving an approval. In any case one or two companies have started this in a pilot form. I can talk of MET Capital Group where we engage the people within the import-driven industry from the spare parts through to the ports and all that,” he concluded.
Source: myjoyonline
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