Cedi could face first half blues – Banker

Kobla Nyaletey, Director of Markets at Barclays Bank Ghana, has predicted that the first half of 2016 may be challenging -- mainly due to weak foreign exchange inflows which could trigger a depreciation of the local currency by about 20 percent against the US dollar.

“We expect the cedi to depreciate by about 20 percent in 2016 within the first half of the year, as foreign exchange inflows are expected to be weak.

“Can we find any currency as volatile as the cedi this year? It’s been topsy-turvy. The currency opened the year at GH¢3.2, weakened consistently to touch an all-time low of GH¢4.3 in June, and in just the next 4 weeks the currency reversed the entire losses to end July at GH¢3.3; since then, the cedi has weakened to about GH¢4 to a dollar.”

Mr. Nyaletey was speaking at a two-day summit -- the West Africa Property Investment Summit that brought together players in the financial institutions and stakeholders within the real estate industry of the sub-region.

The event was organised among other things to discuss some of the key issues on funding for property development in West Africa. The event was also held to provide a link between industry players in the sub-region.

Mr. Nyalatey who spoke on the topic ‘Currency Concerns: Manoeuvring around West Africa’s Currency Volatility’, confirmed that the economy’s current account deficits explain the weakening cedi.

The economy’s gross international reserves are currently at GH¢4.4billion as at the end of September, and is equivalent to 2.8 months of import cover as against a target of 3 months import cover.

“We expect this to improve to around 3.5 months import on cocoa and Eurobond flows that came in the fourth quarter of 2015.”

Christian Ahortor, Senior Economist-West African Monetary Institute, making a presentation on developments in the West African markets explained that the Ebola crisis has dragged West African growth in 2015; with the epidemic especially lethal in Guinea, Liberia and Sierra Leone, where deaths exceeded 10,000 from more than 25,000 reported cases.

“The West African sub-region is currently experiencing serious economic challenges brought about by both domestic and external shocks.

“These present enormous economic management challenges, as policymakers find it difficult making positive economic choices that may disturb socio-politico-economic balance.

“These challenges also present enormous opportunities for the private sector to take advantage of; especially in power generation, housing, economic infrastructure and sanitation,” he said.

Mr. Ahortor indicated that despite the Ebola crisis’ impact, the macroeconomic outlook at the regional level is encouraging -- adding that West Africa has managed to maintain a 6% growth in 2014, two points more than the continental average.

He reckons that West Africa’s economic growth is expected to slow to 5% in 2015 before rebounding to 6.1% in 2016, which will position the region as the second-most dynamic market after East Africa.

Kofi Ampong, CEO Broll Ghana Ltd. -- a property services company, told investors that there are unlimited opportunities in the area of retail, residential, offices; and to a lesser extent industrial parks in the Francophone countries, and the language barrier should not be a hindrance or obstacle.

“Investors should take the bull by the horns and venture into these ‘virgin’ countries such as Benin, Burkina Faso, Niger and Togo with no western style malls, particularly for retail investors,” he stated.

“Despite opportunities in the sub-region, barriers to entry remain slightly high. The major risk for developers and property investors is no longer political instability but, rather, access to title deeds; to some extent, capital constraints and the procurement of building materials; in some instances lack of depth and quality of tenants; and lastly, high rentals demanded by owners of these developments and properties,” Mr. Ampong said.

The creators of the widely-known Africa Property Investment Summit and East Africa Property Investment Summit said the platform was targetted at the top-tier investors and property professionals across the region to enable them gain insights and better understand the region’s real estate markets.

This is because the region is currently witnessing increased investment with an eye on the real estate sector; the WAPI summit provided a platform to learn about the latest regional trends, research and ideas shaping the property landscape.