Manufacturers fear Cedi depreciation
Manufacturing firms in the country are worried the depreciation of the local currency could cause the collapse of their businesses.
In the last few weeks, the cedi recorded an impressive appreciation, a development which was attributed to the Bank of Ghana’s daily injection of some 20 million dollars into the money market.
The currency has in the past few days lost about 15 percent to major trading currencies.
Speaking on Business Trends on Joy FM, Chief Executive Officer of the Association of Ghana Industries (AGI) Seth Twum Akwaboah said the trend is detrimental to their businesses.
He indicated that because most products sold to big businesses by manufacturing firms are done on credit “when you’re getting back your money in two to three months time you want to be able to keep the value of whatever money you’re getting but if the situation is such that you cannot predict, at what price should you sell the product?”
Mr. Twum-Akwaboah said it has become simply impossible to price very well.
“If you price too high, you will be out of competition and if you price too low, you are going to lose money so industry player would just wait and not expand and the implication is that the kind of jobs we need through industry and through businesses, we may not get it,” he said.
This according to him is because players would hold on the little monies they have instead of expanding and selling to the market and eventually lose out, so industry is being careful so that it does not get into experience the current situation again.
Also speaking on the show, the President of the Financial Markets Association of Ghana Othniel Kwainoh said the perennial depreciation of the local currency is giving credence to the perception held by many that the best store of value for them is the US dollars hence, would seize any opportunity to buy foreign currencies.
For him, looking at the central bank and its reserve capacity of about 5.5 Billion Dollars, if individuals are actually holding about 3 billion dollars, it means there is a lot of work to be done.
These he said are matter of fact the liquidity in the market which is supposed to fuel the whole cycle of import and export within the market.
“If the supply situation is getting worse, then it means people are not selling. They probably believe that holding on to the dollars is a good thing and therefore are not trading” he added.
On whether or not the Central Bank is injecting 20 million dollars daily into the economy, Mr. Kwainoh said the BoG continues to maintain its presence in the market and that “it has sold a substantial amount of foreign currency into the market and that caused the appreciation of the cedi but although an amount of 20 million dollars has been made public as the injected money, that is not a fixated amount.”
The Central Bank he maintains could even release more dollars into the market if they think it is important for the market “but the truth is the central bank does not have an insatiable amount of dollars so whatever they do, they take a cue from whatever reserves they have.”
According to Mr. Kwainoh, the Cedi could have depreciated further if the BoG had not injected the dollars into the economy.