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Analysts allay cedi depreciation fears over increased dollar demand

Sept. 6, 2016, 9:21 a.m.

Some currency analysts have downplayed a significant depreciation of the cedi, against major trading currencies anytime soon, due to an increase in corporate dollar demand.

One of such is the General Manager of Treasury at HFC Bank, Joseph Nketsia.
He tells Citi Business News, the coming on board of the cocoa syndicated loan by the Ghana COCOBOD should increase supply of dollars to meet the high demand.

“The increase in the supply of the dollars as a result of COCOBOD syndicated loan will help meet the increased demand. As a result we do not expect the cedi to depreciate steeply due to the increased demand,” Joseph Nketsia stated.

There have been growing concerns that the cedi which is trading at 3 cedis 95 pesewas and 4 cedis on the interbank market and across forex bureaus respectively, could depreciate further if measures are not put in place to shore up supply.

Some economists also maintain that government’s decision to issue a dollar component of its 5 year 1 billion cedi bond next month, will save the currency from depreciating further.

Even though the General Manager of Treasury at HFC admits that the season lends itself to increased dollar demand which could result in a depreciation of the local currency, he is confident the impact will be marginal as there is a likely increased supply.

“Normally around this time, in the round up to Christmas, a lot of corporate institutions order goods for the festive season and so ordinarily, it would have led to the depreciation of the cedi. But incidentally around this time also the COCOBOD syndicated loan comes into the system,” he observed.

Cedi/Dollar not to trade beyond 4 cedis by end of 2016

Figures from the Bank of Ghana early this year indicated that the cedi had depreciated by 1.4 percent as at March 2016 compared with a depreciation of 11.2 percent recorded in the same period last year.

Meanwhile with about four months to end the year and an apparent increase in demand for purchases for the festive season, Joseph Nketia tells Citi Business News he anticipates the dollar will not trade beyond 4 cedis by the end of year on the interbank foreign exchange market.

“I do not expect the cedi to depreciate beyond four cedis at the end of the year whereas at the forex market it could go beyond the four cedis mark, I do not anticipate that the cedi will go beyond 4 cedis on the interbank foreign exchange market,” Joseph Nketia further intimated.

COCOBOD seeks GH¢2 bn syndicated loan

The Ghana COCOBOD is seeking to raise 2 billion dollars syndicated loan facility for the purchase of cocoa beans for the 2016/17 crop season.
Twenty-three syndicated banks will be required to raise the amount requested by COCOBOD by the end of this month.