On Today's Fintech Friday edition, Adrian explores the Ghanaian Cedis reaching an all time low of one pound sterling to eighteen point seventy-five Cedis (£1 to GHC 18.75 Cedis).
"Ghana’s cedi is in a record-breaking weakening cycle. The currency hasn’t gained versus the dollar in the past 22 trading sessions, the longest streak according to data compiled by Bloomberg going back to 1994. The cedi traded 0.3% weaker at 13.9310 by 1 p.m. in London. It’s declined 14% this year, a slump beaten only by currencies that have been devalued, including the Egyptian pound and Nigerian naira."
Dr Andrews Ayiku also writes:
"The falling cedi has made it more difficult for SMEs to function successfully and compete in the market.These enterprises frequently operate with thin profit margins and insufficient means to hedge against currency changes, making them more vulnerable to the negative effects of the cedi’s depreciation."
How the declining Cedi is impacting businesses:
- Increased production costs
- Credit Loan difficulty
- Challenges with cash flow
- Volatility in input prices
- Decreased competitiveness in export markets
- Inflationary pressures
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[00:00:00] Picture this, on Monday morning 27th May 2024, I log into one of my go-to remittance platforms,
[00:00:07] My jaw drops. It's £1 to 18.20 CDs. And then, I log back into the app in the afternoon,
[00:00:18] it's now £1 to 18.60 Garnay in cities. On Friday 31st May 2024, as I'm recording this episode,
[00:00:30] it's now £1 to 18.75 cities. Yes, you heard me right, £1 sterling to 18.75 cities.
[00:00:41] Never in my life have I seen the cities at a rock bottom low. Now, with the backdrop of the elections
[00:00:48] taking place soon in Ghana and also South Africa, the US and the UK, not to mention more talk of war
[00:00:56] with French troops marching into Ukraine and more economic turmoil, I suspect the worst is yet to come
[00:01:03] for Ghana. And I believe we will see £1 hit 20 Garnay in cities very soon. Well, this is my prediction,
[00:01:12] but don't hold me to this. Okay guys, sure, this is great for the diasporians worldwide and those
[00:01:19] in the West or even in foreign countries who can afford to buy the Garnay in cities in bulk.
[00:01:24] I mean, if you can afford to buy in bulk, this is a great time to buy, I must admit. But it's terrible
[00:01:30] for the economy and for those who are doing business in the cities. Now, Dr Andrews Alike says
[00:01:37] that the falling city has made it even more difficult for SMEs to function successfully
[00:01:42] and compete in the market. And I agree with him and that's totally true. So,
[00:01:46] if you look at some of the influence and factors that the city's declining would have in
[00:01:50] business, this would include things like rising costs of production within Ghana. So, of course,
[00:01:56] it costs more to make, to manufacture. You also have banks being more reluctant to loans. I mean,
[00:02:03] if the city continues to decline, then yeah, the banks probably won't make more money.
[00:02:10] You also have the impact on cash flow, especially where goods are imported from overseas.
[00:02:16] And how difficult it will be, can you imagine how difficult it will be to forecast revenue and
[00:02:21] expenses when the city is constantly declining? It's like money is running away from you, which is
[00:02:28] crazy. And it also takes away from the ability to invest in new projects and go operations. So,
[00:02:35] imagine you're a real estate company, you know, on the show I've interviewed a number of real
[00:02:42] founders and developers. And just imagine that they can't go ahead and they can't plan new projects
[00:02:48] because the city keeps declining. They can't plan how much cement that they need to buy.
[00:02:53] They can't plan what they need to afford or what they need to invest in terms of labor
[00:03:01] and so on and so forth. Can you just imagine how crazy it would be for them as well as a
[00:03:07] business? I mean, it's gotten so bad that the Bank of Ghana had to intervene last week and inject
[00:03:13] almost $60 million into the economy. Right? That's $60 million. Right? Now Bloomberg reported in
[00:03:21] early May that the Garnian city is in a record-breaking weakening cycle. Now hear this,
[00:03:28] the currency hasn't gained versus the dollar in the past 22 trading sessions. Now,
[00:03:36] this is the longest streak according to Bloomberg, according to data compiled by Bloomberg,
[00:03:42] going back all the way to 1994. Wow. That's insane. Just think about that for a moment.
[00:03:50] Right? Just think about that for a moment. But anyway, I hope you guys enjoyed that one.
[00:03:55] That's FinTech Friday for today. I know it's not a beautiful one. It's not a pleasant one
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[00:04:45] Daniels until next time. God bless. Take care. And more importantly, may God bless Ghana.