Amidst depreciating cedi: Dollar trading booms in black market

As the Bank of Ghana (BoG) struggles to use all the monetary policy tools at its disposal to stabilise the local currency, the cedi, against the major foreign trading currencies, particularly the United States greenback, some major streets in the capital city of Accra are openly booming with the trading of the dollar.

From Cow Lane, an area right in the heart of the central business district of Accra, also identified as the hot bed of black market currency trading in the country, to the major bus stop at the Kotoka International Airport, a stone throw away from a major police station, down to the Kwame Nkrumah Interchange, specifically in and around the yard of the Allied Filling station, foreign currencies are traded like what some say is just as buying yam and onions on the street.

Aside from these major areas, there are also some minor spots such as Zongo Lane, Abeka Lapaz, Kaneshie, Nima Highway among many others that are equally booming with black market activities.

Banks accused

According to some of the dealers in the illicit trade, most of the dollars they sell to the public are supplied to them by staff of some commercial banks they refused to name, who per their privilege of working in a bank, are sold the dollar at cheaper rates than would be sold to an ordinary customer of a bank.

“If you want $10,000, I can get it for you. My guy at the bank will bring me some. Just show me where you are and I will come by Okada to give you what you asked for,” one black market dealer told this reporter under cover.

When reached for his comments, the Chief Executive Officer of the Ghana Association of Bakers (GAB), John Awuah, confirmed that staff of banks are sold the dollar at slightly lower rates when they make a request.

However he was quick to add that, “they are sold very small amounts and on purpose such as when they are travelling outside the country. So I wonder how they can be selling the volumes required on the black market”.

Mr Awuah also noted that, much as he would not fully dismiss the development, it was not an industry-wide behaviour because the nature of it would have triggered through the system for the bank managements to pick up and apprehend the culprits.

Meanwhile he said “once you have brought it up, the association will begin its own investigations into the matter to ascertain the veracity of it, if any, and address it holistically, but I can assure you again that, this is not something formally sanctioned by any bank management.”

Neighbours interest

The development is rampant and has now reached a stage where some currency traders from Nigeria are reported to have found Ghana a safe  destination to buy dollars for onward transfer to their country which is battling economic turmoil and experiencing serious forex shortages.

In Africa, Ghana seems to be one of the very few countries where dollar and other foreign trading currencies can be openly traded on the streets like any other fast-moving consumer goods (FMCG) without any documentations, a development which raises serious questions about the ability of the central bank to stop the practice because of its consequences on the stability of the local currency it has over the years demonstrated the lack of ability to hold stable.

Foreigners in the trade

The irony of all these is that, this illegal practice is being perpetrated by mostly foreigners from neighbouring countries such as Niger, Chad and Burkina Faso who have capitalised on the loose security system to engage in such a trade.

Whether through the lack of capacity or the lack of interest in the phenomenon, the security agencies have continuously failed to pick up such illegal currency traders.

Particularly when it is openly known that the depreciation of the cedi is partly due to speculations in the market and caused by these operatives, the inaction of the central bank and the security agencies leaves much to be desired.

Analysts say the occasional reactive and firefighting attitude of the security agencies which hit the streets in what looks like a staged movie, ostensibly to apprehend the culprits, seems not to have yielded any results for decades.

Many have argued that the security agencies have no excuse not to be able to stop the practice because the culprits are operating in the full glare of the public and in some instances, very close to police stations like the case near the Kotoka International Airport bus stop.

Cedi free fall

The exchange rate has recently come under some pressure, especially in the forex bureaux market. The pressure in the foreign exchange market reflected increased demand for higher imports, energy sector payments, and uncertainty surrounding the progress of debt restructuring negotiations with external creditors according to the 

Monetary Policy Committee (MPC) report presented yesterday. These conditions, the committee maintained, have fed into sentiments and contributed to additional pressures. 

On a year-to-date basis, the Ghana cedi depreciated by 14.6% against the US dollar as at May 22, 2024 compared to 21.8% depreciation for the first five months of 2023.

Presently, the cedi is trading to the dollar at GH¢13.90 on the interbank market and as much as GH¢15.10 on the average at the forex bureau and slightly higher in the black market.

Much as the rates are advertised on the interbank market, the dollar is scarce from the commercial banks and many are forced to resort to the black market where there is ready availability, a development which clearly confirms the potency of that market.

Solution

An economist and Director of the Institute of Statistical and Social and Economic Research (ISSER), Professor Peter Quartey, confirmed to the Graphic Business that the currency black market activities have a direct impact on the depreciation of the local currency.

According to him, the woes of the cedi were partly to blame on speculations, and cited the players in the black market as the worst culprits who fan the speculations to satisfy their selfish interest.

He wondered why their activities continue to thrive when they do not add any value to the  economy.

“The Bank of Ghana and the security agencies must rid these illegal operatives off the market if the cedi is to see any meaningful stability.

Those whose activities can be formalised should be licensed and those who are not qualified must be dealt with according to the law,” he added.

Prof. Quartey also referenced the shortage of the dollar in Nigeria and said: “Nigerians are coming into the country to buy huge sums of dollars from the open market because Nigeria now has serious forex issues”.

He wondered why over the years, Ghana has not been able to ensure that foreign currencies are exchanged through a well-regulated and formalised process just as the case in countries such as South Africa among others where systems around such dealings are not taken for granted because of the consequences on the economy.