The Ghanaian currency, the cedi, recently hit an all-time low against the U.S. dollar after it depreciated to GHS 14.9335 per dollar. Since the start of the year, when it traded at approximately GHS 12 per dollar, the cedi has depreciated by more than 20% in 2024, making it the fourth worst-performing currency tracked by Bloomberg.

According to a Bloomberg report, the Ghanaian currency is being weighed down by increased demand for dollars to purchase fuel, pharmaceuticals, and other fast-moving consumer goods. The decline in the cocoa output has also complicated matters for the cedi, which was the world’s worst-performing currency at some point in the last quarter of 2022.

“The weakening of the cedi seems to reflect foreign exchange flow mismatches. Foreign exchange demand recovered this year, though it has remained broadly constant in recent months, and continues to exceed supply,” explained Samir Gadio, head of Africa Strategy at Standard Chartered Bank.

After the cedi was named the worst-performing currency, Ghanaian authorities implemented a series of measures to curb the demand for the U.S. dollar. According to Bitcoin.com News, one such measure was the gold-for-oil scheme. Under this program, Ghana, a significant gold producer, utilized the metal to purchase petroleum products.

Since the gold acquired from mining companies was paid for in cedis, this strategy helped diminish the demand for the U.S. dollar. Coupled with other initiatives by Ghanaian authorities, the gold-for-oil scheme contributed to the accumulation of the West African nation’s foreign exchange reserves, which reached $6.6 billion in April. Based on Bloomberg data, these reserves are the largest Ghana has seen in 19 months.

The increase in foreign exchange reserves has, in turn, allowed Ghanaian monetary authorities to intervene directly in the forex market. However, a decline in cocoa production, a vital source of foreign currency for Ghana, has led to a disparity between the demand and supply of foreign exchange, resulting in the cedi’s depreciation.

The report indicates that Ghana is projected to produce between 422,500 and 425,000 tons of cocoa in the 2023-2024 season, nearly half the initial forecast. The report also noted that cocoa revenues of $599 million, generated from January to April, are down by 49%.

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