A Tale of Two Currencies: Naira vs Cedi
The Ghanaian cedi may have earned the title of the world’s best-performing currency in 2025, according to Bloomberg data, but analysts caution that this is not a time for celebration.
Despite the seeming strength, the appreciation is viewed more as a recovery than a sign of long-term currency stability or economic strength.
This year’s currency rebound, where the cedi appreciated by over 25 percent against the U.S. dollar, stands in stark contrast to its 2022 crisis, when it lost more than 55 percent of its value amid soaring inflation, rising debt, and fiscal mismanagement.
Fitch Ratings has since upgraded Ghana’s foreign-currency issuer rating from ‘Restricted Default’ to ‘B-’, pointing to improved investor confidence.
Yet, financial experts stress that a strong currency, especially in developing economies, is not necessarily cause for celebration.
Johnson Chukwu, group managing director/CEO of Cowry Asset Management, believes the cedi’s appreciation reflects a rebound from past depreciation. “What we are currently seeing is a form of recovery. However, it’s important to understand this is not necessarily a sign of sustained strength,” he said. “Over the last four or five years, the cedi has performed better than some other African currencies, but this must be seen in context.”
He emphasised that Ghana’s currency strength is a correction, not a turnaround. “The cedi has not appreciated to the extent that it negatively impacts exports. In fact, it hasn’t reached a point where its strength becomes a challenge to export competitiveness,” he added.
Ghana’s macroeconomic gains have been supported by policy reforms under a $3 billion IMF Extended Credit Facility, as well as improved foreign exchange inflows from high global prices of gold and oil.
According to Marvellous Adiele, portfolio manager at Parthian Capital, “Ghana’s external reserves have steadily grown, supported by increased gold and oil export earnings. Domestic policies mandating cedi-based gold purchases have further enhanced foreign currency supply and helped ease exchange rate pressures.”
Despite this, the recent dollar shortage in Ghana’s banking system is putting pressure on the exchange rate again. The cedi, which reached around GH¢10.28 per dollar by May 2025, has come under stress from surging demand for U.S. dollars and declining liquidity, undermining recent gains and reminding investors of the volatility that lingers.
Currency stability better than appreciation
From a broader perspective, Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), said currency appreciation in itself is not a reliable economic goal. “For a developing economy, celebrating a strong currency may be misplaced,” he noted. “A very strong currency often leads to over-reliance on imports and discourages local production. It penalises domestic manufacturers and encourages consumption of foreign goods.”
He stressed that what should be celebrated is not strength, but stability.
“Focusing solely on having a strong currency is not a viable economic strategy for a country still building its productive capacity. What is worth celebrating is currency stability. A stable currency, coupled with liquidity in the foreign exchange market, inspires confidence among investors, traders, and consumers.”
Weak currency supports exports
In contrast to Ghana’s currency rebound, Nigeria’s naira has continued to weaken, raising questions about whether this should be seen in a positive light. Chukwu argued that a weak currency only supports exports if there is a solid production base. “For a currency depreciation to stimulate exports, a country must have competitive, exportable products. Unfortunately, Nigeria lacks such a base today,” he said.
He said while Nigeria exports crude oil, the naira’s weakness does not affect competitiveness in that sector as oil is priced in dollars. “Unless we develop a vibrant manufacturing sector producing goods in naira that are attractive internationally, currency depreciation will have limited benefits for exports,” he noted.
However, Yusuf pointed out that Nigeria is beginning to see some positive effects from the weaker naira. “Should Nigeria celebrate a weaker naira? To an extent, yes, because it’s encouraging export activities,” he said. “Exporters of agricultural commodities, for example, are doing better now. Even some manufacturers are seeing increased demand for their products, especially within the West African sub-region.”
He cited increased beverage and grain exports as a sign that Nigeria’s manufacturers are gaining traction, although this trend has also contributed to rising local food prices. “This increase in exports is also part of the reason for rising food inflation. With the naira weaker compared to the CFA franc, Nigerian products especially grains are now cheaper for neighbouring countries to buy, creating an outflow of goods and contributing to local price hikes,” he said.
Yusuf warned against artificial exchange rate controls, advocating instead for a sustainable regime. “Pegging the naira artificially, for example, at 400 to the dollar without adequate reserves and fundamentals will only create a thriving parallel market, where rates could jump to 1,500/$ or more. That’s not healthy for the economy,” he cautioned.
In the end, while Ghana basks in the glow of a temporarily strong cedi and Nigeria grapples with the implications of a weaker naira, experts agree that neither strength nor weakness should be the focus. The priority for both countries should be to build stable, export-driven economies with resilient monetary frameworks capable of withstanding global shocks and sustaining long-term growth.
