Evolution of the Local Currency: Sixty-six years after independence 

Evolution of the Local Currency: Sixty-six years after independence 

History has it that, prior to the declaration of independence on March 6, 1957 from the British  colonial powers by Dr. Kwame Nkrumah, the Gold Coast, now Ghana, had already laid a solid  foundation for economic, social and governance take off. And, there was the urgent need to  establish a central bank to, as it were, give a ‘true meaning’ to political independence.  

Consequently, the Bank of Ghana was established on the eve of Ghana’s independence, March 4,  1957, and mandated to issue and redeem bank notes and coins. Prior to this, the West African  Currency Board (WACB), which was constituted in 1912 by the British Colonial Administration, issued and circulated the West African Pound (£WA) in the Gold Coast and the other Anglophone  countries in West Africa (with the exception of Liberia). After independence, however, the West  African pound, shillings and pence remained the units of currency in Ghana until the first currency  reforms in July 1958 when the Bank of Ghana issued the Ghana Pound (£G) as the main currency to further consolidate the political independence.  

Another currency reform took place in 1965, as Ghana adopted the widely  accepted decimal system for its new currency issue, named the ‘cedi’. The word ‘cedi’ was derived  from the Akan word “sedie” meaning cowry shell which was one of the commodities widely used as a medium of exchange (currency) for transactions prior to the colonial era. The third and fourth  currency reforms in 1967 and 1972 respectively, were all undertaken after a military coup d’etat,  reflecting the political and economic uncertainity during those periods. Subsequently, in 1979 another currency reform took effect, where the cedi was rediscounted mainly as a tool to control  liquidity.  

One common feature of the aforementioned reforms was the use of the local currency as a  monetary policy tool. However, the implementation process had unintended consequences as  some citizens lost money through the demonetisation and discounting of the currency. Unlike the  various currency reforms, the re-denomination, undertaken in 2007, was not done as part of a stabilization process, but rather to reflect stability, alongside a strong commitment to good  governance.  

Ghana has witnessed several currency reforms since 1912 to date, and as the country prepares to  mark its 66th Independence Day on March 6, 2023 with celebrations marked across the country,  the Bank deems it appropriate to catalogue the various currency issuances over the past sixty-six  years to commemorate the occasion.  

Currency at Independence – 6th March, 1957 

The West African pound (£WA), shillings, and pence circulated in the Gold Coast, Nigeria, Sierra  Leone and The Gambia prior to Ghana’s independence. The immediate post-independence Ghana continued to use this colonial currency until the first currency reform in July 1958. The West  African currency had the following denominations: 

Currency Reform Processes in Ghana 

First Currency Reforms: Ghana Pound (July 1958) 

After independence, the West African Pound, introduced by the WACB, was regarded as a vestige  of British colonialism that had to be changed. Consequently, the Bank of Ghana introduced the  first set of currency called the Ghana Pounds, Shillings and Pence to replace the West African Shillings  and Pence in July 1958 with the following denominations: 

Second Currency Reforms: Cedi (₵) and Pesewa (P) (July 1965) 

Barely three years after the introduction of the Ghana pounds, shillings and pence, the Government  initiated a move to adopt the widely accepted decimal currency system. The Kessels Committee was subsequently set up to design a road map for the migration. The proposed banknotes were named the “cedi” and the corresponding coin, was the “pesewa” and all the banknotes and coins  bore the portrait of the first President of the Republic of Ghana, Dr. Kwame Nkrumah. In July  1965, the various denominations below were issued:

Third Currency Reforms: The New Cedi (N₵) (February 1967) 

The overthrow of the Convention Peoples’ Party (CPP) Government in 1966, led to the decision to replace the existing currency, ostensibly to do away with the portrait of Dr. Kwame Nkrumah on the currency. In February 1967, a new currency was issued without the portrait of the former  president and the name of the new banknotes was slightly changed to the ‘New cedi (N¢)’, but the ‘pesewa’ was maintained for the new coins. The denominations introduced in February 1967  consisted of: 

Fourth Currency Reforms: The Cedi (₵) (February 1972) 

The fourth currency issue occurred in February 1972 after a military coup that led to the overthrow  of the Government of the Second Republic led by President Edward Akufo-Addo and Prime  Minister Dr. Kofi Abrefa Busia. A Committee was formed under the chairmanship of Mr.  Frimpong-Ansah, then Governor of the Bank of Ghana, to oversee the re-issue of the cedi without  the N₵ symbol. Subsequently, the newly introduced banknotes became simply known as the cedi with the various denominations as presented below.  

Fifth Currency Reforms: Demonetization (March 1979) 

On March 9, 1979, the Government announced the introduction of new cedi notes to replace the  existing ones at a discount of 30 percent for amounts up to ¢5,000 and 50 percent discount for  amounts in excess of ¢5,000. The old currency was therefore demonetized and the ¢50 banknotes  were subsequently confiscated from the system. However, cash already in commercial bank  accounts were neither confiscated nor discounted. The newly introduced denominations were as  follows:

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Sixth Currency Reforms: High Denominations (1982-2003) 

From 1982 to 2003, a series of currency reforms occurred, reflecting the high inflation  environment. Frist, in 1982, the Bank of Ghana issued a new cedi currency in same denominations  but with new designs, colours and enhanced security specifications, to replace the 1979 issue. The  notable aspect of the 1982 issue was the re-introduction of the ¢50 denomination, which had earlier been confiscated. In 1984, new higher denominations of the cedi namely, ¢100 and ¢200 notes, were introduced. And again in 1986, the Bank of Ghana issued another higher denomination, the  ¢500 notes, and eventually replaced and phased out the lower denominations of ¢1, ¢5, ¢10 and  ¢20 notes with coins. By 1986, the structure of denominations had changed to: 

In 1991, the Bank of Ghana introduced the ¢1000 banknote and converted the ¢50 and ¢100  banknotes into coins. The central bank also introduced the ¢2000 and ¢5000 banknotes in 1994  and further changed the currency’s structure by converting ¢500 and ¢200 to coins. In August  2003, the Bank of Ghana again introduced the ¢10,000 and ¢20,000 into circulation, making the  ¢20,000 the highest cedi denomination. The ¢20, ¢10, ¢5 and ¢1 coins were subsequently phased  out. The currency structure was as follows: 

Seventh Currency Reforms: Redenomination of the Cedi (July 2007)

After decades of high inflation, banknotes in circulation increased over 9,000 folds from the  1970/80s levels, resulting in the numerical values of the local currency running into millions,  billions and trillions. These multiple zeros on the currency caused difficulties in expressing  monetary values, transactions at the cashier’s offices, bookkeeping and statistical records, data  processing software, payments system and price tagging, as well as the credibility of the cedi when  economic aggregates were expressed in terms of trillions. In this regard, the Bank of Ghana  deemed it a technical necessity to simplify monetary aggregates by removing four zeros from the  domestic local currency.

The Bank therefore redenominated the currency by removing four zeros from the existing  currencies. The re-denomination exercise was meant to remove the deadweight burden of the  currency on the economy and featured an intensive nationwide sensitization. More importantly,  the redenomination process aimed to reinforce ongoing economic and financial sector reforms at  the time, and therefore served as an important tool towards promoting efficiency in business  transactions. Additionally, the redenomination was expected to reposition the domestic currency  to effectively play its functional role as the means of exchange, store of value, unit of account, and  standard of payment, both within and outside the banking system.  

Starting July 2007, new banknotes and coins were issued and renamed Ghana cedi (GH¢) and  Ghana pesewa (Gp). Both the ‘old’ cedi (¢) and Ghana cedi (Gh¢) notes and Ghana pesewa (Gp)  coins were in circulation for six (6) months before the ‘old’ cedi notes were withdrawn from the  system. By the end of 2007, all banknotes and coins issued before the re-denomination exercise  were demonetized. 

The new currency structure was as follows: 

Eighth Currency Reforms: Commemorative Notes & High Denominations (2010-2019)

In March 2010, the GH₵2 was introduced by the Bank of Ghana to commemorate the centenary  celebration of the birth of the first President of the Republic of Ghana, Dr. Kwame Nkrumah. Then in 2012, Bank of Ghana upgraded the GH₵50 banknote with enhanced security features  due to the high counterfeiting rate of the note. Five years on, a new GH¢5 note was also  introduced as a Commemorative Banknote in March 2017 to mark the 60th Anniversary of the  Bank’s establishment. 

To further improve the security features of all existing banknotes against counterfeiting, the Bank  of Ghana introduced upgraded banknotes of all the Ghana cedi banknotes with the exception of  the commemorative banknotes (GH¢2 with Dr. Nkrumah’s portrait and the GH₵5 with the  portrait of Dr. Kwegyir Aggrey) in May 2019. The upgraded Ghana cedi banknotes still maintained  the original design, that is, colour, size, vignettes and images. 

The most recent addition to the family of Ghana cedi banknotes occurred in November 2019, with the introduction of higher denominatons with new GH¢100 and GH¢200 banknotes. In  2021, the Bank announced plans to gradually replace the GH¢2 notes with coins. Thus, the new 2  Ghana Cedi coin was introduced in the year, and in December 2022, the preexisitng 1 Ghana Cedi  coin was upgraded with new features. This was done to ensure customer convenience, improve efficiency in cash printing, and other currency management activities. 

Currently, the currency structure is as follows: 

Gradual move from Cash to Digital Currency Reforms (2019 – date) 

Since the early 2000’s, the Bank of Ghana has systematically implemented policies and  programmes to strengthen the payments and settlement systems ecosystem. Some of the key  strategic initiatives include strengthening prudential and regulatory frameworks; improving oversight of payment service providers; enhancing product innovation and development;  strengthening financial inclusion and digital finance; and improving non-cash payment streams. In  2019, the Bank of Ghana also facilitated the passage of the Payment Systems and Services Act  2019 (Act 987), that strengthened the legal and regulatory environment for financial technology  companies and financial institutions to collaborate, especially on the introduction of value-added  services such as digital credit delivery. 

In furtherance of the changing payments landscape due to the adoption of digital and mobile  technologies, which has spurred the move towards a cash-lite society, the Bank of Ghana declared  its intention to pilot a a Central Bank Digital Currency (CBDC). This was to be done within the  framework of its financial sector digitisation program and the digitisation agenda of the  Government of Ghana. 

The digital Cedi, otherwise known as eCedi, is a retail token-based CBDC designed to address the  risk of unregulated privately issued digital “currencies” or virtual assets. The eCedi has two types  of wallets, namely; hosted wallets managed by financial institutions and hardware wallets, which  are secure portable storage devices to be held by individuals. Hosted wallets will require access to  the internet, while hardware wallets work in offline mode. Payment is done by transferring the  value note from one person to another. The concept is similar to cash payment transactions, where  payment is done by transferring banknotes and/ or coins from person A to person B. 

The core principles of the eCedi’s design are built around Governance, Accessibility,  Interoperability, Infrastructure and Cyber security. The eCedi, when fully functional, will be under  the full control of the Bank, which is the only entity to create and destroy digital cash. Also, the  ecosystem of the eCedi will include key players, such as banks, and payment service providers, to  provide access to end-consumers. The eCedi will also be integrated into the existing interbank  payment systems and mobile money interoperability platforms operated by the Ghana Interbank  Payment and Settlement Systems (GhIPSS).  

In the medium-term, the eCedi will provide an alternative to cash, promote competition in the  payment market, and facilitate the provision of innovative value-added services to individuals and  businesses. It is designed to meet the following strategic goals:  

∙ Balance transparency of transactions with the privacy of consumer data while being fully  compliant with the KYC and AML/CFT regulations and requirements;  

∙ Boost financial inclusion in an increasingly digital Ghanaian society by involving  financially excluded people in financial services; 

∙ Support programmable use cases to enable innovation and new business models while  maintaining the trust of the users;  

∙ Scalable to handle large volumes of transactions and provide 24/7 availability and  support instant payments; and finally, 

∙ Facilitate cross-border trade, particularly under the AfCFTA.  

Conclusion 

The Bank of Ghana’s exclusive mandate to issue banknotes has been well executed over the years,  given the exigencies of each period. More specifically, the Bank has enhanced its educational  campaigns on currencies in circulation to ensure that counterfeiting is minimised by enhancing the  security features. These will ensure that the banknotes and coins maintain their functional roles of  medium of exchange, store of value, and as a unit of account. The coming on board of the eCedi  would help speed up the cash-lite economy agenda of the government, facilitate financial inclusion,  enhance operational efficiency and cost-effectiveness in payments, as well as promote secure  financial digitalisation in the country.