Ghanaians look to cryptocurrency as hedge against inflation, weak cedi – Report
Cryptocurrency adoption among the adult population of Ghanaians over the last one year increased to 20% at end-August 2022.
The increased uptake of the digital asset marks a 3 percentage points increment from the previous year’s adoption rate of 17%.
Per the August 2022 Cryptocurrency Adoption Index by Finder.com, uptake of cryptocurrency particularly Bitcoin (54%) and Ethereum (20%) increased despite the huge decline in cryptocurrency ownership and price value.
According to James Edwards, cryptocurrency specialist at Finder.com, increased adoption of cryptocurrency among Ghanaians is due to the use of the digital asset as a hedge against inflation and the weakening local currency.
“We saw huge drops in the price of Bitcoin at the start of May and June which led to declines in crypto ownership in other markets. However it looks like Ghana is bucking the trend with cryptocurrency adoption increasing. It’s likely Ghanaians are looking to cryptocurrency as a hedge against inflation and a weakening local currency,” said James Edwards.
The cedi, has since the beginning of the year lost about 36% in value to the dollar, according to Bloomberg.
Inflation has also risen sharply to 31.7% at end-July 2022.
In January this year, Ghana, out of 27 surveyed countries, was ranked the 9th country with the highest rate of cryptocurrency ownership among its adult population.
According to the Cryptocurrency Adoption Index report made available to norvanreports.com by the Finder.com, 17% or approximately 3.1 million Ghanaian adults own cryptocurrency.
This is despite the ban on ownership and use of cryptocurrency in the country by the Bank of Ghana.
The Finder.com notes that 17% of Ghanaian adults owning cryptocurrency is above the global average of 15%.
Per the study by Finder.com, across the globe, some regions are adopting cryptocurrency much faster than others.
Ghana for instance, is adopting cryptocurrency much faster than the US and its African peers like Kenya and South Africa.
“Cryptocurrency ownership in Ghana is behind countries like Australia (23%), Indonesia 22%) and Nigeria (22%), but ahead of countries like Kenya (16%), South Africa (11%) and the United States (10%).
“Of the African countries surveyed, ownership is highest in Nigeria and Bitcoin is the most popular coin to hold among Ghanaians followed by Dodgecoin and Ethereum,” said Finder.com.
43% depreciation rate of cedi to dollar projected for 2022
The cedi is projected to depreciate by 43% to the US dollar for this year.
The cedi’s rate of depreciation against the dollar is however, forecasted to decline to 30% in 2023.
This is according to research agency, Fitch Solutions in its latest report on the country dubbed, “Ghana’s Private Infrastructure Investment Set For Medium-Term Recovery.”
Per the report, the continuing investor concern over the country’s large fiscal deficits puts downward pressure on the cedi.
“We expect weakness for the Ghanaian cedi to persist throughout the near term, as we currently forecast the currency to depreciate by 43% and 30.1% against the US dollar in 2022 and 2023, respectively”.
“We expect that Ghana’s inflation rate will remain high in the near term in the face of spiking global food and fuel prices and as continuing investor concern over the country’s large fiscal deficits puts downward pressure on the cedi”, it stated.
Again, it pointed out that the currency’s weakness will keep revenue risks elevated for foreign investors dependent on revenue streams in local currency.
This is despite an expected $2 billion inflows from the Afrexim Bank and COCOBOD syndicated loan.
Furthermore, it said in the light of the reliance of Ghana’s construction industry on imports, the cedi’s weakness will add to upward pressures on prices of construction materials from existing supply chain disruptions.
This, in turn, will further contribute to increased project costs and potential investment delays in the near term.
“In 2021, Ghana’s trade deficit for iron and steel products is estimated to have exceeded $1.2 billion, up from an estimated deficit of over $780 million worth of iron and steel products in 2020. In light of the Ghanaian construction industry’s reliance on materials imports, we expect that the cedi’s weakness will add to upward pressures on construction materials prices from existing supply chain disruptions. This, in turn, will further contribute to increased project costs and potential investment delays in the near term”.
