Forex Demand Decline Among GUTA Members as Confidence in Cedi Surges
The Ghana Union of Traders’ Associations (GUTA) has attributed the recent appreciation of the Ghanaian cedi to a marked decline in demand for foreign currency among its members, signalling growing confidence in the local currency.
According to Charles Kusi Appiah, Head of GUTA’s Business and Economic Bureau, a significant behavioural shift is underway, with many traders opting to hold cedis rather than US dollars—a reversal from past practices when forex was seen as a safer store of value.
“When the cedi is not doing well, people put their trust in forex. The dollar becomes the store of value. But now the opposite has occurred. The cedi is appreciating. So why hold on to forex when you are losing value?” he remarked in an interview on Thursday, May 8.
He explained that in times of economic uncertainty, traders typically hedge their working capital by holding dollars, even when there is no immediate need, just to preserve value. However, the recent stability and gains in the cedi have altered that approach.
“People used to buy forex just to hold, simply because it felt safer. But now, confidence in the cedi is growing. That is driving a lot of people to liquidate their forex holdings,” Mr. Appiah stated.
He further pointed to the introduction of Ghana’s gold-for-oil barter system, Gold for Oil—often referred to as GoldBod—as a key policy shift that has helped reduce forex demand in international transactions.
“With the introduction of GoldBod, where most international transactions now use gold, the demand for forex has reduced. So there’s no need for one to hold forex for any transaction,” he added.
Mr. Appiah noted that the currency shift among traders is not merely speculative, but rather based on observed economic trends. He recounted a conversation with a concerned trader asking about the viability of holding dollars in the current market.
“I told him, of course, yes—the cedi is gaining strength every day. If you think you don’t have anything to do with that forex, liquidate. There are other investment options, probably the gold coin, that you can invest in so you don’t lose totally,” he advised.
He cautioned that continuing to hold dollars amid the cedi’s rebound would likely result in value erosion.
“Anytime forex outperforms the cedi, our working capital gets depleted. That’s why people used to say, let me limit my losses by buying forex. But when the dynamics change, and you see there’s no need to hold it, the demand reduces. And that is accounting for the downward trend of forex in our market.”
He concluded that the current situation reflects a strong vote of confidence in the local currency.
“The confidence has been that our local currency is strong enough to be the store of value. That is what is accounting for the things we see now.”
