Professor Patrick Asuming, an economics lecturer at the University of Ghana, has identified escalating global conflicts and geopolitical uncertainties as significant contributors to the recent depreciation of the Ghana cedi. The ongoing international tensions, including those involving the United States, Iran, and the prolonged Russia-Ukraine war, are creating global economic pressures that indirectly impact the performance of emerging market currencies like the cedi.
Global Instability and Investor Behavior
Professor Asuming explained that global instability often prompts investors to seek refuge in safer assets and stronger currencies. This shift in investor behavior exacerbates challenges for currencies in emerging markets. He noted that since the return of former President Trump to office, various conflicts have emerged, adding to the existing Russia-Ukraine war. The recent tensions between Israel and the United States on one side, and Iran on the other, further contribute to this climate of uncertainty.
These international developments introduce disturbances to the global economy, and Ghana, like many other nations, is not immune to their effects. The primary channels through which these conflicts impact economies are disruptions to oil supply and international trade.
Assessing the Severity of Cedi Depreciation
Despite the observed depreciation, Professor Asuming emphasized that there is no immediate cause for significant alarm. He stated that the cedi’s decline has been moderate thus far. While it represents a depreciation compared to the appreciation seen in the previous year, the currency has not experienced extreme volatility. The Bank of Ghana has been instrumental in moderating these swings, keeping the depreciation at a manageable level, according to Asuming.
Market Pressures on the Cedi
The comments from Professor Asuming come at a time when reports indicate a steady decline in the Ghanaian currency since the beginning of 2026. Data from the London Stock Exchange Group (LSEG), as cited by Reuters, revealed that the cedi had become the worst-performing currency in West Africa on a year-to-date basis. This performance is attributed to persistent foreign exchange demand and other prevailing market pressures.
Specifically, strong demand for US dollars, particularly from the energy sector, coupled with rising oil prices and existing foreign exchange backlogs, continues to exert significant pressure on the local currency. These factors collectively contribute to the weakening of the cedi against major international currencies.
Implications and Future Outlook
The depreciation of the cedi has direct implications for Ghanaian businesses and consumers. Increased import costs can lead to higher prices for goods, potentially fueling inflation and reducing purchasing power. For businesses relying on imported raw materials or finished products, the weaker currency translates to higher operational costs, which may be passed on to consumers. Conversely, a weaker cedi can make Ghanaian exports more competitive on the international market, potentially boosting export revenues.
Looking ahead, the trajectory of the cedi will likely depend on a complex interplay of global geopolitical developments and domestic economic management. Continued global instability could further pressure the currency, while effective policy interventions by the Bank of Ghana and fiscal prudence could help stabilize it. The resolution of geopolitical conflicts and a potential easing of global trade tensions could provide a significant tailwind for the cedi. Investors will be closely monitoring the country’s foreign exchange reserves, inflation rates, and the government’s debt management strategies as key indicators of the currency’s future stability.
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