Currency Clash: Naira Takes on Cedi

The Ghanaian cedi has garnered attention as the leading currency globally in 2025, achieving an extraordinary appreciation of nearly 50% against the US dollar. This remarkable achievement is attributed to a blend of enhanced investor sentiment, record-high earnings from gold exports, and a more stringent monetary policy. 

What drives  the Cedi’s Strength?

A number of elements have fueled the recent rise of the cedi:

·         Record-high gold prices: Gold exports surged from $7.6 billion in 2023 to $11.6 billion in 2024, significantly enhancing foreign exchange reserves.

·         Enhanced investor confidence: Ghana’s ongoing recovery from debt default and economic instability has drawn in investors, bolstered by the country’s improving fundamentals.

·         Monetary policy: The Bank of Ghana’s increase of 100 basis points in March to 28% has helped to control inflation, which decreased to 21.2% in April.

·         IMF assistance: A $3 billion bailout from the International Monetary Fund has provided crucial financial and technical support.

As stated by Marvellous Adiele, portfolio manager at Parthian Capital, “Ghana’s external reserves have consistently increased, bolstered by rising gold and oil export revenues. Domestic policies requiring cedi-based gold purchases have further improved the supply of foreign currency and alleviated exchange rate pressures.”

Challenges Ahead

Despite the impressive performance of the cedi, experts warn against becoming complacent. The dollar shortage within Ghana’s banking system is exerting pressure on the exchange rate, which undermines the recent gains. With inflation remaining above the central bank’s target range, there is a risk involved, and any premature cuts in interest rates could jeopardize these recent achievements and expose the cedi to renewed volatility. A robust currency can also render exports more costly, which may impact Ghana’s competitiveness in the global market. These challenges underscore the necessity for a nuanced strategy that harmonizes economic growth with stability and competitiveness.

The remarkable appreciation of the Ghanaian cedi in 2025 serves as a testament to the nation’s economic resilience and the effectiveness of policy reforms. Nevertheless, experts stress the importance of exercising caution, as the strength of the currency may not inherently lead to long-term economic stability. As Ghana continues its economic journey, it is vital to strike a balance between currency strength and export competitiveness while addressing potential risks to ensure stability.