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Prices of Goods, Services Still High Despite Cedi Rebound
 
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29-Sep-2014  
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Captains of businesses and industry as well as consumers have expressed mixed reactions to the steady appreciation of the cedi against the major foreign currencies.

Although they see the current appreciation as welcome news, they are not certain about the sustainability of the performance of the cedi.

While consumers insist the rebound must reflect the costs of goods and services on the market, the business operators say it may not make any impact now as they purchased the items at prices based on higher exchange rates.

Consumers say it is unfair for prices of goods and services to remain unchanged when the cedi has regained strength, saying that, “the traders are fleecing us”.

The Chief Executive Officer of the Ghana Chamber of Commerce and Industry (GCCI), Mr Mark Badu-Aboagye, and the President of the Ghana Union Traders Association (GUTA), Mr George Kwaku Ofori, said people should not expect the prices of goods and services to come down as a result of the performance of the cedi.

The President of the Association of Ghana Industries (AGI), Mr James Asare-Adjei, however, expressed a contrary opinion, arguing that prices of goods and services were reflecting the current trend.

According to Mr Badu-Aboagye, traders had already bought goods at the old exchange rates, and so it would be difficult for them to reduce the prices until their wares got finished, and they imported new ones.

“Prices are sticky downwards but move faster going up,” was the simple statement the GCCI president made to describe what people should expect in terms of price changes.

Mr Badu-Aboagye said a lot of what would happen rested with the central bank, which has a role to play in the sustainability of the cedi.

He said the Bank of Ghana’s reversal of its directive that people could not withdraw money beyond a certain threshold after it had outlawed the use of the dollar in business transaction in the country, had left a lot of business people sitting aloof as they did not know what to expect next.

“There are a lot of uncertainties among members of the business community as they do not know what to expect next,” he said.

Presently, he said, imports had declined since the beginning of the year as the free fall of the cedi made a lot of them lose their capital.

For his part, Mr Ofori said it was not possible for prices to go down at the moment. He said the central bank had a lot of work to do to ensure that the cedi was sustained.

Mr Ofori said the local industries also needed to produce more so that imports would be minimised to sustain the current performance of the cedi.

“People are now shifting to Treasury Bills as they do not have to pay any taxes but rather gain on their investments,” he intimated.

He was not sure whether the current performance of the cedi against the dollar was an artificial one, claiming that the performance was as a result of the current Eurobond and COCOBOD syndication.

Expressing a contrary opinion, Mr Asare-Adjei said the strengthening of the cedi against the dollar would see a downward trend in the prices of some goods and services.

He commended the government for its efforts at stabilising the economy and noted that what the country presently needed was micro-economic stability that would enable businesses to thrive.

He said the present situation was a welcome development, adding that whatever was being done to achieve the current results should be maintained.

Ghana raised US$1 billion in its third Eurobond foray with orders being oversubscribed up to $3 billion.

The bond is a soft amortising one, to mature in 2024, 2025 and 2026, with the principal repayments set in three installments of US$333 million in 2024 and 2025 and US$334 million in 2026.

As of September 23, 2014, one dollar was bought at an inter-bank exchange rate of Ghc3.1, and sold for Ghc3.45; one pound was bought at Ghc5.2 and sold for Ghc5.6, while one euro was bought at Ghc4.1 and sold for Ghc4.4.

On the Black Market, one dollar was bought at Ghc3.2 and sold for Ghc3.4 while one pound was bought at Ghc5.0 and sold for Ghc5.1, with one euro being bought at Ghc3.9 and sold for Ghc3.94.

However, at the forex bureaux, one dollar was bought at Ghc3.1 and sold for Ghc3.7, while one pound was bought at Ghc5.6 and sold for Ghc6, with one euro being bought at Ghc3.9 and sold for Ghc4.6.

An official of the Customs, Excise and Preventive Service (CEPS) who spoke on condition of anonymity said the fall of the dollar had, for the past one week, led to a reduction in import duties.

According to the officer, because the services of CEPS were tied to the exchange rate, importers had, for the past few days, enjoyed some respite since they were paying less on their imported goods.

Business operators at the Accra Shopping Mall told the Daily Graphic last Saturday that prices of their goods had not changed.

A visit to shops such as Wooden, Frankies, Papaye, all on the Oxford Street at Osu, showed that the rise of the cedi against the dollar had not affected the prices of goods.

The prices were still the same as they had been since the last six or more weeks.

The Chief Executive Officer (CEO) of the National Petroleum Authority (NPA), Mr Moses Asaga, could not be reached for comments but he was quoted in July this year to have said among other things that the depreciation of “the local currency against other foreign currencies has affected the prices of petroleum products.”

At that time, Mr Asaga said the NPA had decided to re-introduce the automatic adjustment formula, adding that, “Fuel prices will be reviewed on a quarterly basis”.

He said under the automatic adjustment formula, price adjustments would be based on transatlantic shipment freight charges, and the cedi and dollar exchange rate, among other external factors that might be relevant.

Speaking to some motorists on the current performance of the cedi, they expressed the hope that prices of petroleum products would be reduced as the dollar was now rebounding against the dollar.

A business editor and motorist, Mr Theophilus Yartey in an interview said he expected the NPA to reduce the prices of fuel products in the coming weeks.

According to him, since the beginning of the year, the NPA had increased petrol prices by up to 53 per cent citing the depreciation of the cedi against the dollar as the main factor and therefore going forward there should be an adjustment in prices of fuel.

A sales assistant, Musah Korda Husseini asked “what is the government doing about fuel prices, are they not going to reduce the prices, they recently increased the fuel price because of the fall of the cedi against the dollar”.

GHACEM another major player in the business industry on its website before the rebound of the cedi against the dollar, had given a new price list which took effect from September 1, 2014.

Under the new price list the ex-factory price of a 50kg gab of Ghacem Super Rapid was going for Ghc30.550, the same bag for its Ghacem Extra is Ghc31.725, the Bulk per tonne of Ghacem super Rapid went for Ghc 591.025 while the Bulk per tonne of Ghacem extra went for Ghc613.350.

However, in an interview with the Strategy and Corporate Affairs Director of GHACEM, Dr George Dawson-Amoah, he said he was out of Accra and could only comment on the issue when he returned.

For Mr John Newton Kumi, a former tutor, despite the current rise of the cedi against other currencies, prices of goods and services were yet to see any significant reduction or stability.

According to him, prices were still on the high side saying that “but, with time, I think things will improve if we can sustain the stability of the cedi through realistic home-grown policies and effective, and efficient local production”.
 
 
 
Source: Graphic Online
 
 

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