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US Dollar Taking Over The Cedi   
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Ghana's official currency, the cedi, is gradually being neglected as the main medium of exchange in the country, while the government and the Bank of Ghana sit aloof and shows no concern about the situation.

The practice persists in spite of the much touted stability in the macroeconomic indicators of the economy.

Inflation has fallen to a single digit for more than 18 months; interest rates have been slashed, while the cedi has maintained a relative strength against the major foreign trading currencies, particularly the US dollar.

But with impunity, people prefer to quote their charges and prices for goods and services in the US dollar and would stop at nothing to refuse accepting the cedi, unless it is converted into the US dollar at their own exchange rate.

The phenomenon is very prevalent in the real estate business; vehicle dealers and carports, whether brand new or used; the hospitality industry, including hotels and car rental business, and also within the private educational sub-sectors of the economy.

The Graphic Business has observed that the situation was becoming alarming to an extent that some service providers or businesses have mustered the courage and with impunity even openly advertised their US-dollar priced products and services in the national dailies and on billboards.

The real estate sub-sector
In the real estate industry for instance, more than 90 per cent of the companies price their houses in the US dollar.

This is in spite of the fact that they use local materials in the construction of the houses they put up for sale. Those who even import fittings do so from China and the medium of exchange there is the Yuan, which they buy domestically from a bank, yet they still price in US dollars.
The situation, which is also prevalent in the fledgling mortgage market, has made it unattractive for many people because they are dollar-denominated.

The hospitality industry
The hospitality industry is another sector where the prices of services are always quoted in the US dollar. Particularly in Accra, there is no hotel of third-star rating for instance that charges in Ghana cedis.

All room rates are priced in the US dollar, ranging from between US$120 and as much as US$600, depending on the room and the star-rating of the hotel. The prices are either advertised in the newspapers or on their websites. At the front desk of the hotels, the rates are also posted on the walls. Besides the room rates, any other service is charged in the US dollar

On the other hand, vehicle rental companies outside the hotel are also quoting prices in the US dollars and the prices range between US$80 and US$250 per day, depending on the vehicle.

Private Schools
Some private schools, mostly in the capital which have branded Montessori, charge fees in dollars. They only take the cedi equivalent at the prevailing market rate determined by the proprietors or accountants.

This is in spite of the fact that they do not, or seldom import any facility or except rarely, a few learning and teachings aids.

Checks by the GRAPHIC BUSINESS revealed that the parents are made to pay an average minimum of US$400 per term per child.

The practice is fast spreading to other schools which began as ordinary schools but have craftily found a way to add the name Montessori to their names to be able to charge in US dollars.

The irony

The whole irony is that while these companies and individuals price in US dollars, none of them pay salaries or wages in that foreign currency with the explanation that “we are in Ghana and why should we pay you in US dollars”.

Asked whether the practice was permissible in the country, Dr Robert Darko-Osei of the Institute of Statistical, Social and Economic Research (ISSER), said “I am not sure what the law says but it is too 'rampant' for it to be illegal”.

He obviously admitted that the practice was rampant and said; “Everybody is pricing in dollars and so I doubt if that it is illegal”.

As to why people are doing so even at a time when the cedi has relatively stabilised against the dollar and other foreign currencies, he said “even though we are enjoying relative exchange rate stability, the inflation rate (both real and perceived) makes people feel more comfortable holding USD.”

“Also our history still beckons and so we use the savings in USD as some insurance. However I think some proprietors also are using the fact that they can charge in USD to exploit consumers,” he said.

“Note, for these proprietors when you want to pay in cedis they decide unilaterally what the exchange rate should be. Finally for some proprietors, because they procure some of their products from outside, they charge dollars to protect their margins. Otherwise if they charged in cedis, they will have to be changing their prices very often” Dr Darko-Osei observed.

He said people may be using the dollar because it was an easily convertible currency and also had what he termed “the first mover advantage”.

The senior research fellow also said; “the US dollar is historically the most used currency for our international trade and so I believe it was easy to use that for starters and people have seen no reason to change”.

According to Dr Darko-Osei, it is also true to find limited transactions in the euro and the British pound in the country today.

He will not admit that the people have lost hope in the Cedi saying; “I think it is an issue of protecting margins particularly in the environment of very high interest rates. We should not forget that,” he added.

The solution

As to what the government should do about the situation, Dr Darko-Osei admitted that it was very difficult to deal with the problem with an explicit policy as businesses were free to change their prices, even if they were in cedis.

“In other words one can explicitly charge in Cedis but implicitly in USD,” he said.

He suggested a continued hard work on the fiscal front to engender low inflation to discourage the act.

To him, the present situation, in spite of its widespread nature, was on a scale that should not pose any serious concerns to the country.

“The surest way to 'nib this problem in the bud' is to improve on the macroeconomic management. Also, the government needs to keep a very close eye on it so that it does not get out of hand”, he added.

According to Dr David Andah, a Consultant in Banking and Finance, it is an offence to even quote in dollars with the view to receiving the payment in Ghana cedis, (refer to our cover story). He called for tighter enforcement to stem the tide, as the practice put a lot of pressure on the cedi.

He explained that when the practice is allowed to persist, it would continue to put a lot of pressure on the Ghana cedi, as people cue to convert their Ghana cedi into the dollar to effect payments.
In the event where the cedi equivalent of the dollar quoted items were accepted, it shot their prices above normal, and middle men could take advantage to take advantage to exploit unsuspecting people. They could get items in Ghana cedis, quote them in dollars to other buyers, imposing their marging also in dollars, thereby causing prices to rise exponentially.

Dr Andah, a former central banker, said it was only the Bank of Ghana that had the power to permit companies or persons to transact business in the dollar, and even that it was guided by the principle of allowing only entities whose earnings were primarily in dollars, such as the duty free shops and hotels.

The banking and finance consultant called for strict enforcement of the laws and policies to discourage the practice and get the business community to retain confidence in the Ghana cedi.
Source: Charles Benoni Okine

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