Forex

Cedi Falls to Record Low Due to Increased Dollar Demand from Importers

Published

4 months ago

June 11, 2024

The Ghanaian cedi has plummeted to a record low of 14.9335 per dollar as the increase in demand for US dollars by companies importing fuel, pharmaceuticals, and other fast-moving consumer goods put pressure on the currency.

This depreciation, observed by the close of trading in Accra, marks the cedi’s lowest level since at least 1994 when Bloomberg began tracking the data.

Since the start of the year, the cedi has declined by 20% against the US dollar, ranking it as the fourth-worst performing currency among approximately 150 tracked globally by Bloomberg, following the Egyptian pound, Nigerian naira, and Lebanese pound.

“Dollar demand from oil importers, the pharmaceuticals industry, and FMCG companies remains strong,” noted Samantha Singh-Jami, Africa Strategist at Rand Merchant Bank. “Although authorities have significantly increased foreign exchange reserves in recent months, there are still constraints on foreign exchange liquidity in the market.”

Ghana’s gross international reserves rose to $6.6 billion in April, the highest in over 19 months, as per data compiled by Bloomberg.

The central bank has been strategically managing these reserves to ensure sufficient market supply, including directly addressing some companies’ foreign exchange needs to alleviate the pressure on commercial banks.

This increase in reserves follows Ghana’s decision to halt servicing most of its external debt since December 2022.

The move was part of a debt restructuring effort to qualify for an International Monetary Fund (IMF) program. Disbursements from the $3 billion IMF package and inflows from other multilateral and bilateral sources have bolstered the reserves.

However, the cedi’s decline is also attributed to a significant drop in cocoa export revenue, which has diminished foreign exchange supply. Revenue from cocoa shipments fell by 49% to $599 million from January through April.

The country’s cocoa output for the 2023-24 season is projected to be between 422,500 and 425,000 tons, which is only half of the initial estimate.

“The weakening of the cedi seems to reflect foreign exchange flow mismatches,” said Samir Gadio, head of Africa Strategy at Standard Chartered Bank. “Foreign exchange demand recovered this year, though it has remained broadly constant in recent months, and continues to exceed supply.”

The combination of high demand for dollars by importers and reduced foreign exchange inflows has created a challenging environment for the cedi.

Despite efforts by the central bank to manage the situation, the currency continues to struggle under the weight of these economic pressures.

Economic Outlook

The Ghanaian government and central bank face a tough task in stabilizing the cedi amidst these challenges.

Ensuring adequate foreign exchange liquidity while addressing the structural issues in the economy, such as reliance on imports and fluctuating export revenues, will be crucial in reversing the cedi’s downward trend.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Naira

Dollar to Naira Black Market Exchange Rate Today 24th, September 2024

Published

3 days ago

September 24, 2024

Samed Olukoya

The Nigerian Naira exchange rate to the United States Dollar remained at a record low ahead of the Central Bank of Nigeria (CBN) monetary policy decision scheduled for today and tomorrow.

Forex traders bought the Dollar at N1,665 at the parallel market, popularly known, as the black market and sold at N1,675. The British Pound Sterling (GBP) was acquired at N2,220 and sold at N2,240 as shown in the table below.

Naira (NGN) to Dollar (USD) Black Market Exchange Rate Today

Foreign Currency	Buying rate	Selling rate
DOLLAR ($USD)	N1,665	N1,675
POUNDS STERLING (GBP)	N2,220	N2,240
EURO (EUR)	N1,825	1,845
YUAN (CNY)	N222.28	N222.42

At the official forex segment, the local currency was stronger as it was exchanged at N1,587.34 to a United States Dollar while the GBP was traded at N2,066.56 and N2,067.86, respectively.

CBN Exchange Rate Today

Foreign Currency	Buying rate	Selling rate
DOLLAR ($USD)	N1,587.34	N1,588.34
POUNDS STERLING (GBP)	N2,066.56	N2,067.86
EURO (EUR)	N1,761.32	N1,762.42
YUAN (CNY)	N225.35	N225.49
SAUDI RIYAL (SAR)	N423	N423.29

Forex

Nigeria’s Foreign Reserves Gains, Hit $2.35 Billion In Seven Months – Minister Edun

Published

5 days ago

September 22, 2024

Bassey Marshall

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has revealed that the country’s foreign reserves have seen a net inflow of approximately $2.35 billion in the first seven months of 2024.

The minister made this known in Lagos State during the Corporate Customers Forum on Thursday.

Edun attributed the gain in reserves and currency stability to the government’s proactive economic policies.

Furthermore, the minister highlighted some areas that require attention, including Nigeria’s tax-to-GDP ratio, which remains low at around 10%, and the revenue-to-GDP ratio, which stands at 15%.

Edun called for increased spending on infrastructure and social safety nets to address these figures.

His words: “We have relative currency stability. And, of course, the all-important margin of the rates. We’ve seen a gradual elimination of multiple exchange rates.

“We also have foreign exchange liquidity. The gross reserves are up. There has been a net inflow in the first seven months of this year of about $2.35 billion every month.

Minister Edun continued: “On the fiscal side as well, government revenues are growing, and the key to government revenue is not so much that government has revenue to compete with the private sector.

“It’s the fundamentals, the social spending, and the key infrastructure spending. The social safety net spending. Historically, our figures are low. Our tax-to-GDP ratio is as low as 10%. Our revenue-to-GDP ratio is also around 15%.”

Forex

Nigeria’s External Reserves Surge by $490 Million After $500 Million Domestic Dollar Bond Issuance

Published

2 weeks ago

September 13, 2024

Investors King

Nigeria’s external reserves, also known as foreign currency reserves, jumped by $490 million in one week following the successful issuance of domestic dollar bonds by the Debt Management Office (DMO).

Data from the Central Bank of Nigeria (CBN) showed that the external reserves grew to $36.73 billion as of September 10, 2024, from $36.24 billion recorded on September 2, 2024.

On August 19, 2024 the Nigerian Government issued $500 million, the first series of the $2 billion domestic US dollar bond to investors, to stabilise the economy.

During the hybrid roadshow of the domestic US dollar bond in Lagos on August 15, 2024, Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, said the move would enhance foreign currency reserves.

The naira on Wednesday recorded 5.06 percent gain on the official foreign exchange (FX) market following an increase in dollar supply to $221.24 million in one trading day.

After trading on Wednesday, the naira appreciated by 5.06 percent as the dollar was quoted at N1,558.75 compared to N1,637.59 quoted on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.

In what is considered a landmark transaction, the Federal Government raised over $900 million from investors.

The bond, which was over 180 percent subscribed, marks a crucial step in broadening Nigeria’s funding avenues amid global economic headwinds. It reflects growing investor confidence in the nation’s economic outlook.

According to him, the move aims to stabilise the exchange rate, manage inflation, and ultimately reduce interest rates.

We are very pleased to announce the successful launch of this crucial domestic issuance of Federal Government U.S. dollar bonds to the investing public and other stakeholders. Under President Bola Ahmed Tinubu, the macroeconomic reforms have made bold and courageous strides to stabilize the economy while fostering innovation, creativity, and imagination among all economic actors, including those in the financial markets,” Edun stated.

He added, “This historic issuance will provide essential foreign exchange liquidity and boost reserves, which will help stabilise the exchange rate, manage inflation, and eventually lower interest rates. It will also lay the foundation for increased investment by both domestic and foreign direct investors.”