Stronger cedi must reflect in general pricing
Over the past two months, the Ghanaian cedi has recorded a remarkable appreciation against its major international currencies, with the US dollar seeing the most significant shift.
As of close of trading yesterday, the dollar was exchanging at GH¢10.24 (buying) and GH¢10.25 (selling).
Indeed, the recent showing of the cedi has brought a sense of great relief to the business community, particularly importers who are often at the mercy of currency fluctuations.
This performance is attributed to a combination of international and domestic factors. Globally, the decline in demand for the US dollar as a trading currency has contributed to easing pressure on the cedi.
Locally, an increase in the country’s gold reserves, strengthened foreign reserves, and prudent leadership from monetary policy managers have all played key roles in stabilising the currency.
Conservatively, the appreciation of the cedi has already begun to influence certain sectors, notably being, petroleum pricing.
With foreign exchange being a critical variable in Ghana’s fuel pricing formula, pump prices have seen a downward adjustment in recent weeks.
This automatic response is encouraging. However, the same cannot be said of general goods and services across the economy, where prices have largely remained static.
The disconnect raises important concerns. In a country where nearly every product and service is indexed to the US dollar, it is only reasonable to expect a corresponding reduction in prices when the cedi strengthens. Unfortunately, the inverse relationship — price reductions following currency appreciation — is not being observed.
This failure points to an entrenched behaviour where economic actors are quick to exploit depreciation but slow to respond to appreciation. However, a positive exception has emerged from the road transport sector.
Following discussions with government, operators of commercial vehicles agreed to reduce fares by 15 per cent, in response to the drop in fuel prices. This sets a strong precedent and signals a level of responsibility that should be emulated by all.
At a recent stakeholder engagement, the Minister of Transport, Mr Joseph Bukari Nikpe, called on domestic airline operators to follow suit.
He emphasized the need for affordable domestic travel to improve national connectivity, spur economic activity, and support service delivery.
In his words, “I appeal to our domestic airlines to consider what the road transport sector did… and also do a reduction in their fares.”
We on The Ghanaian Times fully support the Minister’s call. Air travel in Ghana has evolved from being a luxury to a necessity, especially due to the poor state of our road network.
Yet, with domestic airfares ranging from GH¢800 to GH¢1,700, many Ghanaians are priced out of safe, timely domestic travel.
While the cedi’s recent gains are commendable, they must be felt beyond the forex markets. The principles of a free-market economy demand fairness and responsiveness.
Just as price increases are swiftly implemented when the cedi falls, so too must reductions follow when it rises.
The business community has a duty to reflect this balance, not only in policy, but in practice.