The Bank of Ghana has announced that it would start forward sales for the purchases of forex from the October 1. 

This was contained in a notice issued by the Central Bank today to dealers in the foreign exchange market.

According to the central bank, it is doing this because of improved liquidity on the market and deepen the foreign Exchange Market. 

Previously, forex purchase was made through spot sales that is; a purchase made on a day and settlements done in two days.  

Details of the forward forex sales

According to the Bank of Ghana, the Foreign Exchange Forward rate Auction is limited to 7-day, 15-day, 30-day, 45-day, 60-day and 75-day tenors starting on October 01, 2019. 

The Central Bank also said in addition to the Auction guidelines, all Authorized Foreign Exchange Dealer Banks shall also comply with the provisions of the Code of Conduct for the Interbank Foreign Exchange market in Ghana.

Bank of Ghana on this new initiative

Speaking to JoyBusiness, Head of Financial Markets at the Bank of Ghana, Stephen Opata noted that the initiative would help business better plan for their forex needs.  

He said, “It creates more certainty for clients for future FX needs and alleviates unnecessary pressure on the spot FX market”.

Mr Opata indicated that it is another window to provide foreign exchange to bank clients based on verified commitments. 

He added that this move is an ongoing reform to streamline operations of the foreign exchange market.  

According to the Bank of Ghana, it would issue a one week notice, before the sale of these forexes, for businesses and commercial banks. 

This would also allow businesses and banks to plan properly for their forex needs; a development that would help reduce pressure on the spot market. The Mr Opata added that after the first forward auction on October 1, the regulator plans to come out with a calendar for further sales.  

Conditions for the forex sale from October 1

The Bank of Ghana maintains that the amount that would be on offer on that day would be $50 million. 

However, the maximum bid size of a single bid shall not exceed ten per cent (10%) of the announced auction target. “The cumulative volume of all bids from any single bank shall not exceed twenty per cent (20%) of the announced target for the auction”.  

Successful banks will be expected to provide the required Cedis on trade date in the case where they are buying a forward contract, the bank added. 

It also stated that allowable spread between bid and offer for banks’ clients shall be 25 pips/0.0025 cedis. 

The regulator also stated that all bids shall be backed by customer demand and documentation shall be submitted to the Director, Financial Markets Department, Bank of Ghana, 24 hours after the release of the auction results.