The Chief Executive of the Ghana Association of Bankers (GAB), John Awuah has attributed the the recent depreciation of the cedi to the US dollar to largely activities of speculators.

According to him, even though stakeholders in the banking sector were expecting some level of depreciation due to the current economic challenges, the rate of depreciation seen in the country cannot be totally linked to the real demand by businesses.

 “Giving the fiscal gap and current challenges facing the economy and Federal rate hike, we expected that the cedi to depreciate, but not by this margin,” he stressed.

Mr. Awuah added that the situation is compounded by some persons and companies buying dollars when they do not immediately need the currency to transact business.

“We are seeing situations where a firm needs about $100,000, but will go out and place multiple requests with four different banks”.

This, he said will definitely push the request to $400,000 from one institution when in actual fact the firm needs only $100,000.

“Now the $400,000 dollar request being push out, will drive the rate downwards and cause the Ghana cedi to depreciate further,” he noted. 

Mr. Awuah also rejected assertions that bankers are contributing heavily to the deprecation due to certain practices. 

“If a bank is looking for dollars, then it’s mainly for a business transaction. A bank will not go out there to buy dollars,” he insisted.

Mr. Awuah noted that there is the need to target customers that are demanding dollars without immediate need for the currency.

Liquidity and cedi’s depreciation

Mr. Awuah  added that banks are not going out to buy dollars and hoard the currency.

“It’s more expensive to hold dollars if as a bank you are not using it for any business transaction”, he said.

The Chief Executive of the Ghana Association of Bankers argued that there's strict regulatory requirements that makes it very difficult for commercial banks to hold dollar currency when not needed.

Cedi performance going forward

Commercial Banks in the country are hopeful measures taken by the Bank of Ghana will stabilise the cedi in the coming weeks.

The Ghana cedi is said to have depreciated against the US dollar by more than 30% since the beginning of the year.

Policy Rate hike impact on commercial banks operations

The Bank of Ghana recently announced that it has increased the reserve requirement of commercial banks in the country from 13% to 15% by November this year.

Mr. Awuah added that commercial banks do not benefit from interest rate hike as the data has actually backed their argument.

On loan disbursement, Mr. Awuah noted that “banks are worried when rates go up because it has serious implication on debt servicing and even new loans”

He also rejected assertions that only blue chip companies are getting low rates from the commercial banks in the country.

Reserve requirement hike and impact on lending

Mr. Awuah admitted that the hike in policy rate will also result in more businesses pushing for re-pricing of their loans due to the impact of current economic challenge on their business and the ability to service the debts.

Mr. Awuah noted that most businesses are taking the decision to review their stances on loans and not because banks do not want to lend to businesses.

Excess liquidity argument and commercial banks 

One of the major reasons for the policy rate hike, according to the Bank of Ghana, is to mop up excess liquidity.

However, the commercial banks argue that, they cannot be  accused of “sitting on cash”.