Explainer: Why one dollar can’t be one cedi

Ghana’s cedi has staged a remarkable recovery in 2025, appreciating nearly 30% in just the first five months of the year. From ending 2024 at around GH₵14.70 to $1, the cedi is now trading at GH₵10.30 to $1—its strongest level in over two years and the sharpest appreciation since 2010.

This sharp rebound has sparked growing public excitement, with some boldly predicting that the cedi could reach parity with the U.S. dollar—that is, $1 equaling GH₵1. But while the optimism is understandable, experts, including President John Dramani Mahama, have quickly poured cold water on the idea.

“I don’t envisage that the currency will come down to sell at GH₵1 to $1. No, that’s extreme. It will collapse our export sector,” the President cautioned.

Ghana’s recent currency strength can be traced to improved dollar inflows from exports, remittances, foreign investment, and returns on offshore Ghanaian assets. But the largest source of foreign exchange—exports—is highly volatile.

Over 80% of Ghana’s exports are commodities like gold, cocoa, and crude oil, which are vulnerable to global price swings and production disruptions. That makes Ghana’s dollar supply fragile, and its exchange rate sensitive.

For $1 to equal GH₵1, Ghana would need a consistent and abundant supply of U.S. dollars—enough to allow every cedi-holder to exchange at will. But Ghana doesn’t print dollars, and its current economic fundamentals don’t support such volume.

Even if such a surge in dollar inflows happened, maintaining a $1 to GH₵1 exchange rate would undermine Ghana’s economic competitiveness.

A super-strong cedi would make Ghanaian goods more expensive on global markets, reducing demand for exports. Since exports are the backbone of dollar inflows, this would start a vicious cycle: strong cedi hurts exports, fewer dollars come in, exchange rate weakens again.

Ghana’s government would also take a hit. Import duties—projected to generate GH₵26 billion—would be slashed drastically if the exchange rate dropped to GH₵1, leaving a massive fiscal gap.

China, despite being a global export powerhouse, intentionally keeps its currency weak to boost competitiveness and protect export and tax revenues. Ghana would do well to learn from that strategy.

To maintain GH₵1 to $1, Ghana would almost certainly need to implement capital controls, especially on dollar outflows, to prevent a sudden depletion of foreign reserves.

But such measures would alarm foreign investors and multinational firms, potentially causing capital flight and damaging Ghana’s economic credibility.

Earlier this year, mere rumours about dollar withdrawal restrictions triggered market panic—a taste of the instability full capital controls could unleash.

Even if the cedi miraculously hit GH₵1 to $1, the Bank of Ghana likely wouldn’t allow it to stay there. As President Mahama rightly noted, “If the exchange rate goes below a certain floor, I’m sure the Bank of Ghana will make an intervention to make sure that it remains within a certain band that gives the true value of the cedi.”

For $1 to equal GH₵1, Ghana would need sustained, large-scale dollar inflows. Given the structure of the export economy and limited industrial base, that’s unlikely.

Worse, a $1 to GH₵1 rate would crush Ghana’s export competitiveness and fiscal stability—much like why China deliberately keeps its currency weak.

Ultimately, getting to GH₵1 would require a deep structural transformation, long-term investment credibility, and even then, it could only be sustained with drastic and potentially harmful measures.