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Ghana’s local currency, the cedi, has recorded a remarkable recovery, appreciating by nearly 19% within just a month to trade around GHS 13.05 to the US dollar — one of its steepest gains in recent years.
According to ABSA Bank’s latest Ghana Market Insight report, released on May 12, this rally has been fueled by a surge in gold prices, strong cocoa values, and a notable rebound in Ghana’s foreign reserves, which have climbed to their highest level in several years.
However, the report cautions that the cedi’s sharp appreciation has outstripped underlying fundamentals. “Our models show the REER is now at its most stretched level in over a decade,” the report said, referring to the Real Effective Exchange Rate. It estimates the cedi is currently overvalued by nearly 20%, posing a risk to Ghana’s export competitiveness.
The bank observed that the cedi’s value rose from GHS 15.50 to GHS 13.05 per dollar in just one month — a 19% jump — but warned that this pace is unlikely to hold. “We believe the cedi has rallied too aggressively. To restore competitiveness and purchasing power parity, the exchange rate is likely to reverse towards GHS 14.00/USD by year-end,” said Nikolaus Geromont, ABSA’s lead analyst for Sub-Saharan Africa.
The rally, ABSA noted, is largely supported by increased export earnings from Ghana’s two top commodities — gold and cocoa. Gold has soared to above $3,300 per ounce, driven by global geopolitical tensions and investor interest in safe-haven assets. Meanwhile, cocoa prices remain high due to anticipated weak harvests in Ivory Coast, while Ghana’s relatively favorable weather conditions have supported strong local production.
These factors, alongside efforts by the Bank of Ghana to accumulate gold instead of fiat currency, and the establishment of the Ghana Gold Board to formalize export inflows, have helped boost foreign reserves. Ghana’s reserves now cover 3.0 months of imports, up from 1.8 months a year ago.
Despite the positive developments, ABSA projects a mild depreciation of the cedi in the coming months. It expects the currency to end 2025 at around GHS 14.19/USD and average GHS 14.16/USD for the year — still stronger than the 2024 average of GHS 14.50/USD. However, the bank warns that the current optimism in the market may not be sustainable.
“A gradual correction in the currency is needed to avoid undermining the fragile gains made in stabilising the economy,” the report concluded.
Looking ahead, additional foreign exchange support is expected from new gold mining projects, including the Cardinal-Namdini and Ahafo South mines, which are set to commence production in 2025. These ventures are anticipated to further strengthen reserves and enhance inflows.
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