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06.03.2007 General News

The Genesis Of The Ghanaian Cedi

Before the introduction of minted currencies to the people of the Gold Coast (as Ghana used to be called), our forebears traded with cowries.

During those times trade was conducted in a bewildering array of money tokens.

In the book, "Banking In Ghana", the author, T. E. Anin, a renowned banker, traces the origins of the local currency from the period when cowries were used as a uniform currency.

According to Anin, until 1880 trade was conducted along the West Coast of Africa in a bewildering array of money tokens such as cowries, which were locally known as Sedie, from which the modern cedi was derived.

The use of cowries declined in the early part of the 19th century when the value of goods and services began to be expressed in gold weight values.

By the close of the 19th century, British silver coins were introduced. Those coins eventually became the common currency of the Gold Coast.

Anin goes further to describe the situation which led to attempts to set up a uniform currency in West Africa with the establishment of the West African Currency Board.

By 1885, the Bank of British West Africa had produced a situation in which the use of British silver coins, mainly in shillings florins and penny pieces, had increased in Lagos, Nigeria, and Accra and Cape Coast.

That resulted in an ever-growing shipment of silver from the Royal Mint to West Africa, leading to the usage of the pound, shillings and pence.

By 1958, after the country had gained independence, it decided to opt out of the West African Currency Board and set up its own national currency, the Ghana Pound (£G), to replace the West African Pound.

The Ghana Pound was issued at par with the West African Pound and, therefore, it was at par with the UK Sterling.

In 1960, Parliament passed the Exchange Control Act, which made it mandatory that all transfer of funds out of Ghana required permission from the Bank of Ghana (BoG).

Six years later, a new currency known as the Cedi (¢) was introduced. It replaced the Ghana Pound at the following exchange rates: ¢2.40 = £1 Sterling, ¢1.00 = US$1.67.

By early 1966, the Cedi had been replaced by a new currency, the New Cedi (N¢), at the following rates: ¢1.20 - N¢1.00, ¢1.00 = US$1.40.

In 1967, the National Liberation Council (NLC) devalued the New Cedi. The following rate of exchange became applicable - N¢1.00 - US$0.98.

In 1971, the Bank of Ghana said that the New Cedi would not be pegged to the Pound Sterling but to the US dollar at N¢1.00 - US$0.98. In the same year, the New Cedi was devalued: N¢1.00 = US$0.55.

The new military junta, headed by Col. I.K. Acheampong, revoked the devaluation by Dr K.A. Busia in December 1971. The Cedi was, in effect, revalued. The following rate of exchange became applicable: N¢1.00 = US$0.78.

In 1972 the dollar was itself devalued by nearly eight per cent in terms of the unit price of gold.

As the New Cedi was pegged to the US dollar, it was automatically devalued in terms of gold by the same percentage.

In early 1973, the dollar was devalued but the government in power, however, decided to maintain the value of the New Cedi (N¢) in terms of gold.

That decision resulted in the appreciation of the N¢, with the following rate being applicable - N¢1.00 = US$0.87.

In March the same year, the government announced that the New Cedi would revert to its original name and be simply known as the CEDI (¢).

In 1978, the Bank of Ghana announced the introduction of a managed flexible exchange rate regime.

After the palace coup in 1978, the Cedi was devalued. The following rate became applicable: ¢1.00 = US$0.36, which meant that 1US$ = ¢2.75.

In October 1983 the Cedi was devalued and the following rate became applicable: US$1.00 = ¢30,000. Since then, the Cedi has been finding its level against the major international currencies.

Come July 2007, the Bank of Ghana will knock off the four zeros of the Cedi. That is, ¢10,000 will now become one New Ghana Cedi (GH¢): ¢10,000 = GH¢1.

According to the Bank of Ghana, the Cedi as it stood now placed a significant burden on the national economy in terms of transaction cost, general inconveniences and high risk of carrying loads of currencies.

It also cited difficulties in maintaining book-keeping and statistical records, problems with accounting and data processing software and the strain on the payments system through the Automated Teller Machine (ATMs).

The value of the GH¢ from July this year will almost be the same as it was in 1967 when the N¢ was equivalent to US$0.98.

— Article by: Lloyd Evans