Unmasking the Illusion: Debunking Dr. Bawumia's Percentage Depreciation Narrative of the Ghana Cedi's Performance Against the NDC

Feature Article Unmasking the Illusion: Debunking Dr. Bawumia's Percentage Depreciation Narrative of the Ghana Cedi's Performance Against the NDC
FEB 19, 2024 LISTEN

Abstract: Beyond Percentage Points
This analysis will challenge the conventional wisdom surrounding the evaluation of currency performance, particularly in the Ghanaian context, where the depreciation of the cedi against the US dollar has been a focal point of political discourse.

In the realm of monetary policy discourse, the narrative of Ghana's cedi depreciation has been wielded as a potent tool by political figures, notably Dr. Bawumia of the NPP, who deftly deploy percentages of depreciation against the US dollar to tout their administration's purported prowess in stabilizing the currency. This approach, while seemingly persuasive, falls prey to the insidious allure of political expediency, wherein the metrics of percentage depreciation are selectively employed to construct a narrative favorable to the incumbent government.

However, such a reductionist approach to assessing currency performance is fraught with inherent flaws, as it fails to encapsulate the nuanced realities experienced by the Ghanaian populace. To blindly gauge economic efficacy solely through percentage fluctuations in the cedi's value against the dollar is to engage in a myopic exercise that neglects the palpable impact on the daily lives of citizens and businesses.

Indeed, luminaries of economic thought such as the late Milton Friedman of the Chicago School of Economics and Paul Krugman, both esteemed Nobel laureates, would vehemently decry the folly of relying solely on percentage metrics to evaluate currency management. They would assert, with scholarly conviction, that the true measure of economic vitality lies not in abstract percentage points but in the tangible purchasing power wielded by Ghanaian entrepreneurs and consumers alike.

To elucidate this point, consider the scenario of a Ghanaian businessman grappling with the practical implications of currency depreciation. If, for instance, the cedi depreciated by a staggering 200% against the US dollar during the tenure of the NDC administration, and a comparatively modest 98% under the stewardship of the NPP, the myopic focus on percentages would erroneously suggest superior economic management by the latter. However, this fails to account for the stark reality that the purchasing power of that Ghanaian businessman has been significantly eroded, regardless of the percentage calculus.

Therefore, a more enlightened perspective, one endorsed by Friedman, Krugman, and scholars of similar ilk, advocates for a holistic appraisal of currency dynamics that transcends mere percentage fluctuations. True economic acumen demands an interrogation of the real-world implications of currency depreciation on the livelihoods and economic prosperity of the citizenry.

In this vein, the proposition to assess the value of 10 million Ghana cedis in terms of US dollars across different epochs provides a salient departure from the reductive confines of percentage rhetoric. By anchoring the discourse in the concrete realm of purchasing power, this approach offers a more nuanced and insightful gauge of economic stewardship, one that eschews the sophistry of political expediency in favor of scholarly rigor and empirical veracity.

Revealing the True Impact of Cedi Depreciation on Ghana's Economy

It is crucial to acknowledge that in Ghana, a new administration commences its term on January 7th. Therefore, for example, the period from January 7th, 2013, to January 7th, 2014, signifies the first-year anniversary in office. Similarly, January 7th, 2017, to January 7th, 2021, constitutes a full term of the NPP's first term in office. The same principle applies to January 7th, 2009, to January 7th, 2013, representing a full term of the NDC administration under Mills and Mahama.

Thus, in evaluating Dr. Bawumia's statement below in quotation marks regarding the exchange rate performance under the NPP government and comparing it with the previous NDC administration, we must approach it with a critical mindset, akin to the Berean's scrutiny of Paul's teachings. Let's dissect Dr. Bawumia's statement and counter it with a rigorous analysis from the perspectives of a Ghanaian businessman.

To avoid biases, I am going to refrain from selecting specific figures to favor a particular narrative and instead utilize actual data points. Bearing dates such as January 7, 2009, in mind, I will employ the following historical data from, presented below, to scrutinize Dr. Bawumia's statement from the perspectives of a Ghanaian businessman who had a 10 million Ghana cedis capital on January 7th, 2009, instead of relying on data points to calculate percentage depreciation which does not reflect the true reality of economic impacts.

2009-2024 DATA:
January 7, 2009: 1 USD = 1.251912 GHS
January 7, 2010: 1 USD = 1.4350 GHS
January 7, 2011: 1 USD = 1.4835 GHS
January 7, 2012: 1 USD = 1.6618 GHS
January 7th, 2013: 1 USD = 1.9050 GHS
January 7th, 2014: 1 USD = 2.3575 GHS
January 7th, 2015: 1 USD = 3.2350 GHS
January 7th, 2016: 1 USD = 3.8148 GHS
January 8th, 2017: 1 USD = 4.2694 GHS
January 7th, 2018: 1 USD = 4.5513 GHS
January 7th, 2019: 1 USD = 4.8689 GHS
January 7th, 2020: 1 USD = 5.6945 GHS
January 7th, 2021: 1 USD = 5.8628 GHS
January 7th, 2022: 1 USD = 6.1650 GHS
January 9th, 2023: 1 USD = 10.418 GHS
January 8th, 2024: 1 USD = 11.964 GHS
Period Under NDC
October 24, 2014: 1 USD = 3.2075 GHS
October 25, 2014: 1 USD = 3.2075 GHS
October 26, 2014: 1 USD = 3.1950 GHS
October 27, 2014: 1 USD = 3.2275 GHS
October 28, 2014: 1 USD = 3.2225 GHS
Period Under NPP
October 24, 2022: 1 USD = 13.859 GHS
October 25, 2022: 1 USD = 14.012 GHS
October 26, 2022: 1 USD = 13.945 GHS
October 27, 2022: 1 USD = 14.001 GHS
October 28, 2022: 1 USD = 14.050 GHS
February 16, 2024: 1 USD = 12.470 GHS
Dr. Bawumia's Statement Analysis:
“On the performance of the cedi exchange rate, it is interesting to note that between 2013 and 2016 the cedi depreciated by an average of 17.7%. Between 2017 and 2020 there was a significant decline in the cedi depreciation to an average of 7.5%. The average cedi depreciation further declined to 6.8% between 2017 and 2021. However, following the 30% depreciation of the cedi in 2022, the average cedi depreciation between 2017 and 2022 is 10.75%. So again, notwithstanding the domestic and global economic crisis, the depreciation of the cedi under our government is lower than what we inherited from the 2013-2016 period”—Dr. Bawumia, January 7th, 2024, via Selfless Leadership and Bold Solutions for the Future lecture address.

Dr. Bawumia asserts that between 2013 and 2016, under the NDC government, the cedi depreciated by an average of 17.7%. He further claims that between 2017 and 2021, under the NPP government, the average depreciation was 6.8%. He mentions a significant depreciation of 30% in 2022, which he implies affected the average depreciation rate for the NPP government's term.

Critical Assessment:
Cherry-picked Data: Dr. Bawumia selectively chooses specific periods to present a favorable narrative. However, this approach lacks academic rigor as it fails to provide a comprehensive picture of the exchange rate performance.

Lack of Context: Dr. Bawumia fails to contextualize the economic conditions and policy interventions during the respective periods. Without considering external factors and policy impacts, the analysis lacks depth.

Misleading Averages: While Dr. Bawumia presents average depreciation rates, he fails to provide the actual figures or methodology used to calculate these averages. Without transparency in calculations, it's challenging to validate the accuracy of these averages. For academic scholarship and integrity purposes, when calculating the percentage of depreciation from one period to another, it is important to use the specific exchange rates at the beginning and end of the period rather than the average rate over the entire period. This is because the average rate over the period does not reflect the specific changes that occurred from the start to the end.

Let's calculate the purchasing power of 10 million Ghana cedis in terms of US dollars for each year from 2009 to 2024 using the provided exchange rates from

January 7, 2009: 10,000,000 GHS / 1.251912 GHS per USD = approximately 7,981,092.15 USD

January 7, 2010: 10,000,000 GHS / 1.4350 GHS per USD = approximately 6,970,740.74 USD

January 7, 2011:10,000,000 GHS / 1.4835 GHS per USD = approximately 6,743,976.55 USD

January 7, 2012: 10,000,000 GHS / 1.6618 GHS per USD = approximately 6,015,344.02 USD

January 7, 2013: 10,000,000 GHS / 1.9050 GHS per USD = approximately 5,251,968.50 USD

January 7, 2014:10,000,000 GHS / 2.3575 GHS per USD = approximately 4,239,414.60 USD

January 7, 2015: 10,000,000 GHS / 3.2350 GHS per USD = approximately 3,089,678.97 USD

January 7, 2016:10,000,000 GHS / 3.8148 GHS per USD = approximately 2,620,498.79 USD

January 8, 2017:10,000,000 GHS / 4.2694 GHS per USD = approximately 2,341,643.03 USD

January 7, 2018:10,000,000 GHS / 4.5513 GHS per USD = approximately 2,196,879.57 USD

January 7, 2019:10,000,000 GHS / 4.8689 GHS per USD = approximately 2,054,717.13 USD

January 7, 2020:10,000,000 GHS / 5.6945 GHS per USD = approximately 1,755,997.08 USD

January 7, 2021:10,000,000 GHS / 5.8628 GHS per USD = approximately 1,705,215.83 USD

January 7, 2022:10,000,000 GHS / 6.1650 GHS per USD = approximately 1,622,589.10 USD

January 9, 2023:10,000,000 GHS / 10.418 GHS per USD = approximately 959,275.09 USD

January 8, 2024:10,000,000 GHS / 11.964 GHS per USD = approximately 835,674.68 USD

February 16, 2024:10,000,000 GHS / 12.470 GHS per USD = approximately 801,441.35 USD

The calculated data above clearly demonstrates a significant decline in the purchasing power of 10 million Ghana cedis in terms of US dollars over the years. On January 7, 2009, the Ghanaian businessman could obtain approximately 7.98 million dollars with the same capital. However, by January 8, 2017, the purchasing power declined to approximately 2.34 million dollars.

Furthermore, the situation worsened significantly over time. By February 16, 2024, the purchasing power plummeted to approximately 801 thousand dollars. This indicates a dramatic erosion of wealth and purchasing power over the years.

The situation was particularly dire on October 28, 2022, when the exchange rate soared to 14.050 GHS per USD. At this rate, the businessman's 10 million cedis would only yield approximately 712 thousand dollars, reflecting a sharp decline compared to previous years.

These numbers highlight the real-world impact of currency depreciation on businesses and individuals. Despite fluctuations in exchange rates and percentage depreciation figures, the true measure of economic well-being lies in the ability of individuals and businesses to maintain purchasing power and financial stability. In this case, the Ghanaian businessman experienced a significant decline in purchasing power over the years, emphasizing the importance of considering real-world implications rather than relying solely on percentage figures when evaluating currency performance.

Therefore, relying solely on percentage depreciation to compare the performance of the cedi under a particular political administration is misleading. Dr. Bawumia's emphasis on percentages fails to capture the true impact of currency depreciation on the Ghanaian consumer and businessman. Instead, a true reflection of depreciation should be based on the purchasing power of the Ghanaian businessman with a given capital, such as 10 million cedis, at different periods of time.

While Dr. Bawumia is likely aware of this argument, his political motivations may prevent him from presenting a holistic and analytical scholarship. It is evident that the Ghanaian businessman experienced better purchasing power under the NDC administration compared to the NPP. Therefore, Dr. Bawumia's claims of the NPP being a better manager of the cedi are invalid when considering the real-world impact on the Ghanaian economy and its stakeholders.

Ebenezer Ato Ntarkurfah Jackson
Cornell University-Johnson School of Management

MBA Class of 2015
Email:[email protected]