The old Ghanaian cedi will cease to be legal tender by midnight today, Monday December 31 2007. This implies that the old currency will not be accepted in any business transactions.
Those with the old currency can, however, change them into the new currency at the Bank of Ghana, any commercial bank, rural or community bank or savings and loans company throughout the country.
In an interview with the Daily Graphic, Dr Ernest Addison, Executive Director of the Bank of Ghana in charge of Research, gave the assurance that anyone could walk into a bank and change the old currency for the new one.
Dr Addison stressed that one did not have to be a customer of a bank before the change could be effected as the banks were under obligation to change any amount of money for anybody who would enter there for that purpose.
In July this year the Bank of Ghana re-denominated the current cedi by knocking off four zeros to reduce the weight of the cedi in the pockets of Ghanaians.
The Bank of Ghana set the numerals at ¢10,000=GH¢1=100Gp. The new set of currency had the following characteristics: The sub-unit of GH¢ is the Ghana Pesewa (Gp). The series of notes and coins are as follows: Notes: GH¢1, GH¢5, GH¢10, GH¢20 and GH¢50, while the coins are 1Gp, 5Gp, 10Gp, 20Gp, 50Gp and GH¢1.
Hence for the past six months, since July 3 this year, both the old and new cedi banknotes and coins have been in physical circulation, but from January 1, 2008 the old notes and coins would only be exchanged at the Bank of Ghana and any commercial or rural bank but will not be legal tender and, therefore, would not be used for trade and other transactions.
When the Bank of Ghana announced the decision to knock off the four zeros at an annual dinner of the Ghana Institute of Bankers in November last year, it said the current note regime placed significant dead-weight burden on the economy and stated that this came in several forms such as the high transaction costs, general inconvenience and high risks involved in carrying loads of currency for transaction purposes, increasing difficulties in maintaining bookkeeping and statistical records and ensuring compatibility with data processing software, and the strain on the payments system.
According to the bank as the economy grew there would be increased complexity in financial transactions, as there would be difficulties in price tagging at shops and supermarkets and the inability to use vendor machines and car parking meters that were part of a modern growing economy.
Experience in other emerging market economies in similar situations suggests that re-denomination of the currency by dropping zeros in the relative prices of domestic price relation leads to significant efficiency gains, when undertaken in the context of strong economic fundamentals and macro-economic stability, which is the situation characterising the economy today.
There is a high fixed cost of re-denomination as it takes resources, organisation and time to implement, including re-calibration of certain equipment, e.g.. ATMs and accounting software.
Historical analyses suggest that re-denominations have been very successful in an environment of macroeconomic stability, that is, declining inflation, stable exchange rate, fiscal prudence, and well anchored expectations of policy credibility.
Over the weekend, many commercial drivers refused to accept the old currency from their passengers, reports Justina Ampadu-Nyarko.
Apart from the commercial drivers and their mates refusing payment of fares in the old currency, some passengers also refused to accept the old currency as change, a situation which ended in brawls in some cases.
The Secretary of the Kwame Nkrumah Circle/Dansoman Station of the Ghana Private Road Transport Union (GPRTU), Mr W. K. Appiah, told the Daily Graphic that there had been many reports that the drivers and their mates engaged in heated arguments with passengers over the use of the old currency.
“Just this morning a driver drove some passengers to the station for clarification on the matter,” he added.
The story at Tema Station was not different as many drivers and their mates also reported similar experiences with passengers.
A Station Master at the Accra-37-Airport Station, Mr Usif Dunyo, said some passengers rejected the old currency or even went to the extent of throwing the money on the streets.
“They give us big notes and when you give them their change with some of the old currency, they refuse to accept it,” he said.
Some of the passengers interviewed were of the view that the commercial drivers should take the old currency as it would be easier for them to dispose of it.
For instance, they said, the drivers could use the old notes to buy fuel for their vehicles, or even be able to mobilise a lot which they could change at the bank.
According to the passengers, they only had few old notes and found it inconvenient to go to the bank to change that little amount of money.
The misunderstanding and arguments are also prevalent between traders and their customers. At the Makola Market, hawkers, as well as iced water sellers and their customers, said transacting business with the old currencies had been a problem since the last few weeks.
They pleaded with the Bank of Ghana to introduce more of the smaller denomination of the new currency to make business transactions easier.
They also called for an extension of the deadline from January 1, 2008 to allow people to be more conversant with the issues.
Story by Lloyd Evans