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Six years later, Ghanaians still not familiar with currency

A research undertaken by Rising Ghana, a Non - Governmental Organization (NGO), reveals that as Ghana enters the sixth year of the introduction of its third Cedi, Ghanaians can hardly understand their own currency.

According to the research, "In an uncontrolled environment for nearly 18 months, we received an average of 500 phone calls a week, each lasting about 50 seconds. The conclusion was 90 % of customers are still confused about the difference between the old and new Cedi".

What went wrong? Was it the Information Serv ice? Certainly, the education did not go down well. What is the way forward? We need to broaden the debate to include all stake-holders; in this case the entire nation.

Secretary General of Rising Ghana, Pastor Raymond Boakye Danquah stated, “as an NGO concerned with the development of the youth of Ghana, we wish to spearhead this debate on the national agenda”.

BACKGROUND

The Ghana cedi[2] (currency sign: GH?;[1] currency code: GHS) is the unit of currency of Ghana. The word cedi is derived from the Akan word for cowry shell (cowry shells were once used in Ghana as a form of currency). The new Ghana cedi was introduced on 1 July 2007 at a rate equal to 10,000 old cedis. It was the highest-valued currency unitissued by sovereign countries in Africa in 2007.

One Ghana cedi is divided into one hundred Ghana pesewas (Gp). A number of Ghanaian coins have also been issued in "sika" denominations. These are probably best considered as "medallic" coinage, and may have no legal tender status. The word sika means "gold". First Cedi

The first cedi was introduced in 1965, replacing the pound at a rate of 2.4 cedi = 1 pound, or 1 pesewa = 1 penny. The first cedi was pegged to the British pound at a rate of 2.4 cedis = 1 pound.

The first cedi was replaced in 1967 by a "new cedi" which was worth 1.2 first cedis. This allowed a decimal conversion with the pound, namely 2 second cedis = 1 pound. The change also provided an opportunity to remove Kwame Nkrumah's image from coins and notes. Second Cedi

The second cedi was initially pegged to the British pound at a rate of 2 cedi = 1 pound. However, within months, the second cedi was devalued to a rate of 2.45 second cedi = 1 pound, less than the value of the first cedi. This rate was equivalent to 1 cedi = 0.98 U.S. dollars and the rate to the dollar was maintained when the British pound was devalued in November 1967. Further pegs were set of $0.55 in 1971, $0.78 in 1972, and $0.8696 in 1973 before the currency was floated in 1978. High inflation ensued, and so the cedi was re-pegged at ¢2.80 = $1.00.

Inflation continued to eat away at the cedi's value on the black market. In the early eighties, the government started cracking down hard on the retail of products at prices other than the official established sale price (price controls). This had the effect of driving nearly all commerce underground, where black market prices for commodities were the norm, and nothing existed on store shelves.

By 1983 the cedi was worth about 120 to one U.S. dollar on the black market, a pack of cigarettes cost about ¢150 (if they could be found), but the bank rate continued at ¢2.80 = $1.00. Finally, with foreign currency completely drying up for all import transactions, the government was forced to begin a process of gradual devaluation, and a liberalization of its strict price controls. This process ended in 1990 with a free float of the cedi against foreign currencies. Inflation continued until by July 2007, the cedi was worth about 9500 to one US dollar, and a transition to the third cedi was initiated.

In 1979 a currency confiscation took place. New banknotes were issued which were exchanged for old at a rate of 10 old for 7 new. Coins and bank accounts were unaffected.

A second confiscation took place in 1982, when the ¢50 note (the highest denomination) was demonetized. Ghanaians, in theory, could exchange any number of ¢50 notes for coins or other banknotes without loss, but foreigners could not make any exchange. However, many Ghanaians who were hoarding large amounts of cedis feared reprisal if they tried to convert all of it, and so simply burned a lot of their money. Many other Ghanaians received "promise payment notes" from the banks, but never received compensation.

This confiscation was publicly justified as a means to create a disincentive for the flourishing black market. However, from a monetary perspective, currency confiscations have the effect of reducing the available cash in the economy, and thereby slowing the rate of inflation. After the ¢50 note confiscation, the ¢20 note was the highest cedi denomination, but had a street value of only about $0.35 (U.S.)

After the ¢50 note confiscation, fears existed that the government could also confiscate the ¢20 or even the ¢10 notes. This fear, along with inflation running at about 100% annually, started causing Ghanaian society to lose its faith in its own currency. Some transactions could only then be done in foreign currencies (although that was technically illegal), and other more routine transactions began to revert to a barter economy.

Third cedi

The new currency is denominated in Ghana cedi (GH¢), a unit equal to 10,000 old cedi, and Ghana pesewa (Gp), equal to one-hundredth of a Ghana cedi or 10,000 old pesewa (100 old cedi). Banknotes are issued in GH¢1, GH¢5, GH¢10, GH¢20, and GH¢50 denominations. Old currency was withdrawn beginning in July 2007, and after a six month transition may only be exchanged at banks and will no longer be legal tender. The Bank of Ghana has launched a website on this re-denomination campaign.

A new GH¢2 Cedi banknote was issued on 14 May 2010 to meet public need for an intermediary denomination and reduce the frequency, and associated cost, of printing large volumes of the GH¢1 banknote. The introduction of the new denomination coincides with the conclusion of the year-long centenary celebrations of the birth of Kwame Nkrumah, Ghana’s first president, and has the commemorative text “Centenary of the Birth of Dr. Kwame Nkrumah”.

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