High demand for foreign currency by Ghanaian traders going to China
Ghana has had a long standing trade history with China and this trade relation keeps surging.
With more Ghanaians conducting businesses to and from China, discussions on exchange rates and how that affects the economy has become more eminent than ever with economic experts and the public querying the Central Bank on measures it is taking to reduce trader’s reliance on the US dollar.
Trade between Ghana and China rose to $6.6 billion in 2015, representing an 18.2 per cent year- on- year increase. In the first eight months of 2016, trade between Ghana and China amounted to $3.8 billion with China exporting goods worth $3 billion while Ghana exported products worth $800 million.
The the Governor of the Bank of Ghana (BoG), Dr. Abdul-Nashiru Issahaku says the Bank is doing its best to make available the Chinese currency, the Yuan, but customs and tradition on the part of the traders is making trade in the currency difficult.
Dr Issahaku was speaking at the Monetary Policy Committee (MPC), meeting on March 27, 2017 at the Bank of Ghana.
“It amazes me that since childhood we have been handling and spending cedis but to date people still want to have dollars sometimes. You know some traders want to feel the dollar and euro when trading and so it will take some time to get them to change their mentality about the currency.”
“I believe we have to do more by educating the traders and providing some knowledge about the currency.”
He noted that the Yuan is available and some of the banks like Stanbic and Ecobank are marketing them, not without challenges though.
“It is just the habit, they are not used to the currency,” he added.
Mr. Raymond Amanfu, the Head of Banking Supervision at the Bank of Ghana, observed that traders’s preference for the dollar over the Yuan is because of its bulkiness.
“The dollar is handier for them to carry,” he said.
Mr Amanfu noted that since the traders buy in bits from different shops and they need cash, it will be prudent that trade rates are established with contact banks, then transfers can be done in China when traders get there.
He pointed out that the central bank has enough of the Yuan currency but the issue is with demand by the users-basically the traders who go to China.
He adds that, “Now the issue is most traders who go to China trade on cash basis, meaning they carry cash along. Looking at the exchange rate between the dollar and the Yuan, it is about one dollar to 16 Yuan and what it means is that a trader who wants to carry about $5000 will need about 80,000 Yuan.”
“You have to think about convenience and also look at challenges that traders are bound to face at the point of entry when they carry huge currencies on them,” he further explained.
Adding to that, the traders often go from shop to shop buying and therefore need to carry this money wherever they go.
Mr Amanfu however, indicated that if traders had larger trading partners outside, then transfers could be done on their behalf so that on arrival, the goods would have already been paid for.
“If banks establish representative offices, it will be easier for the traders to push their money there, go to their agency in China and redraw the money,” he suggested.
He did not dispute the fact that traders needed to be educated on how their high reliance on foreign currencies affect the economy.
By Pamela Ofori-Boateng