As at September 16, the Ghana Cedi has depreciated by some 32% against the US dollar from the start of the year. It has also depreciated by 22% against the Euro and 20% against the Pound Sterling. I have already covered the reasons for this decline here and further explained the general debt crisis in this surprisingly popular post.

But in this post I want to discuss one reason for the cedi’s depreciation which is of much concern to me as someone who has been advocating for investing in Ghana for about a decade. And that reason is the absolute lack of interest in cedi-denominated investments from domestic investors. It is normal for foreign investors to pull out of the domestic market when times get rough but it is quite startling that domestic investors are willing to hold cash rather than any form of interest-bearing cedi asset.

When it became clear from the 2022 budget read in November 2021 that we were not getting any more loans from the international capital markets, financial advisors encouraged clients to look into buying more government bonds. This was because as government relied more on the domestic markets for borrowing, interest rates were going to rise. However, nobody could have predicted just how quickly the economic situation would deteriorate. Inflation went from 12.6% in December 2021 to 33.9% in August 2022. This has left several investors who bought bonds paying interest of about 20% in the red, and the market is dominated by people frantically trying to sell their bonds at any price.

But why would people be seeking to convert their holdings to cash in this period where the value of cash is eroding by the day? It’s because they have found an alternative investment – the US dollar. Buying and holding the dollar has become the investment du jour. Demand for the US dollar is therefore very high and that is contributing to the losses the cedi is experiencing. This has given many a Ghanaian investment advocate (including me!) a sleepless night as they see the many years of work put into explaining all the investment opportunities available in the country go down the drain.

Nevertheless, things are not all lost. There are still investment opportunities in Ghana that are cedi-denominated and are not tied to the state of the government’s finances. And in the coming months I will be writing about them.