Naira and Cedis: Which is more valuable?
Naira and Cedis – which is more valuable? Nigerians have the belief that Cedis is more valuable than their national currency. This is not entirely accurate. Everything depends on the economic situation in the country. This article will help you to analyze which currency is more valuable!
Naira and Cedis value
Naira and Cedis – which has more value? According to the official exchange rate, you can buy one Cedis for 73 Naira. Does it make Naira less valuable? The answer is NO! If it`s true, then Japanese Yen is also less valuable then Cedis. You can buy one Cedis for 26 Japanese Yen. Still, Japan is one of the top 10 economies of the world. The average salary in Japan is $3000 per month. At the same time, an average Ghanaian can only earn about $200 per month.
It means that the value of the currency does not define the value of the economy. Instead of revaluation of the currency, it`s needed to increase GDP. Japan does not hold on to Yen. You can buy one dollar for 111 JPY. It`s a real price for this currency. Therefore, there is no black market of currency in Japan. You need to analyze the real economic value of the country`s currency.
Cedis History From 2007
It`s needed to take a tour to 2007. In this particular period, the exchange rate between Cedis and USD dollar was only 9.2 to $1. Ghana thought that it was a catastrophe for National currency. Therefore, the government of Ghana decided to change the exchange policy in 2008. Ghana revaluated its national currency. The Ghanian Cedis value became 0.92 to $1. If you think that it was the miracle, think again! This miracle was not for long. In only two weeks, the exchange rate became 2.35 to $1.
A citizen of Ghana could buy one dollar for 9.2 Cedis in 2007. If you use the old exchange rate, then the same citizen could buy the same dollar for 2.35 Cedis a year later. It meant that only one year was needed to loose about 1.43 Cedis. It resulted in an inflation rate of 155%. At the end of 2008, Ghanaians could exchange one dollar for 2.60 Cedis.
According to this data, the government did not deal with the real economic problems! Ghana just decided to focus on nominal value of the national currency. The government of Ghana did not analyze the market value of its currency. Instead, it just provided a fixed rate. It led to creating of the currency black market. This market provided the real price for Cedis. The real exchange rate kept dropping. The actual revenues of citizens kept falling. It only led to further economic collapse and decrease of spending capacity.
For more than nine years Ghana did not change their exchange rate policy. Only crude oil and gas production helped this country to maintain the economy. Still, by 2014 the geopolitical situation in the world has changed. The Oil war between nations started again. Ghana`s economy significantly collapsed in 2014. Ghana Cedis value was decreased by 100%. Today you can buy one dollar for 4.32 Cedis.
Why did Cedis Fall?
According to the international analytics, there are two main reasons for this situation:
☞ The first reason is the failed revaluation policy provided in 2008. It only created the illusion of a healthy market in Ghana. The low exchange rate for Cedis existed for only two weeks! The government did not think about the real market value of its currency. Instead of this, Ghana just set the price for its money.
☞ The second reason was the financial crisis in 2008 and then the oil crisis in 2014. Ghana is not a country with the strong and independent economy. It`s a part of the international market. Ghana is hugely dependent on crude oil production. When the prices for crude oil began dropping, Ghana`s economy stepped into the failing process.
What can Ghana do now?
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A lot of experts suggest that Ghana should set their currency free. The government shouldn't dictate the price of the national currency. The international market demand should regulate Cedis. It may help the country to become stable again and stimulate its growth. Unfortunately, Ghana`s government does not desire to do that. Eventually, the black market will only keep growing in the country.
What happened in Nigeria?
Naira and Cedis value is crucially dependent on the governments` policies. Nigeria also suffered from economical losses with the reduction of crude oil prices. It severally damaged the economy of Nigeria. Naturally, Nigerian government tried to restrain the price of Naira to Dollar. Still, it only created the double market of currency in the country. The actual revenues of citizens decreased.
The Federal government tried to hold Naira at N195-200 to Dollar. Still, the real price for Naira at the black market was about N300 to one dollar. It also created corruption schemes, where banks bought dollars for N200 and sold them at the black market for N300.
This problem stays the same in 2017. The CBN exchange rate Naira to USD is N315 to 1. At the same time, the black market sells one dollar for 375 Naira. International investors do not desire to conduct affairs with this exchange rate. It means that Nigeria can`t expect investments from international partners.
International banking institutions give Nigerians the same advice – "set your currency free". It will stabilize the economy and invite a lot of investors in the country. Moreover, it will destroy corruption schemes where banks buy from the CBN for N315 to 1 and sell at the black market for N375 to 1.
Naira and Cedis. Which is more valuable? Conclusion!
If you consider the nominal price (actual amount) of the currency, then Cedis is more valuable than Naira. However, it does not prove that Nigerians earn less than Ghana citizens. International organizations agree that Nigerians should deal with the double exchange rate in the country. How to handle this problem? That is the task for the Federal Government.
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Source: Legit.ng
