You cannot discuss our currency’s strength without looking at factors such as volatile global financial market, weaknesses in global growth, revenue accrued within a period, government’s expenditure, borrowing, infrastructure constraints, economic and political environments etc.
This was the reason why I described what the UDS lecturer wrote about the depreciation which was treated as sacred truth by the ekosii sen presenters as bogus, unscientific, and mere propaganda material. It is unscientific and illogical to assess the performance of the cedi from 1993 – 2019 without looking at the prevailing economic situation (global and internal) across the period. The continent’s impressive average economic growth of around 5%, over the 14 years to 2014, saw economists toasting to the continent’s development potential. The global financial crisis in 2009 did not affect the continent’s economy because of high commodity prices and marginal exposure to global financial markets. Steady flow of foreign direct investment also assured a sustainable growth trajectory.
A precipitous crash in commodity prices changed that upbeat African narrative and Ghana was not spared. African countries that depended most heavily on commodities such as gold, oil, diamond, bauxite etc were in dire straits. Apart from the low prices of our commodities, the volatile global financial markets, weaknesses in global growth, severe infrastructure constraints, the unstable power situation, the single spine policy (implementation), rising borrowing cost also contributed to our woes. The Price of oil plummeted from $100 a barrel in 2013 to $26 a barrel in February 2016, and hovered around $50 a barrel in October.
The economy came under intense pressure because of these external factors. The fall in commodity prices represented a significant shock for the country, as proceeds from these commodities form a more significant percentage of our total revenue. The value of our currency and that of other sister African countries depreciated. The value of the naira, for instance, fell from 150 to 450 naira to the dollar between January 2014 and October 2016. Sierra Leone’s Leone suffered the same fate, declining to 6,500 leones to the dollar from 5,000 leone. Nigeria, for instance, did rebase its economy in 2014 and the economy was reported to be worth $450 billion but the economy shrunk to $250 billion due to a decline in export earnings. We were faced with a huge budget deficit because of the enumerated problems. The administration took measures (IMF bailout etc) to overhaul our tax system to increase revenues, aggressively fought corruption, reduced government recurrent expenditure, allowed certain state agencies to borrow on their own strength to implement their projects eg.( Terminal 3 etc), established the Exim bank and at the same time, cleared significant portion of our infrastructure deficit and invested heavily in the communication and oil and gas sectors. The agenda of the administration was to industrialise by diversifying away from commodities and, at least, to add value to our commodities. In spite of all the economic anxieties, the administration embarked on massive infrastructure development and fixed the decades-old power crisis. Atuabo was completed saving Ghana close to Ghc 500 million annually, the government invested heavily in the oil and gas sector culminating in the world bank and IMF projections in 2015/16 that the economy will grow by 7 to 8 percent between 2017-18. Low commodity prices, falling terms of trade, low revenue generation, foreign debt obligations, huge spending on salaries have huge negative effect on the currency. Developing countries with relatively high savings and foreign currency, including some of our sister oil exporters, faced domestic uncertainty and foreign currency-related policy constraints.
I described the article and the argument the presenters made in their studios as bogus and unscientific because they failed to factor in all these important ingredients in their assessment of the situation.
In spite of all the enumerated challenges the administration faced between 2013 and 2016, it was able to transform almost all the sectors. The achievement includes one of the biggest gas investment in recent times and the first of its scale in West Africa, accounting to a whopping $7 billion on the Sankofa Gye Nyame fields. The power crisis which was the major headache of all administrations was permanently fixed, new schools including universities were built, ultramodern hospitals were constructed, our ports were renovated. The number of barrels of oil we produced increased as a result of these strategic investments. These automatically increased government revenue and reduced its expenditure in terms of buying gas etc.
Mahama’s administration didn’t make significant gains from the huge investments it made across the sectors. The main beneficiary of these investments is the Akufo-Addo government hence my disagreement with those who make hollow arguments about the Cedi and do an illogical and unscientific comparison. The semi-annual report on Petroleum holding fund and Ghana’s Petroleum funds showed that Ghana realised $ 191.32 million in revenue in the first half of 2017 compared to the $114.4 million the Mahama administration received in the same period the previous year. The Akufo-Addo government recorded a $463,569,38 in petroleum revenue in 2018. The petroleum holding fund received $372,511.72 in surface rentals from seven companies and $72,422,752.49 million for corporate tax and undistributed funds in the PHF earned interest of $757,855.51. Other revenue from surface rentals, corporate tax and interest income accounted for $73,553.72 being 16 percent of the total. The government estimated that oil revenue will reach Ghc 6.1 billion ($1.1 billion) in 2019. The 2019 second quarter collection stood at $363.73 million. Apart from the 2014 revenue which was $978.01 million, chunk of the revenue was recorded under current administration including the 2018 revenue which totalled $977.11 million. In 2016, we recorded $229.04 recorded as the lowest revenue collected. The Heritage fund also contributed $485 million and stabilisation fund contributed $381 million to the total investment return. An amount of $203 million has been withdrawn from the fund but the cedi is still shrugging. The government is entitled to oil royalties on gross production equivalent to 5% from the jubilee and TEN Fields and 7.5 percent from the SGN Field.
This administration is enjoying all these sweet benefits yet cannot stabilise the Cedi and still telling the world that it inherited empty coffers. This administration is enjoying good commodity prices on the international market unlike the Mahama administration when the Cedi struggled significantly due to pressures of low commodity prices. With the rise in commodity prices under the current administration, the Cedi started appreciating against the dollar but the administration’s bad economic policies, reckless expenditure and unfavourable economic policies stagnated the appreciation leading to the situation the Cedi finds itself. What at all in terms of infrastructure etc, is this administration implementing from the huge revenue it receives from oil and other commodities. What about the multi-billion dollar equivalent of refined Ghanaian bauxite, a mineral crucial to aluminium production, in return for Chinese construction of infrastructure in Ghana announced by the administration. The deal, per what the Vice President told us, offers a loan and foreign currency free means of securing development investment. So why are we where we are? Mahama did not get all these opportunities, his investments and initiatives made Ghana attractive to nations and companies the current administration is dealing with.
So, Omanhene and O.B, I admire attempts by you to scrutinize issues on your show but spend a little time on issues or information forwarded to you to enable you to expose the rots in such materials. Per his record and what we all witnessed during his time, I can confidently say if Mahama is allowed to manage the projects and investments he made his four years, our Cedi or Eco will join the world’s powerful currencies.