BoG’s withdrawal of FX support: Most importers don’t use official forex – Bright Simons

The Vice President of IMANI Africa, Bright Simons says the Bank of Ghana’s forex ban for some imports will completely fail to stabilize the depreciation of the Cedi.

A tweet by Bright Simons indicated that the move will come to nought because “most importers don’t use official forex.”

The Bank of Ghana (BoG) has signalled that it will no longer provide FX support for imports of more than eight items imported into the country.

The items include rice, poultry, vegetable oil, toothpicks, pasta, fruit juice, bottled water, ceramic tiles and other non-critical goods.

“In accordance with the President’s directive issued at his recent address to the nation on the Ghanaian economy, on October 30, 2022, BoG will no longer provide FX support for the imports of rice, poultry, vegetable oils, toothpicks, pasta, fruit juice, bottled water, ceramic tiles and other non-critical goods” BoG said in a statement.

The central bank withdrew the support this month as part of efforts to maximise the country’s reserves while encouraging domestic production and the consumption of local substitutes.

But Simons observes Nigeria failed with such decision some 7 years ago when it implemented same, and fears this could largely be repeated in the case of Ghana.

“A general rule for predicting how Ghana evolves is that it lags Nigeria by ~7 years. After months of blaming speculators failed to stem the slide in the Cedi, Ghana will now resort to forex bans for some imports.

A. Most importers don’t use official forex.

B. It failed in Nigeria”

In 2015, the central bank of Nigeria, as a way of salvaging the Naira and encouraging local manufacturers, placed an embargo on the importation of rice, furniture, soaps, toothpicks, cosmetics, cement, private jets, steel products, plastics and rubber, margarine, palm kernel/palm oil products/vegetable oils, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, eggs, turkey and others.

The move was also brought about to save the country’s foreign reserves, which had increased.

But the foreign exchange ban earlier placed on the importation of 41 items by the Central Bank of Nigeria (CBN) was removed later.