In 2025, the Ghanaian cedi has experienced a significant appreciation, strengthening by approximately 42% against the U.S. dollar. In May 2025, the Cedi traded as high as 10.30 to the US Dollar. Conversely, the Nigerian naira has faced continued depreciation, reaching record lows. This divergence in currency performance is attributed to differing economic policies, fiscal management, and external factors influencing both countries.
Ghana’s Economic Strategies Fueling Cedi Appreciation
1. Tight Monetary Policy
The Bank of Ghana (BoG) has maintained a tight monetary policy stance, keeping the key interest rate at 28.0% as of May 2025. This approach aims to control inflation and stabilize the currency. The BoG’s commitment to price stability has contributed to the cedi’s strength.
2. Fiscal Consolidation
Ghana has implemented fiscal consolidation measures, including spending cuts and efforts to reduce the fiscal deficit. These actions have enhanced investor confidence and supported the cedi’s appreciation.
3. Increased Export Revenues
Ghana’s export sector has benefited from rising global prices for key commodities such as gold and cocoa. The surge in export revenues has improved the country’s trade balance and bolstered the cedi.
4. IMF Support and Debt Relief
Ghana’s engagement with the International Monetary Fund (IMF) has provided financial support and policy guidance, contributing to macroeconomic stability. Debt relief initiatives have also eased fiscal pressures, aiding the cedi’s performance.
5. Reduced Demand for Dollars
- Import Restrictions: The government’s policies to curb non-essential imports have reduced dollar demand.
- Stable Forex Market Sentiment: Reduced panic buying of dollars by businesses and individuals.
6. Improved Investor Confidence
- Successful Eurobond restructuring talks and signs of economic recovery have attracted foreign portfolio investments.
- The Ghana Stock Exchange (GSE) has seen improved performance, bringing in forex.
Nigeria’s Economic Challenges Leading to Naira Depreciation
1. Currency Devaluation and Inflation
Nigeria has experienced significant currency devaluation, with the naira losing over 40% of its value in the past year. Inflation remains high, exceeding 23%, eroding purchasing power and investor confidence.
2. External Borrowing and Fiscal Deficit
The Nigerian government has sought parliamentary approval for $21.5 billion in external borrowing to finance budget deficits. This reliance on external debt raises concerns about fiscal sustainability and currency stability.
3. Exchange Rate Volatility
Despite efforts to unify exchange rates, the naira continues to experience volatility in the foreign exchange market. This instability deters foreign investment and exacerbates currency depreciation.
4. Structural Economic Issues
Nigeria faces structural challenges, including overreliance on oil exports, limited diversification, and governance issues. These factors contribute to economic vulnerability and pressure on the naira.
Comparative Analysis: Cedi vs. Naira
| Factor | Ghana (Cedi) | Nigeria (Naira) |
|---|---|---|
| Monetary Policy | Tight, with high interest rates | Efforts to stabilize, but facing challenges |
| Fiscal Management | Consolidation and spending cuts | High deficits and increased borrowing |
| Inflation Rate | Declining, around 21.2% | High, exceeding 23% |
| Export Performance | Strong, with increased revenues | Dependent on oil, facing market fluctuations |
| IMF Engagement | Active support and debt relief | Limited engagement |
| Currency Performance | Appreciated by 42% against USD | Depreciated, reaching record lows |
Ghana’s proactive economic policies, including tight monetary control, fiscal consolidation, and successful engagement with international partners, have contributed to the cedi’s appreciation in 2025. In contrast, Nigeria’s economic challenges, such as high inflation, fiscal deficits, and structural issues, have led to continued depreciation of the naira. The divergent paths of these two West African currencies underscore the importance of sound economic management and policy implementation in achieving currency stability.