Between the Naira and Cedis, which is more valuable? This is one of the questions residents in West Africa would like to find out. When people rub minds over the economy of a certain country, all minds rush to the strength of its currency against other currencies.
These assumptions are quite true. The value of a country’s currency can be juxtaposed with other currencies to measure and ascertain the economic status and strength of the country.
The Naira and the Cedis are the legal tenders and national currency of Nigeria and Ghana respectively. You may be pondering over which currency has more value between the Naira and the Cedi.
Before we make a conclusion on the most valuable, let’s check the economic status of Nigeria and Ghana. In this article, we will try to find out the strongest and the most valuable of both currencies.
Although you can use a country’s currency to gauge its economy, this system is not applicable to all countries of the world. Therefore, there are some countries that you cannot use their currency as a criterion to rate their economy.
For instance, Japan has an exchange rate of $1 to 108.41 Japanese Yen (January 2020), yet Japan has one of the strongest economies in the world. The Japanese citizens enjoy an average per capita income of $3000 monthly – this goes a long way in telling how great and stable their economy is.
Is Ghana Cedis More Valuable Than Naira?
Most Nigerians think that the Ghanaian Cedis is more valuable than the Nigerian Naira, well this is not completely true. The strength of the Nigerian Naira against the Ghanaian Cedi lies heavily on the economic situation of both countries.
Using the official exchange rate, you can buy one Ghanaian Cedi for 63.70 Naira. Well, does this mean than the Nigerian Naira is less in value to the Cedis? The answer is NO!
If you think that it is true, then why is it that the Japanese Yen is less valuable to the Cedis. You can buy one Ghanaian Cedi for 19.05 Japanese Yen.
Even with that, Japan maintains a stable economy and it is listed as one of the top 10 countries with the best economies. An average Japanese earns a monthly income of over $3000.
In the same vein, an average Ghanaian earns a monthly income of over $200 per month. The DIFFERENCE is CLEAR! In essence, the value of a currency doesn’t define the value of the strength of its economy.
Instead of using a country’s currency to gauge its economy, it can be used to increase its Gross Domestic Product (GDP). As a matter of fact, Japan doesn’t hold on to the Yen.
You can buy a dollar for 108.41 JPY, this is the official price as of January 2020. Hence, there is no black market as the Japanese can buy one dollar for 111 JPY.
It’s a real price for this currency. Therefore, there is no black market for the Japanese currency.
Is The Cedis More Valuable Than The Naira?
According to the accurate conversion rates for January 2020, the conversion of the Cedis to Naira stands at 1GHS=63.70NGN.
The conversion rate of the Nigerian Naira to Cedis is just about 1NGN=0.016GHS. With consideration to the nominal values, we can say that the Ghanaian Cedi is more valuable than the Naira, but these metrics are not entirely accurate.
Back in 2007, the exchange rate between the Cedis and the United States Dollar rose from 9.2 to $1. The Ghanaian Government presumed that this was a clear indication of a disaster upon its National currency.
As a matter of fact, the consequence of the exchange rate resulted in an inflation of about 155%. The Government of Ghana considered it’s economy in terms of currency rather than the Gross Domestic Product (GDP), which is a strong factor in currency markets.
Shortly, the Ghanaian government made a decision to change the exchange policy. In 2008, Ghana changed the exchange policy and revaluated its national currency. The Cedis value became 0.92 to $1.
It looked like a miracle but it didn’t last for long. The exchange rate became 2.35 to $1 after two weeks. Therefore, in 2007, a Ghanaian can buy a dollar for 2.35 Cedis. However, if you use the old exchange rate in 2008, the Ghanaian can still buy one dollar for 2.35 Cedis.
The difference is that the value of the Cedis dropped after a year. Towards the end of 2008, Ghanaians were able to buy a dollars for 2.60 Cedis.
What Did Ghana Do To Change The Value of the Cedis?
Using these metrics, it can be deduced that the government didn’t combat the real economic problems of Ghana. Rather, it paid attention to the nominal value of its national currency.
The Ghanaian government weren’t able to analyze and study the market value of its national currency. Instead of critically analyzing the market value of its national currency, it provided a fixed rate only.
Still, Ghana didn’t change its exchange rate policy for more than nine years. Moreover, the production of petroleum products (crude oil and gas) further helped to stabilize the Ghanaian economy.
By 2014, the geopolitical situation of the world changed and there was an oil war among countries. Ghana’s economy significantly collapsed and the value of the national currency (Cedis) decreased by 100%.
Today, you can purchase one U.S dollar for 5.55 Ghanaian Cedis.
Why did the Ghana Cedis Fall In Value?
According to the international economic and financial analytics, there are 2 main reasons why there is a decline in the value of the Cedis. They are;
- The first reason why the value of the Cedis declined is that the failed revaluation policy was implemented in 2008. This policy only created the illusion of a stable, healthy market in Ghana.
But two weeks after the implementation of the policy, the low exchange rate for Cedis became high. Still yet, the Ghanaian government did not consider the true market value of its currency. Instead of this, the government decided to set the price for its currency.
- Another reason for the fall of the Ghanaian Cedis was the economic crisis in 2008 as the crude oil brouhaha in 2014. Ghana is a homogenous country, it is not a country with a strong and independent economy.
So, Ghana’s survival in the international market is solely on its crude oil production. By the time the prices for crude oil dropped, Ghana’s economy was in a state of great disorder.
What did Ghana do to curb this?
Financial experts and economists advised the Ghanaian government to set the Cedis free and put it open in the market for it to rebuild itself. According to these experts, the Ghanaian government shouldn’t control the price of the Cedis in the market.
Instead, the international market should regulate and dictate Cedis. If this happens, the economic strength of the country will be stable and gradually, the economy will regain itself.
Sadly, the Ghanaian government had no interest in what the economists and financial experts suggested. This resulted in the creation of the currency black market and it kept growing in the country. The black market provided the real price for the Ghanaian Cedis.
What happened to the Nigerian Naira?
The value of the Naira and Cedis lies heavily on the government` policies. The Nigerian government is to be blamed for the fall in the value of the Naira.
Nigeria has suffered from several economical losses and the reduction of crude oil prices crippled the economy further. When the value of the crude oil dropped, the price of a barrel of oil dropped significantly.
The Federal Government of Nigeria tried to manage and control the value of the Naira against the U.S Dollar, but all efforts failed. Their efforts created a double currency market in the country.
Also, the actual revenues of Nigerians declined significantly. The real exchange rate of the Naira was falling and the actual revenue of the citizens kept dropping.
Consequently, this resulted in economic collapse and a decrease in the spending capacity of citizens. The Nigerian government tried to hold the Naira at ₦195-200 to the U.S Dollar. Yet, the real price for the Naira at the black market was around ₦300 to one dollar.
Furthermore, it created a lot of fraudulent and corruption schemes as many Nigerian banks bought the U.S dollars for ₦200 only to sell them for ₦300 at the black market.
The problem remained in 2017 as the CBN exchange rate of the Naira to USD was ₦315 to $1. At the same time, the black market exchange rate was ₦375 to $1.
Foreign and international investors were disinterested in doing business in Nigeria at this exchange rate. The result of this was that Nigerians cannot expect to get investment from foreign partners.
International financial organizations and banking institutions advised Nigeria to ‘set the currency free’. According to these investors, if the Naira is set free and made open, the Nigerian economy will be stabilized and this will draw the attention of foreign investors into the country.
Furthermore, it will terminate corruption schemes whereby banks buy from the Central Bank of Nigeria (CBN) at ₦315 to $1 and sell at the black market for ₦375 to $1.
A lecturer of the University of Cape Coast, Dr John Gatsi expressed the belief that the Cedi is stronger than the Naira because Ghana places no restrictions on the importation of basic items such as food and pharmaceuticals.
Dr Gatsi also said that the Nigerian economy is a strong one because the living standards in Nigeria are quite higher than that of Ghana. Furthermore, Gatsi says that inflation in Ghana is higher than that of Nigeria.
If you should consider the actual price (the nominal price) of the currency, you will see that the Ghanian Cedi is more valuable than the Naira.
However, this does not prove that Nigerian citizens earn lesser than their Ghanaian counterparts. As a matter of fact, foreign and international organizations agree that the Nigerian government should deal with the issue of the double exchange rate.
We believe that this article has helped you greatly in analyzing and measuring the most valuable currency between the Nigerian Naira and the Ghanaian Cedi.