[ 2017-03-21 ]

BoG’s 120 million dollars auction begins yielding results
Currency analysts have stated that the Bank of
Ghana’s auction of 120 million dollars in the
first quarter of this year, to contain the
cedi’s depreciation has begun yielding the
intended results.

According to them, the move would have been more
effective if the Bank of Ghana increased its
supply of dollars in the first two months of the
year.

The comment follows Citi Business News’
assessment to explore the impact of the auction by
the Bank of Ghana, with about a week to end its
performance in the first quarter of this year.

Governor of the Bank of Ghana, Dr. Abdul Nashiru
Issahaku justifying the move by the central bank
to auction 120 million dollars for the first
quarter of 2017.

This year’s 120 million dollar auction followed
a similar one carried out in November 2016.

At the time, the central bank auctioned 60 million
dollars from the 1.8 billion dollars cocoa
syndicated loan contracted in September 2016.

But has the move yielded the intended result which
is primarily to stabilize the cedi against the
dollar.

Figures available to Citi Business News show that
the cedi, between January and February this year
witnessed a sharp depreciation against the major
trading currencies both on the interbank foreign
exchange market and across forex bureaus in the
country.

A GN Bank report also showed that the cedi
depreciated by about 7 percent to the dollar as at
March 10, 2017.

The development shows that despite the auctioning
in the month of January and February the cedi
performed badly.

New figures however show the cedi for the month of
March has experienced relative stability against
major currencies.

Speaking on the progress of the auction, the
General Manager of Treasury at HFC Bank, Joseph
Nketsia explained to Citi Business News the sharp
depreciation in early months was largely because
of the inadequate supply to meet demand.

“The dollar auction has really had a positive
two weeks. At the initial stages, the demand for
foreign currency was very high as a result, the 40
million dollars auction by the bank of Ghana
wasn’t enough to absorb the demand on the market
and that is what caused the cedi to depreciate
further,” he asserted.

A Senior Research Fellow at the Institute for
Fiscal Studies, Dr. Said Boakye earlier told Citi
Business News he opposed the auction and
questioned its sustainability.

In his view, the central bank risks depleting its
foreign reserve with the plan.

But Joseph Nketsia further explained that the move
is now yielding results after not doing so in the
first two months of this year.

“Traders who were restocking have completed that
and those whose goods were brought in on letters
of credit were able to pay for them hence the
demand for foreign currency has slowed down…Some
banks who took inventory of some of the dollars
still have dollars available and that is what has
brought about the stability on the market now,”
he said.

Source - citibsinessnews.com

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