The Nigerian currency, Naira rose against the Ghanaian Cedi in the first quarter of 2022, despite Ghana’s central bank raising interest rates to offset shortfalls caused by global tensions in Europe.
Ghana’s cedi has lost roughly 20% of its value versus the dollar this year, making it the major currency effect of the Russian-Ukraine conflict.
Demonstrating the strength of Nigeria’s foreign exchange position in the region, Naira has gained a huge 16.68% year to date (YTD) against the Cedi.
The Ghanaian Cedi/Nigerian Naira (GHSNGN) was trading at a 5-year low of 55.25 at the time of writing this article. This is a gain for the Naira of around 26.69% over the last five years with the most decline seen this year.
The Bank of Ghana increased its primary lending rate by 250 basis points to 17%, signalling a tough stance against rising prices for everything from flour to sugar to fuel, as well as a weakening local currency that has harmed investor confidence.
The conflict between Russia and Ukraine is expected to have a substantial impact on Ghana’s exchange rate, particularly in the construction, agriculture, and international trade sectors.
Russia and Ukraine accounted for around 2.5% of Ghana’s total non-oil imports and 0.4% of Ghana’s total exports in the recent past.
Grain, wheat flour, and fertilizers are the most common Russian imports. In 2021, Russia accounted for roughly 28.7% of Ghana’s grain imports, while in the first two months of 2022, Russian grain imports accounted for 31.2% of total grain imports. In the first two months, Russia supplied 50.0% of the flour and 39.2% of fertilizer imports, respectively.
Ghana’s major imports from Ukraine are iron ore and steel, which account for more than 60% of total iron ore and steel imports. As a result, supply disruptions and higher steel and iron ore import prices are almost certain to hit the building industry.
