The Need To Introduce The Cedi Coins To Check Inflation

NEWS COMMENTARY ON THE NEED TO REVISIT THE LOWER DENOMINATIONS OF THE CEDI
 
From July 2007, the Cedi (¢), was re-denominated to the Ghana Cedi
(GH¢), such that ten thousand Cedis was equivalent to one Ghana Cedi.
The re-denomination was not expected to affect the intrinsic value of
the currency since it was tagged “the value will be the same”.
Two of the reasons given by the Central Bank for the re-denomination
were the increasing difficulty in maintaining accounting and
statistical records; and problems associated with accounting and data
processing software.  The cost savings were derived in two main ways.
Firstly, the elimination of four zeros which reduced the time taken to
input financial data and time spent by management in reviewing the
same. The second main area of cost saving related to the cost incurred
in customizing standard packages that were purchased by businesses.
The view of the Bank of Ghana Technical Committee on the
re-denomination was that, “the re-denomination of the cedi simply
involves knocking off some zeros; hence the accounting methods,
principles, policies and standards currently in use by businesses will
not be breached” With proper planning and preparation, therefore, the
re-denomination exercise was not to be too much of a burden for
companies in their day-to-day transactions and accounting. From the
analysis, one can say that the re-denomination exercise hardly looked
at the plight of the ordinary citizen but rather that of businesses
and the technocrats who effected the change.  It is therefore not out
place to urgently call on the Bank of Ghana to consider and
expeditiously introduce new but lower denominations of the Cedi coins
as part of the Bank’s efforts at helping to reduce the galloping rates
of depreciation of the national currency. This call has come on the
heels of the fact that the day-to-day economic activities, especially
of the ordinary citizens of the country, involve coins which have
virtually lost their value for the absence of certain denominations
that could have acted at bridge-points. The need for a new 1 pesewa, 2
pesewa and 3 pesewa coins is therefore urgent and economically
sensible to introduce.  It may be established that the 1 pesewa coin
that came with the re-denomination exercise was very bad in quality
and size and therefore could not last.  In the same vein, the lack of
2 pesewa and 3 pesewa coins meant that any price increases beyond 5
pesewas would be in multiples of 5 (with percentage reflections of
100%, 150%, 200% and so on). For example, sachet water has been
selling from 5 to 10 to 15 pesewas and the next point of call has
threateningly been 20 pesewas, that is, 400% increase.
  If the bridge-point coins were available, sachet water could have
easily been sold at 6 or 7 or 8 or 9 pesewas before reaching the
levels of 10 pesewas. The percentage increases could have therefore
been 20%, 17%, 14%, 13% and 11% .   In the colonial or immediate
post-independence era, coins in the values of 1 farthing,
half-a-penny, 1 penny, 2 pence, 3 pence, 6 pence, and 1 shilling gave
very convenient and economic respite for the day-to-day transactions
that affected the livelihoods of the people across board. One may
wonder why the supervisors of the currency re-denomination did not
take into consideration the need for lower categories of the coins
which greatly influenced the economy at the mass level and on a daily
basis.  A trip to Togo or Benin exposes the Ghanaian to a rather
strange experience of the importance of using coins in the overall
management of the economy of a country. The coins of these countries
are very qualitative and therefore durable; they are also respected
and accepted for their use.
Though they may be inconvenient to carry, the important fact is their
role in cushioning the economy by way of daily transactions in the
goods and services, particularly in food, drinks and commuter
transport that the people need.   Even in the developed countries, the
use of coins in doing business in the super-markets, weekend markets
as well as boarding buses and coaches cannot be down-played. That goes
to reinforce the old adage that ‘little drops of water make a mighty
ocean’.
Thinking that coins are too insignificant in the money industry is
therefore too naïve to believe, especially as those who graduated us
from the era of cowries to currencies are still using them. There is
no magic about such economies still recording very low rates of
inflation other than the fact that they are very in tune with using
their coins, and more importantly, value them as means of survival and
growth. It is necessary therefore that the Bank of Ghana revisits the
need for strengthening the economic base by seriously considering the
role that coins play in helping to stabilize, even if on a minute
platform, the often volatile inflationary trends in the Ghanaian
economy.

By Osei Piesie-Anto (A Management Consultant)