Once again, it looks like metal coins are poised to win over the cost of printing banknotes or having them. Admittedly, the public isn’t as thrilled as the Bank of Ghana, but the African nation’s central bank nonetheless seems set to replace several banknotes with coins.
Financial reporting group Bloomberg recently ranked Ghana’s currency 14th among the top 20 currencies tracked by Bloomberg in Africa. The cedi is now considered the African currency with the “worst spot yields” after being dubbed the best performing currency during the first quarter of 2021.
With inflation and interest rates on the minds of the Ghanaian public, the Bank of Ghana has started to phase out the 1 and 2 cedi banknotes in favor of coins of the same denomination. The public perception of coins is that they are bulky and impractical compared to paper money versions of the same denominations. Bank of Ghana Governor Ernest Addison sees things differently. He is more concerned with the cost of printing banknotes compared to the cost of minting coins and the greater durability of coins for long-term use.
The decision has fairly high-profile detractors. On October 19, the Pulse.com.gh website published: “If cost justification is the main reason for the transition from low denomination banknotes to coins, then one might ask, is this a prudent decision?”
Pulse.com points out that the cost of using coins instead of banknotes “could be” very high for consumers and businesses.
The online article continues: “You can imagine the hurdles a mobile banker or ‘susu’ collector would have to overcome to transport heavy coins brought in by customers of a financial institution as savings, and the high cost the acquisition of coin processing equipment by institutions and companies in order to adapt.
Pulse.com points to a US study by the National Association of Convenience Stores that suggests counting pennies can add 2.5 seconds to each transaction, “revealing how significantly productivity could drop over time.” term”.
The argument continues: “With a strong preference for banknotes, replacing GH₵ 1 and GH₵ 2 banknotes with coins would reduce and eventually stop transactions involving these denominations and, therefore, a change commodity prices to or from the smallest note in circulation, the 5 GH₵ note. This would result in inflation and a worsening of the standard of living of citizens.
Ghana banknotes are currently printed on paper. The polymer substrate as a substitute had not been discussed by Addison as an alternative to new coin denominations. Polymer has become an increasingly popular substitute for paper due to its superior durability.
Some opponents of the new coins suggest what has been called “light cash saving” using electronic payment rather than physical monetary systems. On November 19, Ghana’s Finance Minister Ken Ofori-Atta discouraged the idea, announcing that the government would start imposing a tax on electronic transactions from February 1, 2022. The 1.75% tax on the value electronic transactions will be imposed on “payments by mobile money, bank transfers”. , merchant payments and inbound remittances,” according to QuartzAfrica.com.
Ofori-Atta said what he called the electronic levy “will widen the tax net and the rope in the informal sector.” The initiators of the transaction will pay the tax except for incoming remittances which will be paid by the recipient. There will be an exemption for transactions up to 100 GH¢ per day, or approximately US$16.
Ghana legal tender coins were issued in denominations of ½, 1, 2½, 5, 10, 20 and 50 pesewas and 1 cedi between 1967 and 2007. Since 2007, banknotes have been issued in denominations of 1, 2, 5, 10, 20, 50, 100 and 200 cedis. These Ghana cedi notes were exchanged at a rate of 10,000 new cedi notes as the latter were devastated by inflation. The Ghanaian cedi became the most denominated currency unit issued in Africa at that time, but its purchasing power has since fallen by around 20%.