Re-denomination of the Cedi - Shed three zeros, not four

The news is that Bank of Ghana plans to introduce New Cedis in July, 2008. The New Cedi would drop off four zeros from the current denomination. In other words, C1,000 would become 10 New Pesewas, C10,000 will become NC1; C1,000,000 will become NC100 and C1,000,000,000 will become NC100,000.

I don’t know if the debate is still on or it’s a forgone conclusion, but, so long as Parliament has not debated and passed new legislation for the new tender, and as far as the new currency has not as yet been printed, I can safely assume that the debate is still on.

The idea is a welcome one. Personally, I support the idea wholeheartedly and I believe most Ghanaians will. In fact, in 2002, when Bank of Ghana was planning to introduce the C10,000 and C20,000 notes, I thought then that it would have been better if they had rather printed completely New Cedis dropping off a few zeros. I provide below the links to two articles I wrote to that effect.

http://www.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=25406

http://www.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=23792

Bank of Ghana has succinctly espoused the many advantages of the proposed New Cedi. The proposed New Cedi takes us back to the good old days before coups upon coups and subsequent economic mismanagement caused a series of devaluations that necessitated the denominations we currently have.

Upon reflection, however, and unless it is too late, I think Bank of Ghana should consider dropping off three zeros instead of the proposed four. In other words, C1,000 should become NC1; C10,000 should become NC10; C1,000,000 should become NC1,000 and C1,000,000,000 should become NC1,000,000. My reasons for this are listed below:.

1. Ease of Conceptualization Normally, when currencies change as we plan to do, it takes a long time before people get used to the new nomenclature. What we find is that, even when the old currency faces out, people do their calculations and trading in the old currency before they convert to the new. It’s like learning a new language. You tend to think in the old language before you translate in your heard into the new language. Ghanaians will go through the process when the new currencies are introduced. Luckily, it will be relatively easy as we are only dropping zeros – three or four. However, it will be relatively easier if we drop three because, it is mentally less taxing to conceptualize a C1,000 being called NC1 or C10,000 being called NC10 than C1,000 being called 10 New Pesewas and C10,000 being called NC1.

Ghanaians today are already used to calling the ten thousand cedi note simply ten, anyway. If you drop off three zeros, they just would continue calling it what they are already used to calling it.

2. Currency Design If we drop off three zeros, we can keep the design of the C1,000, C2,000, C5,000, C10,000, C20,000 and the C50,000. These designs currently honour certain symbols and individuals. We just rename them NC1, NC2, NC5, NC10, NC 20 and NC50 with minor changes, mostly in improved security features. We can keep those symbols and personalities without much harm.

3. Foreign Exchange In today’s Ghana, 10,000 Cedis is equivalent to US1. If we drop off four zeros from the Cedi as planned, the New Cedi is then at par with the US dollar. In my opinion, a situation like that would give the impression that Ghana’s economy is as strong, as steady and as resilient as the US economy. We all know that that is not the case. If we make the New Cedi equivalent to the Dollar, there will be inevitably a big downward pressure on the New Cedi. The pressure may even be so strong that we might even have to sharply devalue the New Cedi in the not-too-distant future. Devaluation will have far-reaching psychological and economic effect on the Ghanaians, the politics of which would be unthinkable to the ruling Government at the time.

On the other hand, if we drop off three zeros, ten New Cedis will be worth US$1. I think, this situation will make more sense than the other situation. The New Cedi will continue to be stable and there will be no pressure for devaluation. If the economy improves in the future and the New Cedi gains in value and the Dollar is then worth NC8,000, we would have a reason to celebrate.