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NEWS - Three years after introducing the new cedi, a GH¢ 2 note is launched, as well as… a political fight and a new one Pesewa coin

Apr 30, 10 - Comments

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As part of activities marking the centenary celebrations of the life of first Ghanaian president, the Bank of Ghana (BoG) unveiled in April 2010 a new two Ghana Cedi note which is embossed with a big portrait of Dr. Kwame Nkrumah.

 

GH¢2 note which is to serve as a bridge currency note between the GH¢1 and the GH¢5 is to be put into circulation in May 2010. The note is being introduced following a research by the Bank of Ghana to review the cash cycle of the cedi after the July 2007 redenomination exercise. At a news conference to launch the public education campaign of the new note, the Governor of the Bank of Ghana, Mr Kwesi Bekoe Amissah-Arthur, noted that “an important observation of the review of the cash cycle in Ghana revealed that the GH¢1 banknote had taken on the role of three old bank note denominations, that is the old ¢5,000, ¢10,000 and ¢20,000.” That, according to the Governor, put a lot of pressure on the GH¢1 banknote and deteriorated the quality of the notes.

 

Mr Amissah-Arthur again stated that the general public had since the redenomination exercise demanded an intermediary banknote to especially improve exchangeability and facilitate transactions. “The GH¢2 banknote will, therefore, expand the series of banknotes in circulation, thereby providing a better choice to the public”.

 

Coinciding with the conclusion of the year long centenary celebrations of the birth of Dr. Kwame Nkrumah,

the front side of the note has his portrait to acknowledge his contribution to the country’s development whilst the reverse depicts the old and new parliament buildings signifying the country’s deepening democracy. The introductory issue of the two cedi bank note will have the commemorative text “Centenary of the birth of Dr. Kwame Nkrumah” so get your hands on this collector item.

 

The use of the portrait of Ghana’s first President is in line with the plan to use different and distinct portrait on each banknote, allowing the general public to better identify the different denominations. “It becomes necessary to upgrade and change the design and security features of banknotes”, Mr Amissah-Arthur stated. He added that varying the portraits on the banknotes will also permit the nation to recognize departed national heroes who positively impacted on the lives of Ghanaians.

 

The plan of the National Democratic Congress (NDC) government to remove pictures of the ‘Big Six’ from future Ghana Cedi notes, if confirmed, is likely to spark another heated political debate between the ruling party and the New Patriotic Party (NPP) whose government introduced the current Ghana Cedi in July 2007.

 

The Big Six, comprising Dr. Kwame Nkrumah (Ghana’s First President), J.B Danquah, Edward Akufo-Addo, Emmanuel Obetsebi-Lamptey, William Ofori Atta, and Ebenezer Arko-Adjei, were leaders of the United Gold Coast Convention (UGCC), a leading political party in the British colony of the Gold Coast at the time. They got the name ‘Big Six’ when they were detained by the colonial authorities in 1948. They were featured on the front of all the new Ghana Cedi notes in 2007 by the then NPP government to reward them for their courage and sacrifice.

 

Let it be reminded that the then opposition NDC campaigned vigorously against the redenomination exercise and questioned the prudence in introducing a currency at a great cost. The exercise turned out to be a positive step for Ghana.

 

Among some of the security features introduced for GH¢ 2 note are a watermark with highlight “2”, a security thread, Gold-Iridescent latent image, which shows the figure 2 in different shades, and recognition marks for the visually impaired.

 

 

  

 

The Bank of Ghana says it will modify the size of the one Ghana pesewa (1Gp) coin.

 

In a statement released on April 20, 2010, the central bank said it has begun a survey to solicit ideas from the general public regarding the appropriate size for the coin. The Bank has also denied an April 19, 2010 publication by the Financial Intelligence newspaper which said the central bank was planning to release new two pesewa coins soon.

 

The one Ghana pesewa since it was introduced in 2007 has not been accepted by many Ghanaians. A public opinion sampling conducted by the GNA in February 2009 showed that the one Ghana pesewa coin is not easily accepted among the public either for purchases or change. According to the survey some buyers prefer to let vendors keep the coin, rather than to collect it as change. In few instances, some people even refuse to accept the one pesewa coin as legal tender, a situation which requires prompt action from authorities to step up education to drum home the fact that irrespective of its value, the coin remains a legal tender.   

 

 

A history of the Ghana Cedi

 

Redenomination of the Cedi is not new in Ghana’s history. The first Cedi was introduced in 1965, replacing the pound at a rate of 2.4 cedi per 1 pound, or 1 pesewa per 1 penny.

 

It was replaced in 1967 by a 'new cedi' which was worth 1.2 first Cedis. This allowed a decimal conversion with the pound, namely 2 second Cedis per 1 pound. The change also provided an opportunity to remove Kwame Nkrumah’s image from coins and notes.

 

The second cedi was initially pegged to the British pound at a rate of 2 cedi per 1 pound. However, within months, the second cedi was devalued to a rate of 2.45 second cedi per 1 pound, less than the value of the first cedi. This rate was equivalent to 1 cedi per 0.98 US Dollar and the rate to the dollar was maintained when the British pound was devalued in November 1967.

 

Further pegs were set at $0.55 in 1971, $0.78 in 1972 and $0.8696 in 1973 before the currency was floated in 1978. High inflation ensued, and so the cedi was re-pegged at ¢2.80 per $1.00.

 

Inflation continued to eat away at the Cedi's value on the black market. In the early 1980s, the government started cracking down hard on the retail of products at prices other than the officially established sale price (price controls).

 

This had the effect of driving nearly all commerce underground, where black market prices for commodities were the norm, and nothing existed on store shelves. By 1983, the cedi was worth about 120 to one US dollar on the black market. A pack of cigarettes cost about ¢150 (if they could be found).

 

With foreign currency completely drying up for all import transactions, the government was forced to begin a process of gradual devaluation, and a liberalization of its strict price controls. This process ended in 1990 with a free float of the cedi against foreign currencies.

 

Inflation continued until July 2007, when the cedi was worth about 9500 to one US dollar, and a transition to the third cedi was initiated. In 1979, a currency confiscation took place. New banknotes were issued which were exchanged at a rate of 10 old for 7 new. Coins and bank accounts were unaffected.

 

A second confiscation took place in 1982, when the ¢50 note (the highest denomination) was demonetized. Ghanaians, in theory, could exchange any number of ¢50 notes for coins or other banknotes without loss, but foreigners could not make any exchange.

 

However, many Ghanaians who were hoarding large amounts of Cedis feared reprisal if they tried to convert all of it, and so simply burned a lot of their money.

 

Many other Ghanaians received "promise payment notes" from the banks, but never received compensation. This confiscation was publicly justified as a means to create a disincentive for the flourishing black market.

 

However, from a monetary perspective, currency confiscations have the effect of reducing the available cash in the economy, and thereby slowing the rate of inflation. After the ¢50 note confiscation, the ¢20 note was the highest cedi denomination, but had a street value of only about $0.35 (US).

 

After the ¢50 note confiscation, fears existed that the government could also confiscate the ¢20 or even the ¢10 notes. This fear, along with inflation running at about 100 per cent annually, started causing the Ghanaian society to lose faith in its own currency. Some transactions could only then be done in foreign currencies, and other more routine transactions began to revert to a barter system.


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