Wednesday, March 31, 2010

NDC KILLS ‘Big Six’ from Cedi Notes

Cedi is the currency of the republic of Ghana

By William Yaw Owusu

Wednesday march 31, 2010
It may sound funny and petty but credible information sipping in strongly suggests that the National Democratic Congress (NDC) government intends to remove pictures of the ‘Big Six’ from the new Ghana Cedi notes.

The decision, if confirmed, is likely to spark another heated political debate between the ruling party and the opposition parties, particularly the New Patriotic Party (NPP) whose government introduced the current Ghana Cedi in July 2007, following a redenomination of the old Cedi.

Daily Guide intelligence has gathered that the government will take advantage of the introduction of the GH¢2 denomination to phase out the existing Ghana Cedis notes with pictures of the ‘Big Six’. According to the information, the phasing out process, which will see a replacement with the portrait of Osagyefo Dr. Kwame Nkrumah alone, is going to be a gradual one.

A source at the Bank of Ghana (BoG) was specific that anytime the government orders the printing of more Ghana Cedi Notes, would mark the beginning of the replacement process, adding that the directive is ‘from above’.

“The pressure is coming from the Castle. There is a calculated attempt to delete the Danquah/Busia/Dombo tradition from the country’s history. As we sit here it is a done deal. All is set for the pictures to be removed”, the source hinted.

When the Daily Guide called Esi Hammond, Public Relations officer of the Bank of Ghana on her mobile phone to enquire about the issue she said “I have no idea. I am not aware of any such decision. I am currently on a holiday. All that I know is we are working on modalities on how to educate the public on the GH¢2 note which will be coming,” she explained.

She later directed Daily Guide to speak to Mr. Alex Bernasko, the Bank’s secretary who is also a member of the committee working on the introduction of the GH¢2 but was told he had been in a long meeting.

The big six, who included 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 following disturbances which led to the killing of three World War II veterans on the 28th February Crossroads.

They were featured on the front of all the new Ghana Cedi notes (GH¢: 1, 5, 10, 20, 50) by the then NPP government to reward them for their courage and sacrifice.
The then opposition NDC during the redenomination exercise in 2007 campaigned vigorously against the exercise and questioned the prudence in introducing a currency at great cost.

They had accused the Bank of Ghana of not being entirely forthcoming about the cost of the redenomination and claimed too much money had been spent on an effort to merely ease the inconvenience of carrying too much cash around.

"If Ghana's consumer price index stands at an enviable 10. 5 percent, with the cedi showing a low depreciation rate against the major currencies, why redenominate now?" the, NDC's spokesperson on finance at the time and the current Health Minister, Dr. Ben Kunbuor, asked during a press conference in 2007.

Redenomination of the Cedi is not something 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. The first cedi was pegged to the British Pound at a rate of 2.4 cedis per 1 pound.

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 of $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 official 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), but the bank rate continued at ¢2.80 per $1.00.

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 by July 2007, 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 for old 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 Ghanaian society to lose its 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 economy.

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