MINORITY STATEMENT ON THE INTRODUCTION OF NEW HIGHER-DENOMINATION BANKNOTES AND

COINS

1.The Bank of Ghana is reported on Friday November 29, 2019 to have issued two higher-denomination
of the Ghana cedi notes GHS 100 and 200 and a GH¢2 coin which replaces the withdrawn 2-cedi notes.
Ghanaians will recall that in May this year the Central Bank introduced upgraded Cedi notes. Ghanaians
are still waiting for the Governor of the Central Bank to render account of the cost of printing the
upgraded currency.

2.The Governor of the Bank of Ghana has offered unsatisfactory explanation for printing the higher-
denomination cedi banknotes. Among the reasons given for the exercise include that, the new higher
denomination notes “will complement the existing series to ensure customer convenience and bring
about efficiency in the printing of currency to generate savings for the country”. This amounts to an
affront to the paperless economy.

3.The Central Bank Governor also argued that “These new higher value denominations will restore the
dollar value of the higher denomination to about US$40, not quite close to levels in 2007, but high
enough to significantly reduce the deadweight burden and high transaction cost in making high-value
purchases in a cash-based economy like Ghana”. The Minority finds this very disappointing and absurd.
Do we have a dollar-peg as our currency regime in Ghana?

4.We were made to believe that simply increasing the currency bound would suddenly increase our
economic fortunes compared to the United States. The determinants of long-term growth are well
known and include variables such as factor productivity growth and investment, amongst others.
Moreover, Ghana does not have a parity regime with the US-dollar and therefore no reason why we
should seek to have the cedi indexed to the US-dollar, and it is surprising the Governor is actually
making such an argument. What we have in place is a managed floating regime whereby the Bank of
Ghana intervenes in the foreign exchange markets to smooth-out excessive volatility.

5.The NPP government is obsessed with the nominal movements of the cedi, because what matters are
the real movements, which takes account of inflation. For example, if really inflation is at a 5-year low of
7% currently, then the cedi could be well aligned in real terms irrespective of the cedi depreciation this
year. No need to seek to attain a particular parity with the US-dollar. It is an exercise in futility.

6.In discussing such issues of high currency denominations, it is helpful to relate these to the size of a
country’s GDP. For example, it is misleading to assert that the US has $100 notes and hence Ghana must
also have some parity of notes. This is an exercise in futility which has to be looked at in the appropriate
context. For example, Ghana’s GDP is about $48 billion compared to US GDP of $19,390 trillion which is
over 400 times bigger. What is therefore the basis for Bank of Ghana to have a high value denomination
of the cedi compared to the US?

7.China has a GDP of $12,237 trillion and its highest denomination is 100 Yuan which is just equivalent
to $16 dollars. The United Kingdom has the 50 Pound Sterling note with a GDP of $2.622 trillion. Brazil
has its highest denomination as R$100 with a GDP of $2,055 trillion. Even Nigeria, with GDP of $500
billion (10 times more than Ghana’s GDP) has its highest denomination (N1,000) equivalent to only $3.6
dollars. Finally, South Africa has its highest denomination as R200, equivalent to $13.7 dollars with GDP
of $349.4 billion which is about 7 times bigger than Ghana’s GDP. What is the cedi’s equivalence to the
US dollar? Why then would Ghana want to have its highest denomination equivalent to $40 dollars?

8.What the Central Bank is doing is simply an exercise to raise seigniorage revenue. By seigniorage
revenue, the Central Bank is going to make profit from difference between the face value of the new
currency and cost of printing each currency. For instance, if it will cost the BoG GH¢10 to print a unit of
currency that has a face value of GH¢200, the profit of GH¢190 on each unit of currency is the
seigniorage.

9.The Central Bank is likely to be making a profit of about GH¢3.8 billion if it prints 20 million pieces of
the GH¢200 notes. The Central Bank engineers this kind of revenue because they have sole monopoly to
issue the monetary base of the country. In practice, this kind of currency engineering is usually
accompanied with inflation which causes the holder of real money balances to lose.

10.The NPP government needs to be reminded that even though the newly issued higher denomination
notes could provide a “revenue” string for the government, it may be accompanied by a corresponding
inflation that will be at a cost to the good people of Ghana. Why would the Bank of Ghana claim to be
striving to control inflation at great cost by mopping up excess liquidity using short-term Bank bills, and
then engage in an action that will cause massive inflation?

11.There is absolutely no economic justification for the Central Bank’s decision. The Central Banks own
economic and financial data reveals that current money growth is not below the optimal rate. The latest
data from the Bank of Ghana as at the end of October 2019 suggests that reserve money growth was
26.1 percent in October 2019 as compared to 4.3 percent in the same period last year. Narrow money
(M1) also recorded a spike of 22.6 percent in October 2019 as compared to 14 percent recorded in the
same period a year ago.

12. We in the minority are not oblivious with the fact that Central Banks across the globe do undertake
periodic reviews (between 5 to 10 years) of the structure and design of their currencies. Indeed this was
why the effort started in 2016 under the NDC administration with new design concepts for all the
denominations of the Cedi.

13.The idea was to replace the denominations with enhanced security features may be desirable but the
timing is questionable and to phase out the 1 Cedi-Note such that the 2-Cedi note would become the
coin/note boundary. This is what could actually save printing costs since the 1-cedi note is susceptible to
destruction more from pressure of usage.

14.The new designs were to be used to recognize illustrious citizens such as Yaa Asantewaa, Madam
Esther Ocloo, Dr. James Emmanuel Kwegyir Aggrey, the late Archbishop of Tamale, Peter Cardinal
Porekuu Dery, etc. Unfortunately, these have been discarded by the current administration and the
portrait of the big six alone maintained.

15.We are living in times when most countries are rather eliminating higher value denominations in the
fight against terrorism and other criminal activities. It is a fact that these higher value notes often fuel
illegal activities and also become targets for counterfeiting. The recent article by Kenneth Rogoff “The
Curse of Cash: How Large-Denomination Bills Aid Crime and Tax Evasion and Constrain Monetary Policy”
is a good reference.
16.It is a fact that high value transactions mainly occur in Accra, Kumasi, and perhaps Takoradi. The
irony here is that payments services as well as other banking services are not lacking in these areas at
all. For example, one can pay in a high value cheque and obtain a same day clearing free of charge.
Hence the 50-note could have remained as the highest denomination because the rest of the country
often does not circulate the high value notes because their types of transactions do not require these. Is
the NPP government faithful to its quest for a paperless economy?

17.Moreover, the additional burden of obtaining a change to complete a transaction makes it highly
unattractive. Indeed a 5-band currency structure (2-cedis, 5-cedis, 10-cedis, 20-cedis and 50-cedis) is
very much in line with best practice among Ghana’s peers such as South Africa and Nigeria. This
approach would be more cost effective and would also facilitate economic transactions as well as
promoting the usage of coinage especially the 1-cedi coin.

18.Sadly, the Bank of Ghana is engaging in this waste of public resources at a time when its own balance
sheet is in a very precarious state and needing re-capitalization. Another critical issue must be why the
Bank of Ghana is refusing to disclose the cost of printing the new 100-note and 200-note. If there was
indeed such great need for the high value notes, the Governor must rather be happy to give the public a
full transparent disclosure of the cost.

19.The Minority's position is that the Central Bank must be stopped immediately. What happened to the
amount of money the Bank of Ghana made from issuing the upgraded currency in May this year? The
Governor must account properly to Ghanaians for that transaction as well.

20.We shall in the coming days be initiating steps to summon the Governor of the Bank of Ghana to
appear before the house and present a detailed report on the exercise, which must include the total
cost incurred, cost of each note compared to its face value, the utilization of the seigniorage revenue to
be raised, and the quantity of each note ordered. These are public resources being expended, hence the
Government owes it a duty to be transparent about the exercise.

21.We hope the amount of revenue to be raised as seigniorage will not be used to fund the 2020
campaign of the NPP.

22.We intend to also invite the Minister of Finance to Parliament to clarify Government's position on
Ghana’s earlier commitment to adopt the new regional ECO currency in January 2020.

23.We hereby serve notice that a future NDC government to be inaugurated in 2021 will conduct a
forensic audit into this entire exercise as well as others, which would focus on the individual roles played
by the members of the Bank of Ghana Board and friends and family of President Nana Addo Dankwa
Akufo-Addo.

Thank you for your attention.

#RescueMission2020