By Felix Larry Essilfie (PhD)
Ghana’s recent exchange‐rate rebound has delivered tangible relief to importers, but retail prices have stubbornly refused to follow suit.
This puzzling disconnect underscores how entrenched interests and institutional gaps distort the passage of macroeconomic gains into consumer welfare.
In theory, a strengthening cedi should lower the domestic currency prices of imported goods, alleviating inflationary pressures. In practice, however, retail prices often remain elevated long after the exchange rate has firmed, suggesting deep‐seated structural impediments to efficient price transmission.
These frictions arise from concentrated market power, regulatory deficiencies, and informational opacity, all of which call into question the laissez‐faire assumption that competitive forces alone will guarantee fair pricing.
The heart of the matter lies in the confluence of profit maximization, power consolidation, and policy inertia. Large importers and powerful trade associations possess both the capacity and incentive to sustain supra‐competitive mark‐ups when the cedi appreciates, effectively insulating their margins from currency‐driven cost reductions.
Their market dominance allows them to coordinate pricing behind thin screens of legal compliance, deploying minimal regulatory pushback to thwart price cuts. This behavior contravenes the Law of One Price and typical exchange‐rate pass‐through models, which presuppose that retail prices adjust symmetrically to currency movements.
Instead, Ghana’s retail sector exhibits pronounced price stickiness, particularly for staples and imported consumer goods.
The regulatory architecture in Ghana has historically tolerated selective state intervention in certain sectors—fuel prices are benchmarked through a formula overseen by the National Petroleum Authority, and medicines face negotiated ceilings under the National Health Insurance Authority—yet broader retail pricing remains unregulated.
This laissez‐faire stance rests on the notion that market liberalization and minimal state interference will eventually yield efficient outcomes.
Yet, in the face of a 16 percent cumulative appreciation of the cedi since early 2025, retailers have rarely passed on more than a third of the cost benefit to consumers. Such inertia exacerbates inflationary pressures, eroding real incomes—especially for low‐ and middle‐income households whose budgets are heavily skewed toward essential goods.
The macroeconomic impulse of a stronger currency is therefore blunted, undermining monetary policy efficacy and accentuating social discontent.
A well‐designed Price Regulatory Commission (PRC) could address this market failure without upending Ghana’s market‐oriented ethos.
Drawing on Stigler’s theory of regulation, powerful market actors often shape policy outcomes to entrench their advantages; a PRC would invert this dynamic by empowering neutral technocrats to monitor price behavior, mandate transparency in cost structures, and sanction collusive or predatory pricing practices.
North’s institutional economics framework emphasizes that formal and informal rules shape economic performance—highly concentrated retail markets require robust oversight to ensure that informal norms of overcharging do not supplant formal rules of fair competition.
A PRC could implement routine market reviews, publish cost‐to‐price analyses, and issue binding guidelines for acceptable mark‐ups on imported goods. Such an agency would neither supplant market signals nor impose arbitrary price ceilings but would instead focus on enforcing competition and transparency, thereby restoring the link between exchange‐rate gains and consumer prices.
Implementing a PRC in Ghana, however, requires careful institutional engineering. Unlike the National Petroleum Authority or the Public Utilities Regulatory Commission—already enshrined in legislation with well‐defined mandates—a PRC would need a bespoke legislative framework.
This law must delineate its scope (e.g., oversight of retail pricing for imported consumer goods and staples), establish procedures for data collection and analysis, and grant enforcement powers (fines, injunctions) against malfeasant actors.
Coordinating among existing institutions is equally critical: the Bank of Ghana’s price tracking, the Ghana Statistical Service’s Consumer Price Index data, and the Ghana Revenue Authority’s import records would all feed into the PRC’s market surveillance.
Robust data analytics capabilities are non‐negotiable; without granular information on import costs, distribution margins, and retail prices, the PRC cannot identify distortions or measure compliance.
Precedents elsewhere lend valuable lessons. South Africa’s Competition Commission has successfully pursued retail cartels, notably the bread‐price fixing scandal, where coordinated enforcement shattered entrenched oligopolistic collusion.
That body’s quasi‐judicial powers—investigation, adjudication, and sanction—demonstrate the deterrent effect of credible enforcement.
Ghana’s PRC could mirror such a model, though adapted to local realities: rather than stand alone as a full‐blown competition authority, it might be nested within the Ministry of Trade and Industry but endowed with operational autonomy and technical resources.
Similarly, Kenya’s short‐lived Price Control Act of 2011 revealed the perils of heavy‐handed intervention absent rigorous market diagnosis; price ceilings imposed without empirical support led to shortages and grey‐market surges.
Ghana’s PRC must therefore avoid blunt instruments; its role would be to set enforcible guardrails—minimum pass‐through rates, maximum allowable mark‐ups—rather than fixed price level targets.
Ghana itself offers an instructive microcosm: the fuel pricing mechanism, which transparently adjusts pump prices based on international benchmarks and verifiable logistics costs, has generally succeeded in aligning retail fuel prices with world market movements, notwithstanding occasional delays.
Likewise, the NHIA’s negotiation of generic medicine prices under a formulary has kept drug costs contained while preserving supply. These sector‐specific successes rest on formula‐based transparency and legal backing.
Extending comparable principles to imported consumer goods would require systematic disclosure of landed costs (including insurance, freight, duties, and taxes), and mandating retailers to publish consumer prices alongside a breakdown of their cost components.
Beyond technical design, political economy considerations are paramount. Retail associations, importers, and logistics firms constitute a powerful coalition. Their opposition to a PRC would likely center on perceived risks to profit margins and fears of experimentation with price controls.
To mitigate resistance, policymakers must frame the PRC’s mission clearly: it is not an antitrust enforcer in the European style, nor a populist price‐setting agency, but an arbiter of transparency and fairness.
Engaging trade associations early through stakeholder consultations can build a sense of co‐ownership. Potential quid pro quos—such as streamlined customs procedures, reduced bureaucratic red tape, and targeted support for small retailers—could alleviate fears and secure acquiescence.
The design of the PRC’s governance must preclude politicization: commissioners should be appointed through a multi‐stakeholder process involving parliament, civil society, and expert panels, with fixed terms and insulated tenure to resist election‐year cargo‐cult influences.
Between January and May 2025, the cedi appreciated by roughly sixteen percent against the US dollar, a realignment that the Bank of Ghana anticipated would sharply reduce imported inflation.
In practice, however, consumer price inflation fell only modestly over the same period—from 23.8 percent in January to 21.2 percent in May—indicating a mere 2.6 percentage‐point deceleration rather than the more substantial decline implied by the foreign exchange gain.
This disconnect complicated the central bank’s policy calculus, as opaque retail‐price adjustments concealed the true impact of exchange‐rate improvements on household costs.
Had retail prices reflected the cedi’s strength more fully and transparently, the Bank of Ghana could have credibly signaled policy‐rate reductions earlier in Q2 2025, thereby alleviating borrowing costs and supporting credit growth.
Instead, inflation expectations among urban and formally employed households remained anchored near 21 percent, while rural and low‐income populations—whose expenditures are disproportionately on food and transport, categories heavily dependent on imported inputs—continued to bear elevated price pressures.
Empowering a Price Regulatory Commission to ensure more timely pass‐through of exchange‐rate gains would have strengthened monetary policy transmission, allowing the central bank to better anchor expectations and bolster financial stability.
One must also consider the risk that a PRC, if poorly grounded, becomes a tool for rent capture. Ghanaian history is replete with agencies created in good faith but gradually repurposed to serve cronies.
The PRC’s design must therefore incorporate rigorous accountability: periodic audits by the Auditor‐General, public disclosure of investigations and enforcement actions, and mechanisms for stakeholder appeals. Civil society organizations and consumer rights groups should have defined roles in monitoring PRC performance and convening public hearings.
By institutionalizing transparency—from board appointments to case adjudications—the PRC can minimize space for rent‐seeking. Effective sanctions (e.g., fines proportional to the excess margin at issue) must be credible enough to deter collusion without driving retailers into unregulated informal channels.
Retailers often cite high input costs and logistics bottlenecks as justifications for elevated margins. While some of these costs are genuine—fuel, port fees, and taxes do represent real burdens—the gap between wholesale and retail prices frequently exceeds reasonable profit thresholds.
Empirical analysis using vector error correction models reveals that, following a 10 percent cedi appreciation, a fully competitive retail sector would reduce prices by about 8–9 percent within three months. In Ghana’s case, survey data shows only 2–3 percent pass‐through within the same window. This asymmetry implies that import costs are only partially reflected in consumer prices.
A PRC should require firms to document cost components—negotiated freight rates, financing costs, and distribution margins—and benchmark them against regional peers. When discrepancies exceed set thresholds, the commission could initiate investigations or require corrective rebates to consumers.
International experience offers further guidance. Australia’s grocery code of conduct mandates standard trading terms and dispute‐resolution mechanisms between supermarkets and suppliers, reducing unfair margin‐squeezing practices.
Although Ghana’s retail structure is not as centralized, a similar code for basic imports—rice, wheat, milk powder—could require importers to submit cost worksheets to the PRC quarterly, enabling rapid identification of outliers.
In Brazil, a consumer protection prosectorate collaborates with competition authorities to monitor price movements; a Ghanaian equivalent could similarly leverage data analytics to flag suspicious deviations.
Ultimately, the PRC must be more than a policing body; it must also serve as a facilitator of market efficiency. It can promote voluntary codes of conduct—drawing on retailers, wholesalers, and transporters—to commit to prescribed pass‐through rates.
By convening regular “price roundtables,” the PRC can bring together stakeholders to review cost trends, share best practices, and accommodate legitimate business concerns. This consultative approach, while maintaining enforcement teeth, will cultivate a culture of compliance rather than confrontation.
In sum, Ghana’s price‐setting architecture currently fails to translate macroeconomic gains into consumer benefits. Exchange‐rate pass‐through asymmetries, enabled by concentrated market power and regulatory vacuums, have allowed retailers to sustain high prices despite significant cedi appreciation.
A well‐crafted Price Regulatory Commission, endowed with data‐driven oversight, enforcement authority, and safeguards against politicization, could rectify this distortion.
By mandating transparency in cost structures, monitoring mark‐up behavior, and fostering stakeholder collaboration, the PRC would restore the credibility of economic reform and improve welfare. The alternative—a continuation of unchecked price rigidity—risks entrenching inflationary pressures and undermining public trust in macroeconomic policy.
As Ghana recovers from inflationary shocks and seeks to anchor price stability, the time has come to place profit, power, and policy under greater scrutiny.
Institutional innovation in the form of a PRC is the logical next step for a maturing democracy intent on ensuring that households, not just market incumbents, share in the gains of a stronger cedi.
By bridging the gap between currency movements and consumer prices, Ghana can reinforce its monetary framework, protect the real incomes of the vulnerable, and foster a more competitive, transparent retail sector.
The writer is the Executive Director, IDER
