Exchange-rate gains and consumer relief: Quantifying cedi pass-through in the retail markets

By Felix Larry ESSILFIE (Ph.D)

The remarkable strengthening of the Ghanaian cedi between January and May 2025 has created a window of opportunity for consumers, provided exchange‐rate gains are transmitted through to retail prices.

Over this interval, the cedi appreciated by 22.55% against the US dollar, 16.63% against the British pound, and 16.12% versus the euro (Table 1).

This trajectory of appreciation was fostered by a combination of tight monetary policy—evidenced by the maintenance of the policy rate at 28.0% in May—and robust fiscal consolidation, which together bolstered both reserve buffers and market confidence.

Table 1: Percentage Appreciation of the Ghanaian Cedi against Major Currencies (Jan–May 2025)

Source: Bank of Ghana, Summary of Economic and Financial Data – May 2025

By translating the cedi’s appreciation into lower foreign‐currency costs at the point of import (“landing costs”), downstream price adjustments become feasible. Assuming full pass-through of exchange gains, rice and cooking oil—both typically invoiced entirely in US dollars—would see landing‐cost reductions mirroring the 22.55% US‐dollar gain.

Electronic goods, often invoiced across multiple currencies, would experience a weighted decline of approximately 21.32%, assuming an 80% share of USD invoices, 10% EUR, and 10% GBP (Table 2). These proportional falls highlight the mechanical potential for importers to source goods more cheaply in cedi terms, though actual behaviour hinges on competitive pressures and regulatory oversight.

Table 2: Proportional Declines in Import-Landing Costs for Selected Commodities

Source: Bank of Ghana, Summary of Economic and Financial Data – May 2025. ¹Typical invoicing shares

The pass-through of these landing‐cost declines into consumer‐facing prices is not instantaneous or necessarily complete. To quantify the implied gains under both full (100 percent) and conservative partial (80 percent) pass-through scenarios, Table 3 applies the calculated proportional falls to representative January 2025 retail prices.

Under full pass-through, rice at GH₵ 5.00 per kilogram would fall to GH₵ 3.88 (a saving of GH₵ 1.12), while cooking oil at GH₵ 15.00 per litre would decline to GH₵ 11.62 (GH₵ 3.38 saved).

Electronic goods with an average unit price of GH₵ 2,000.00 would drop to GH₵ 1,573.60 (GH₵ 426.40 saved). Even under an 80 percent pass-through, meaningful reductions accrue: GH₵ 0.90 per kilogram of rice, GH₵ 2.71 per litre of cooking oil, and GH₵ 341.12 per electronic unit.

Table 3: Impact of Cedi Appreciation on Retail Prices and Consumer Savings

Source: Authors’ calculations based on Tables 1 and 2

From a macroeconomic perspective, these reductions in staple‐food and durable‐goods prices translate into enhanced real incomes. A low‐income household purchasing 20 kg of rice and 5 L of cooking oil monthly would realize monthly savings of GH₵ 22.40–18.00 and GH₵ 16.90–13.55 respectively, depending on pass-through efficacy.

Such savings can alleviate cost‐of‐living pressures and stimulate spending in other sectors, supporting aggregate demand without stoking inflation—a critical consideration for the Bank of Ghana’s inflation‐targeting framework.

However, incomplete pass-through remains the norm in many developing economies, owing to factors such as market concentration, information asymmetries, and weak regulatory enforcement. In Ghana, retail markets for staples and energy are often dominated by a handful of wholesalers and importers, who may be incentivized to retain foreign‐exchange windfalls as extra profit.

Moreover, logistical bottlenecks, distribution costs, and value‐added taxes can attenuate the mechanical cost savings implied by exchange‐rate movements. The theoretical upper bound of full pass-through must therefore be tempered by the political economy of retail price setting.

To strengthen the linkage between exchange‐rate gains and consumer welfare, a multi‐pronged policy approach is warranted. First, the establishment of a dedicated Price‐Pass-Through Committee—comprising representatives from the Bank of Ghana, the Ministry of Trade and Industry, consumer advocacy groups, and market regulators—could monitor monthly retail‐price movements for vulnerable commodities and issue directives when unexplained deviations from exchange‐rate‐driven benchmarks occur.

Second, enhancing market transparency through a publicly accessible dashboard of import‐landing costs and corresponding retail prices would empower civil society and the media to hold traders accountable.

Third, targeted support for small and medium-sized importers—via temporary tariff waivers or expedited customs procedures—could diversify supply sources and intensify competition, exerting downward pressure on retail margins.

Ultimately, the political economy of state‐market interaction in Ghana must reconcile the dual objectives of preserving market incentives and safeguarding consumer welfare.

The Bank of Ghana’s monetary tightening created the conditions for cedi appreciation, but fiscal authorities and regulatory agencies bear responsibility for ensuring that these macro gains materialize in everyday price relief.

Effective coordination between fiscal and monetary institutions, bolstered by transparent data and stakeholder engagement, is essential to deliver on the promise of stronger purchasing power.

The case of January–May 2025 serves as a potent reminder that macroeconomic policy transmission is not confined to interest‐rate corridors or foreign‐exchange interventions; its true measure is felt in the markets where citizens purchase food, fuel, and durable goods.

By institutionalizing mechanisms for real‐time monitoring and enforcement of exchange‐rate pass-through, Ghana can both deepen its market reforms and reinforce public confidence in the state’s capacity to translate macroeconomic stability into tangible welfare gains.

The author is the Executive Director, IDER

Email: [email protected]