West Africa: Ghanian Cedi Plummets; 33 of 36 Nigerian States Flooded

Written by Osetemega Iribiri

October 24, 2022

The Cedi, Ghana’s national currency, has depreciated by 47% against the dollar, making it the worst-performing currency to the dollar. Further, its annual inflation stood at 37.2% in September, the worst in twenty-one (21) years. Consequently, members of the Ghana Union of Traders Association suspended commercial activities in the nation’s capital, Accra, for three days starting from Wednesday. This action was their message to the government to express their frustration over the weakening currency, surging inflation, high lending rates, over 50% reduced profit margin, and increased cost of living. Ghana’s central bank raised its lending rate by 10% to tame price growth, bolster the currency and lure back foreign investors. Unfortunately, this move increased traders’ borrowing costs.

In July, the Nana Akufo-Addo-led government engaged the International Monetary Fund (IMF). It seeks a $3 billion relief package to inject into the economy. Although Ghana’s finance ministry is trying to fast-track this process, the response has been slow as the IMF requires a debt sustainability plan before lending. Ghana has also witnessed the exit of foreign investors over concerns about the country’s debt sustainability.

Ghana is not just going cap in hand to the IMF; it is seeking ways to improve the economy. Ghana Statistical Services revealed, despite the economic downturn, the economy grew by 4.8% in Q2 2022, an upward progression from 3.4% in Q1 2022. This was a consequent effect of the cumulative growth in the manufacturing, crops and cocoa, mining and quarrying, information and communication, and education sectors.

Ghana is the second largest economy in West Africa, following Nigeria, the largest in the continent.

Nigeria is also facing economic setbacks. In a preemptive move, Nigerian Liquefied Natural Gas (NLNG) declared force majeure due to Nigeria’s high flood water levels. In a tight global market, the company is temporarily cutting off its 22 million tonnes/annum production capacity export terminal at Bonny Island, Rivers State.

NLNG was developed to monetize Nigeria’s vast quantity of flared gas oilfields. Also, it became an effective alternative for Europe, especially with winter drawing near, as Russian gas supplies fell. Portugal relies heavily on NLNG gas. NLNG primarily supplies gas to Galp Energia, a Portuguese gas company. Nigeria is heavily reliant on petroleum revenue. Therefore, this shutdown will plummet Nigeria’s IGR.

The flooding began in June 2022. Currently, 33 of Nigeria’s 36 states are flooded. Over 600 people dead, millions displaced, thousands injured, and road networks cut off. Homes, classrooms, health care centers, private and commercial buildings, food storage facilities, and farmlands are destroyed, and food supply chains are disrupted. Citizens have resorted to canoes as means of transportation in affected areas. This is the deadliest flood in twelve (12) years.

In the form of persistent rainfall, climate change is partly to blame for this flood. The other factor is the release of water from Cameroon’s Lagdo Dam. The dam began operating in 1982 and is located on Cameroon’s side of River Benue. Its construction was intended to supply electricity to the parts of Nigeria and allow the irrigation of 15,000 hectares of crops downstream. Still, states in Nigeria’s North-East, namely Borno, Adamawa, and Taraba, are usually flooded whenever water is released. As a countermeasure, the Nigerian government was to embark on a similar project along River Benue. The purpose was to contain the flood water released upstream from Lagdo Dam and prevent flooding and the attendant consequences. However, the dam, which was to be in Adamawa State, was never built.

This incident affects Nigeria’s economy, security, education, and health sectors. Health authorities warn of potential cholera and malaria outbreak in affected areas. This incident compounds Nigeria’s humanitarian crisis and increases the number of internally displaced persons (IDPs) already fueled by Boko Haram insurgency.

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