The Effects of The Depreciation of The Ghana Cedi on Foreign Direct Investment in Ghana

ABSTRACT

This study was primarily to ascertain the relationship and by extension the effect that the depreciation of the Ghana Cedi has on the inflow of foreign direct investments (FDI) into Ghana. The study employs secondary data from the Central Bank of Ghana database, World Development Indicators, National Statistical Service and the Ministry of Energy over a seventeen-year period from 2002 to 2016. The correlation analysis established that; currency Depreciation has an inverse relation with the inflow of FDI with a correlation coefficient of - 0.58 The regression results which is consistent with the correlation results also buttressed the fact that there is an inverse relationship betweem currency depreciation and Foreign Direct Investment (FDI) into the country. It, therefore, implies that the continuous depreciation of the local currency will reduce the amount of FDI that will flow into the country. It was also ascertained that there was a steep increase in the flow of FDI into the Ghanaian economy between 2002 to 2016. Even though the receipt of FDI into the country is on the upward trajectory, it should be mentioned that this is still very low as compared to the volume of FDI received by other countries in other regions of the world. As a result, it can be said that the concentration of policy should be geared towards maintaining favourable levels of depreciation of the local currency as it influences the volume of net Foreign Direct Investments that are received into the economy