Trading in the dark: Why Ghana’s black forex market thrives despite crackdown

When Ahmed Yaya, a black-market operator, was nearly arrested together with three others for illegally operating a forex bureau on the shoulders of the road, he thought that was the end of his trade. 

Facing all the trouble from the police and the fear of being incarcerated, he vowed never to continue with the business without a license. 

He, thus, took steps to acquire the license. However, the process, according to him, was thwarted because it was arduous and filled with bureaucratic hurdles.

Then, with a wife and a child to take care of and no other source of income, he found himself in a dire situation. Family pressure, coupled with financial difficulties, compelled him to return to the streets.

The Fourth Estate in its recent investigations has uncovered a troubling trend: high bureaucratic barriers and inflexible bank rates are pushing both buyers and sellers into the arms of the illegal black market. 

Despite the personal and larger economic risks involved, individuals like Ahmed Yaya are compelled to operate outside the law due to the formidable obstacles posed by official channels. 

As Ahmed aptly puts it, “[Even though] the police always chase us away, we will always come back. Even if they come after us a hundred times, we will flee and return the next day [because] the system leaves us with no choice but to turn to the streets.”

Such is the reality of Ghana’s Foreign Exchange (Forex) black market, where individuals participate in the illegal exchange (selling and buying) of foreign currency through unauthorized channels to circumvent government price controls. They operate without a license and since their transactions are undocumented, both sellers and buyers manage to evade government payments, including taxes, and other regulatory measures, risking financial sanctions and prison time. 

The Bank of Ghana has also, on various occasions, cautioned the public against dealing, engaging or trading with illegal forex traders, arguing that apart from potential dangers to the individual, they pose larger existential risks to the Ghanaian economy, by devaluing the Ghana Cedi and money laundering, enabling illegal activities such as terrorist financing, and contribute to inflation. The Forex black market operators have also been accused on several occasions of hoarding dollars. 

Hoarding dollars, experts contend, creates discrepancies between black market rates and official rates that can result in notable differences in purchasing power. 

“If you hoard the dollar, then you’re cutting the flow of the currency,” said the President of the Ghana Union of Traders Associations (GUTA), Dr Joseph Obeng.

“They [black market brokers] also speculate. They can read the system and know that at this time, the rate is falling and if we hoard it for about a week, it will drop, and we will get this much profit.”

Easy access, better rates

To ascertain why a customer would choose the black market over the appropriate channels, The Fourth Estate visited some banks to trade in Forex. In the course of the investigations, it was revealed that without being a customer of a particular bank, you cannot change/trade in foreign currency with them. 

“We can’t do it over the counter, this is not a Forex Bureau,” a bank teller said. “Do you have an account with us?” another inquired and when the response was ‘no’, she categorically stated that, “we cannot do it for you if you don’t have an account with us.” This means that individuals are only allowed to legally exchange foreign currency at their own banks. Consequently, banks set noncompetitive rates, driving customers to the black market for currency exchange.

It also appears the systems are not favorable to the ordinary Ghanaian who would want to trade in foreign currencies like Yakubu, who insists on being identified with only his first name. A trader, he says he prefers the forex black market for its convenience and better rates. 

During The Fourth Estate’s conversation with him, Yakubu mentioned that dealing with the bank for forex trading is quite a hassle. He explained how they asked for his Ghana card, passport, and other documents, making the process slow. Comparatively, he found the black market much easier, where transactions are quick and straightforward. He added that just filling out a form and completing a transaction at the bank took him about an hour for a single transaction.

In addition to their inefficiency, the exchange rates that banks set are also uncompetitive, while consumers of the black market can negotiate better rates, he said.

 “Maybe, the Bank of Ghana says the rate is GHc 12 per dollar, if you go to the black market, and you are able to bargain, you might get GHc 13 per dollar,” he added.

He also expressed frustration over the charges he incurred during a previous visit to the bank for forex trading. Recalling an incident in early 2021, when he needed to access funds in dollars, he was surprised to learn about a 20% deduction, regardless of whether he chose dollars or cedis. This left him feeling frustrated by the unexpected fee, which led to a significant decrease in the value of his funds.

Yakubu admits trading with the black market “is risky,” due to issues with counterfeit currency and the absence of recourse in case of disputes or transaction failures. However, he insists that will remain his preferred choice if regulatory bodies do not do anything about the “cumbersome” processes involved with trading through the right channels. 

Addressing unmet needs: How do they get the foreign currency? 

Despite these dangers, over the past years, the dark economy has consistently maintained a steady supply of foreign currency, especially dollars. Even when the Central Bank and other legitimate sources run out of foreign currencies, the black market continues to thrive, serving as an alternative source for individuals seeking access to such currencies.

A source who spoke on grounds of anonymity disclosed to The Fourth Estate that there are traders in this business who travel to neighbouring countries, acquire dollars and other foreign currencies, cross the borders and bring them into Ghana. This process is cited as the reason they consistently have a stock of dollars and never run out even when the Central Bank and other channels do not have foreign currencies.

The President of GUTA, Dr Obeng confirmed this, and also accused some staff at the Central Bank of providing individuals of the black market with dollars.

“Once you have the money and you can afford it, why not? They sell the dollars to the black market operators,” he asserted. His assertion, however, has been dismissed by authorities at the Bank of Ghana who claim it is unfounded. 

How high bureaucratic barriers drive people to the black market

In addition, for many people interested in trading in foreign currency, overly strict requirements and high bureaucratic barriers make it very difficult to obtain the necessary permissions to operate legally, driving them into the black market:

Before traders can operate a Foreign Exchange (Forex) Bureau they must obtain a license from the regulator, the Bank of Ghana (BoG). 

Per the requirements outlined by BoG, before individuals applying for the license would be granted the document, he/she must be a Ghanaian, must be of good character, provide satisfactory information on capital and sources of funds, etc.

Also, the applicant must register with the Registrar of Companies as a Forex Bureau with the sole aim of carrying on the business of the Forex Bureau. After, they are to purchase “the prescribed form” at a fee from the Banking Department of the Bank of Ghana, pay a non-refundable licensing fee as well as the mandatory deposit fee in US dollars, among other processes.

It is also a requirement in the regulations that govern the operations of forex trading in Ghana that persons operating a forex bureau must conduct business in a premises that is public and

accessible, preferably in a room size spacious enough to accommodate the customer’s lobby, cashier’s counter, and a back office for a manager and other staff. 

A forex trader is also expected to have a license issued by the Bank of Ghana which should be displayed in the premises of the forex bureau. In addition, all forex bureaux are required to affix the forex bureau logo in front of their premises. 

The Bank of Ghana’s requirements for operating a Forex Bureau are crucial for various reasons. They ensure businesses are easily identifiable and accountable to regulatory authorities, maintain financial system stability, deter illegal activities like money laundering and terrorism financing, promote fair competition in the forex trading industry, and prevent tax evasion. However, the complexity and strictness of these regulations may present considerable barriers for black market operators to adhere to.

Dr Joseph Obeng believes that the aforementioned process, coupled with the stringent documentation requirements for obtaining licenses tend to deter individuals and may lead them to feel less motivated to pursue them diligently. He holds the strong conviction that if some of these processes are relaxed, the activities of these unauthorized forex traders would be on the low in the country. 

Meanwhile, the Bank of Ghana has implemented several measures to address the proliferation of the Forex black market in Ghana. These measures include regular public awareness campaigns, issuing warnings to the public about the risks associated with engaging in black market trading, and proposing penalties, including potential jail sentences, for individuals involved in illegal forex transactions.

In the absence of more accessible licenses and regulations, black market forex traders like Ahmed – who do not comply with any of the aforementioned requirements – will continue to thrive. On a recent Tuesday, he sat along the shoulder of Airport-Madina Road, at the Airport bus stop, calling out to prospective customers to come and trade with him. Ahmed says that business is lucrative and he attracts more business this way than he would sitting in an office, as government regulations require.

“I don’t have a shop. My shop is here. None of us standing here has a shop. Here, you get more customers,” he said.

The writer of this report, Jessie Ola-Morris, is a fellow of the Next Generation Investigative Journalism Fellowship at the Media Foundation for West Africa (MFWA).