In recent years, the debate over small denomination coins has gained traction globally. In the United States, the penny has been at the center of discussions about its economic relevance and production costs. Similarly, in Ghana, the pesewa—the smallest unit of the cedi—has sparked conversations about its role in the economy. While some argue that pesewas are outdated and inconvenient, this blog post makes the case for enforcing the use of pesewas in Ghana, highlighting its potential benefits and demonstrating why its impact on inflation would be minimal.
At AHAJAH Creo, we are firmly devoted to empowering Ghana’s youth and promoting long-term development, which is why we are particularly interested in Ghana’s pesewa. By encouraging the use of this little but powerful denomination, we hope to increase financial inclusion, encourage microeconomic activity, and aid in poverty reduction—all of which are important aspects of our mission to provide young Ghanaians with practical skills and possibilities. Furthermore, guaranteeing the pesewa’s economic significance represents our goal of a prosperous nation in which every citizen, regardless of income, can contribute to and benefit from Ghana’s progress toward Sustainable Development
The Historical and Cultural Significance of Pesewas
The pesewa has been an integral part of Ghana’s currency since the introduction of the cedi in 1965. It is more than just a monetary unit; it is a symbol of national identity and pride. The word “pesewa” originates from the Akan language, meaning “penny,” and reflects Ghana’s rich cultural heritage. Eliminating or neglecting the pesewa would mean losing a piece of Ghana’s history and identity.
The Current Challenge: Why Pesewas Are Overlooked
Despite their historical significance, pesewas are often ignored in everyday transactions. Prices are frequently rounded to the nearest cedi, and many consumers and vendors view pesewas as inconvenient or unnecessary. This practice has several negative implications:
- Arbitrary Pricing: Rounding prices to the nearest cedi can lead to inconsistencies, disadvantaging consumers, especially in smaller transactions. For example, a product priced at GH¢4.75 might be rounded up to GH¢5, effectively overcharging the customer.
- Perceived Insignificance: The lack of emphasis on pesewas reinforces the idea that they are unimportant, further discouraging their use.
- Missed Opportunities: By ignoring pesewas, Ghana is missing out on the potential benefits of a more precise and transparent pricing system.
The Benefits of Enforcing the Use of Pesewas
Enforcing the use of pesewas isn’t just about counting coins—it’s about creating a more efficient, equitable, and inclusive economic system. Here’s how:
1. Preventing Arbitrary Price Increases
When prices are rounded to the nearest cedi, merchants may take advantage of the situation to inflate prices slightly. For example, a product worth GH¢9.50 could be rounded up to GH¢10, effectively increasing the price by 5%. Enforcing the use of pesewas ensures that prices remain accurate and fair, protecting consumers from unnecessary price hikes. It can mitigate the effects of inflation on citizens by curbing arbitrary pricing practices. When prices are rounded to the nearest cedi, vendors may subtly inflate costs, disproportionately affecting low-income individuals who rely on small transactions. By ensuring prices are precise and transparent, the use of pesewas limits the ability of merchants to exploit rounding to their advantage, thereby shielding consumers from unnecessary price hikes. In this way, the pesewa acts as a safeguard, ensuring that inflation’s impact is not exacerbated by unfair pricing practices, ultimately protecting the purchasing power of everyday Ghanaians. This aligns with AHAJAH Creo’s mission to empower communities and promote fairness in economic systems.
2. Promoting Financial Inclusion
Pesewas are essential for everyday transactions, particularly for low-income individuals who rely on small denominations to make purchases. By enforcing their use, Ghana can ensure that all citizens, regardless of income level, have access to the full spectrum of the currency. This promotes financial inclusion and ensures that no one is left out of the economic system.
3. Enhancing Economic Efficiency
Pesewas facilitate smaller transactions, which can stimulate economic activity at the micro-level. Street vendors, market traders, and small businesses can price their goods more competitively, attracting more customers and boosting sales. This, in turn, contributes to the overall growth of the economy.
4. Improving Financial Literacy
Encouraging the use of pesewas can improve financial literacy and numeracy skills, particularly among younger generations. Handling smaller denominations teaches people the value of money and the importance of precision in financial transactions.
Minimal Impact on Inflation: Debunking the Myth
One of the primary concerns about enforcing the use of pesewas is its potential impact on inflation. However, this fear is largely unfounded. Here’s why:
1. Prices Are Determined by Market Forces
Inflation is driven by factors like supply and demand, production costs, and monetary policy—not by the availability of smaller currency denominations. Enforcing the use of pesewas won’t suddenly cause prices to skyrocket.
2. Businesses Won’t Radically Change Pricing Strategies
Companies are unlikely to overhaul their pricing models simply because they’re now using pesewas. Instead, they’ll adjust to the new system, maintaining their profit margins without significant price hikes.
3. Psychological Benefits
Dealing with smaller units of currency can make consumers more price-conscious, encouraging them to make more informed purchasing decisions. This heightened awareness can actually help curb inflationary pressures.
Addressing Production Costs and Efficiency
One of the key arguments against small denomination coins is the cost of producing and handling them. Like the penny in the United States, the production cost of pesewas may sometimes exceed their face value. However, enforcing their use can lead to more efficient cash transactions, reducing the time and labor involved in rounding transactions to the nearest cedi. Additionally, coins have a longer lifespan than banknotes, meaning fewer resources are required over time, potentially balancing out the initial environmental costs associated with production.
Recommendations for Implementation
1. Public Awareness
Educate Ghanaians about the value and importance of pesewas in daily transactions. Highlight how using pesewas can benefit both individuals and the economy as a whole.
2. Regulatory Measures
Encourage businesses to display prices inclusive of pesewas and provide adequate change. Consider implementing policies that mandate the use of pesewas in certain sectors, such as retail and transportation.
3. Technological Adaptations
Integrate pesewas into electronic payment systems and point-of-sale devices. This ensures that digital transactions are just as precise as cash transactions.
4. Gradual Implementation
Introduce the changes gradually to allow businesses and consumers time to adapt. Start with pilot programs in specific regions or sectors before rolling out nationwide
Conclusion: A Small Change with Big Benefits
Enforcing the use of pesewas in Ghana is more than a monetary adjustment—it’s a step toward a more accurate, transparent, and inclusive economy. By giving the pesewa the attention it deserves, Ghana can enhance pricing accuracy, build trust in transactions, and stimulate economic activity at the micro-level—all without significantly impacting inflation.
This isn’t about abandoning rounding altogether; in large transactions or cash-heavy scenarios, rounding may still be practical. However, incorporating pesewas into everyday transactions can serve as a powerful tool for promoting economic fairness and transparency.
The enforcement of pesewas in Ghana aligns closely with several Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities). By promoting the use of pesewas, Ghana can promote greater financial inclusion, ensuring that even the most vulnerable populations have access to fair and precise pricing in everyday transactions. This supports poverty reduction by enabling low-income individuals to maximize the value of their money. Additionally, the economic efficiency gained from accurate pricing and micro-level transactions contributes to sustainable economic growth, while the emphasis on fairness and transparency helps reduce inequalities in the marketplace. By embracing pesewas, Ghana takes a meaningful step toward achieving these global goals while addressing local economic challenges.
The time has come to rethink the role of the pesewa in Ghana’s economy. By embracing this small but mighty denomination, we can cultivate a culture of precision, trust, and financial literacy that benefits everyone. Let’s give the pesewa its rightful place in our wallets and our economy—it’s a change worth making.
What do you think? Should Ghana enforce the use of pesewas? Share your thoughts in the comments below!
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