Ghana's booming fintech remittance sector is unintentionally weakening the cedi by disrupting traditional foreign exchange buffers, according to economist Professor William Baah-Boateng.

The Bank of Ghana has increased oversight of fintech remittance activities, citing breaches of new guidelines, signaling a move toward tighter regulation of digital currency flows.

This situation highlights the tension between advancing financial technology and maintaining monetary stability, as remittances are crucial for millions of Ghanaian households, requiring balanced policy responses.

Modern fintech firms now auction foreign currency proceeds directly to the highest bidders among local banks instead of building dollar reserves, which intensifies competition for limited foreign exchange and accelerates cedi depreciation.

Baah-Boateng warns that the structural shift caused by fintech could undermine macroeconomic stability, emphasizing the need for deliberate policy measures to ensure remittance inflows bolster the cedi.

Historically, remittance services like Western Union partnered with local banks such as ADB, allowing these banks to hold dollar reserves that helped stabilize the exchange rate.

Despite a nearly 25 percent depreciation of the cedi earlier in 2024, President John Mahama projects that with interventions from the Bank of Ghana, the currency's depreciation will stabilize within 5 percent annually.

Although remittances reached a record $6.65 billion in 2024, nearly quadrupling foreign direct investment, the cedi continues to face downward pressure, revealing a disconnect between inflows and currency stability.