The historical development of money in Ghana

THE HISTORICAL DEVELOPMENT OF MONEY IN GHANA
Definition of money

Money can be defined as “any commodity which is generally acceptable in exchange for goods and services.” It has three dimensional meanings. The first is that it is a medium of exchange. The second is that it is a unit of account and the third is that it is a store of value. For the ordinary man in the street, because he uses money for the exchange of goods and services is seen as a medium of exchange.

DEVELOPMENT

In the beginning, goods were exchanged for other goods. This means that if someone wants oranges, he or she needed to exchange what he or she had for the orange. For instance, the person has avocado but wants oranges; so he looks for someone who has oranges and exchanges it. This system was called the barter system.

There were difficulties with the operation of this barter system. One of these problems is that if someone had avocados and wanted oranges, that person must look for another person who has the oranges he or she is looking for but who also wants avocado in return. Apart from that, there was a problem of determining how many avocados must be exchanged for how many oranges. The system was therefore not as smooth as was needed.

The next stage of the development of money is the stage of commodity. This kind of money was valuable and wanted by many people. It was also durable and portable. It could also be easily stored. An example of this commodity is maize because it was in great demand and was useful on its own. At other times, commodities like tobacco, salt etc were used as money.

After this, precious metals were introduced and used. They were referred to as metallic money. Some examples of precious metals which were used as money were gold and silver. For one thing, they were valuable. They could also be divisible into smaller sizes and weighed so as to assign a value to each or weight.

One of the earliest use of coins as money was in Ancient India around the 6^th century BC. Later, the Greeks and the Romans used it.

Paper currency, on the other hand, was first introduced in China in the 11^th century. Later, it was introduced in Europe by the renowned explorer, Marco Polo in the 13^th century. The paper currency later spread to other parts of the world.

In the Gold Coast, now Ghana, cowry shells were in use from the 14^th century till about 1796. It was in 1796 that the Gold Coast coin was introduced and it run parallel to the cowry shell till 1901.

Later, the British introduced the British West African pound into the Gold Coast and the other British colonies in West Africa. Then the Ghanaian pound was introduced in 1958 and was used for seven years. In 1965, Ghana, which had attained independent status earlier, left the British colonial monetary system and introduced the cedi as a legal tender. This has been the Ghanaian currency up until today. Though it was changed many times and recently, in 2006, redenominated and re-christened the Ghanaian cedi, it has remained Ghana’s legal tender.

SAMPLE QUESTIONS

1. Trace the history and development of money  

<<Back to Home Page 

Go to other topics in Economics>> 

Go to the list of other subjects>>