Small-denomination coins, which have had a love-hate relationship with Ghana’s informal economy are in the spotlight again following a spike in rejection by traders and customers alike. Below, the B& FT’s Ebenezer Chike Adjei Njoku engages Deborah Adu-Twumwaah (DAT), a legal practitioner and finance scholar, at UPSA, as she examines the legal meaning of legal tender and the consequences of routinely rejecting pesewa coins in everyday transactions.
Drawing on constitutional provisions, banking statutes and currency law, she argues that the practice amounts to a form of de facto partial demonetisation, with implications for inflation management, regulatory authority and public confidence in the cedi.
B&FT: What is a legal tender?
DAT: The definition of legal tender is of great importance, as it concerns whether a currency is accepted as a unit of account and medium of exchange to facilitate trade and commerce in any civilised society. It is important to consider the legal or statutory definition of legal tender, but Ghanaian statutes offer little guidance.
The closest we can get to obtaining the definition of a legal tender is the definition provided under the Currency Act, 1964 (Act 242), which defines legal tender as “legal tender in the Republic.” Borrowing the words of the governor of the Bank of Ghana, Dr. Johnson Asiama, at the ABSA-UPSA quarterly Banking Round Table held in July 2025, legal tender, defined in its simplest form, refers to money that must be accepted if offered in payment of a debt. Sono (2003) defined legal tender in his article titled “Legal Tender: A Notion Associated with Payment” as a notion associated with the discharge of monetary obligation by payment.
These definitions clarify legal tender as that which must be accepted as a form of payment or as a unit of exchange in any sovereign state. What is legal tender in one country may not be legal tender in another. In Ghana, the cedi (in both paper and coin form) is the only legal tender. Article 183 (1) of the 1992 Constitution of the Republic of Ghana mandates the Bank of Ghana as the only body authorised to issue Ghana’s currency.
The provision under this Article is the source from which the Bank of Ghana derives its mandate to issue currency that has legal tender status and is used as a form of payment and medium of exchange.
Section 41 of the Bank of Ghana Act, 2002 (Act 612) makes clear that all currency notes and coins issued by the Bank of Ghana shall have legal tender insofar as they are in accordance with the provisions under this act. Every country has its own legal tender, and a unit of exchange that is legal tender in one country does not automatically become legal tender in another.
Dr. Johnson Asiama clarified this point at the ABSA-UPSA quarterly Banking Round Table, by conscientising Ghanaians to reject the US dollar if offered for payment, since it is not legal tender in Ghana, even though it is legal tender in the US.
B&FT: What does Ghana’s law say about the refusal of small-denomination coins in everyday transactions?
DAT: Section 41 of Act 612 provides that the currency notes and coins issued by the Bank of Ghana are legal tender. Whether paper currency notes or small-denomination coins, they are legal tender so long as they are issued by the Bank of Ghana or comply with the legal limits set out in Act 612.
The Bank of Ghana, deriving its mandate from the 1992 Constitution under Article 18, is the sole body with the power to issue the currency of Ghana, placing an obligation on the people of Ghana to accept and use all legally issued currency by the Bank of Ghana. No person in Ghana has the right to reject any form of currency, whether in small-denomination notes or coins. Rejection would defeat the purpose of the provisions in the 1992 Constitution of the Republic of Ghana and the Bank of Ghana Act.
The Currency Act, 1964 (Act 242), criminalises the refusal to accept currency classified as legal tender in Ghana, whether small-denomination coins or paper currency. Section 4 of Act 242 provides that “a person commits an offence if that person refuses to sell an article exposed for sale in the ordinary way of business and the refusal is due to the offer or proposed offer by the intending purchaser of a current coin or note in payment for the article exposed for sale.”
The penalty that goes with this has been provided under section 5 (2) of the Act 242 as “a person who is convicted of an offence under section 4 is liable to a term of imprisonment not exceeding three years, or to a fine not exceeding seven hundred and fifty penalty units, or to both the imprisonment and the fine.” Refusal to accept legal tender undermines Ghana’s monetary system.
It is important to note, however, that the refusal of small denominations coins tends to result in the rounding-up of prices for goods and services, making prices higher than they should be.
The effect of rounding of small-denomination coins is the reduction of practical usability and adequate purchasing power of the small-denomination coins, even though their legal value remain stable. This practice contradicts the provisions under the Currency Act.
B&FT: Are there any circumstances under which a trader or customer is legally permitted to reject legal tender?
DAT: Although the provision under section 41 makes currency issued by the Bank of Ghana legal tender, and legal responsibility is placed on the people of Ghana to accept and use the currency for trading or transacting business in Ghana, the law allows some exceptions to the use of paper currency and coins.
The exceptions permit a rejection of money considered as legal tender under two main circumstances. That is, where the rejection is due to currency notes and coins exceeding their legal tender limits, and where they are tempered or not tampered with. Per section 41 (2) (a-c), the currency notes and coins are legal tender only up to:
(a) Five thousand cedis in the case of coins of denominations of one hundred, two hundred, and five hundred cedis;
(b) One thousand cedis in the case of denominations not less than twenty cedis; and
(c) One hundred cedis in the case of coins of denominations less than twenty cedis.
Section 41 (3) permits rejection when the currency notes have been damaged, defaced, or there is suspicion about the currency.
That is, a coin shall be deemed to have been tampered with if the coin has been:
(a) impaired, diminished, or lightened otherwise than by fair wear and tear; or
(b) defaced by stamping, engraving, or piercing, whether the coin has been thereby diminished, lightened, or not.
B&FT: If small coins worth more than GH¢186 million are increasingly refused in practice, does this amount to a partial de facto demonetisation?
DAT: Demonetisation removes a currency’s legal tender status, rendering it incapable of being used or accepted as a unit of exchange in a particular country. The purpose includes, but is not limited to, fighting hyperinflation, transitioning from one currency to another, combating corruption, black money, tax evasion, and encouraging the use of digital currency for financial transactions in a particular economy.
The refusal of small denomination coins worth more that GH¢186 million, in practice, tends to result in de facto partial demonitisation, but not a formal one. With formal partial demonetisation, a formal declaration of demonetisation must be issued by the regulator or the law-maker to strip the particular currency of its legal tender status. Given the rejection of small coins by traders in Ghana and many other economies, the demonitisation of these coins is a de facto partial demonitisation, as traders refuse to accept them.
That is illegal and contrary to the requirements of the Currency Act. The persistent refusal to accept small-denomination coins leads to the fading-out of these coins as a medium of exchange. So, in effect, what the traders create by their act of rejecting small coins worth more than GH¢186 million is de facto partial demonetisation.
B&FT: What legal or regulatory risks does that pose for the monetary system?
DAT: The rejection of small coins poses significant regulatory and legal risks to Ghana’s monetary system, even though most who engage in the practice do so with impunity. The Currency Act criminalises this, but we rarely see prosecutions in this area. The key regulatory and legal risks posed by the rejection are as follows:
- Statutory Risk: It has been established that rejecting small coin constitutes de facto partial demonetisation, thereby undermining the statutory requirement for their legal tender status. Left unattended, it may lead the citizenry to decide which currency note or coin to accept or reject, thereby weakening the statutory authority that grants legal tender status to the various denominations.
- Constitutional Risk: The rejection of small coins may result in the traders overriding the decisions of the central bank, which has the mandate by the 1992 constitution to issue and control monetary policy in Ghana. Thus, it would create parallel monetary norms that can undermine constitutional control of the monetary system.
- Regulatory Risk: As shown above, the rejection of small coins can lead to price rounding, resulting in artificial price increases and, in turn, hyperinflation. The continued effect is to distort the economy’s inflation management structures, which are intended to help control inflation.
- Currency Management Cost Increment Risk: Rejection of small coins may decrease their circulation velocity and result in a loss on the cost of their production. Expenditure incurred on the production of small coins would be wasted, since they will have no use.
B&FT: What practical legal or policy steps could regulators take to address widespread rejection of pesewa coins?
DAT: The practical steps to take to address this menace include:
- Amendment of the Statutory Laws on Currency Regulation: The currency regulation statutes of Ghana should be amended to reflect current practices of small-coins rejection, with explicit provisions for violations. The Bank of Ghana Act, 2002 (Act 612), must be amended to give the Bank of Ghana clear power to levy higher administrative penalties on traders and other businesses that fail to accept smaller-denomination coins. The Currency Act, 1964 (Act 242), also needs amendment to reflect current developments, including sanctions and high penalty payments resulting from the rejection of small-denomination coins.
- Public Education: There should be massive public education campaigns organized by the Bank of Ghana, in collaboration with other tertiary education institutions and trade unions, to sensitize the public about the legal consequences of rejecting small-denomination coins. Social media platforms like Facebook, TikTok, and YouTube can be used to reach traders, especially market women involved in this practice.
- Price Ceiling Adoption: The government of Ghana can put a price ceiling on some petty items like sachet water and others not to cross the one (1) Cedi ceiling as a way of getting Ghanaians to use the smaller denomination coins. Rounding up has led to some of these petty items costing GH¢1. With a price ceiling that prevents these items from crossing the GH¢1 mark, traders would be forced to sell them below GH¢1, thereby increasing the use of small-denomination coins and helping curb artificial inflation.
- Encouraging Digital Payments: The government of Ghana and the Bank of Ghana may encourage the use of digital payments without killing the use of physical currency. That would ensure payment with smaller-denomination coins with ease, since money change is not an issue with digital payment. The government should remove the transfer cost for mobile money payment transactions for lower-denomination coins and notes related transactions. That will encourage the payment of lower-denomination prices. A vigorous campaign against mobile money scams should be launched to encourage more people to patronize mobile money transactions without fear and with confidence.
B&FT: Can this be done without being viewed as imposing undue burdens on small businesses?
DAT: Yes, it can be done without posing undue burden on small businesses. The focus should be on more incentive-based regulation rather than just command-and-control type of regulation.
Under an incentive-based system, rewards will be given for compliance, while punishments will accompany violations. The attention should be more gradual than the expectation of immediate results. Small businesses should be made to understand and appreciate why that practice needs to stop.
When they are drawn closer and the adverse effects of their actions are made known to them, they would appreciate the need for change. When the laws are amended to clarify and increase penalties for rejecting small-denomination coins, small businesses will be aware of the penalties and deterred from engaging in the practice. It will go a long way toward helping them expand their business, as artificial inflation created by their actions would be prevented.
Public education would also help most of these small business owners, who may be unaware of the practice of rejecting small-denomination coins. Some of these traders innocently reject the coins without realizing that it violates the law and also carries sanctions. If there were constant education in the various Ghanaian languages they would understand, and desist from such acts. The price ceiling would help control the prices of some petty items so they cost the same or close to the same across Ghana.
It will not place any burden on small businesses, but rather relieve them of the unfair pricing practices they often use. Encouraging digital payments would help small businesses reduce their reliance on physical cash, which can expose them to theft and other risks. It will also help them address the issue of change, which can sometimes pose problems for their trading activities.
REFERENCES
- Bank of Ghana Act, 2002 (Act 612). (2002). Republic of Ghana
- Currency Act, 1964 (Act 242). (1964). Republic of Ghana.
- Republic of Ghana. (1992). Constitution of the Republic of Ghana, 1992. Republic of Ghana.
- Segbefia, L. (2025, July 17). The dollar is not a legal tender in Ghana, you can reject it as medium of payment – BoG Governor. MyJoyOnline. https://www.myjoyonline.com/the-dollar-is-not-a-legal-tender-in-ghana-you-can-reject-it-as-medium-of-payment-bog-governor/
- Sono, K. (2003). Legal tender: A notion associated with payment. In Current developments in monetary and financial law (Vol. 2, pp. 679–690). International Monetary Fund. https://www.elibrary.imf.org/display/book/9781589061767/ch034.xm
The post Keep the change: Rejecting the pesewas and the erosion of GH¢186m in legal tender appeared first on The Business & Financial Times.
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