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Banks reluctant to lend in Ghana. Why it matters

A reluctance by banks in Ghana to lend is threatening to stall one of Africa’s fastest expanding economies.

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A reluctance by banks in Ghana to lend is threatening to stall one of Africa’s fastest expanding economies.

With almost a quarter of all outstanding loans in the country at risk of not being repaid, credit granted to the private sector is increasing at nearly the slowest pace in four years.

At stake is the 6.8% growth that the government is hoping to achieve to boost revenue and narrow its budget deficit.

Gross domestic product in West Africa’s second-largest economy experienced its quickest expansion in five years in 2017 as oil and gas production surged and following a peaceful transition in government which saw President Nana Akufo-Addo take power.

Read Also: All you need to know about sack of Mozambique airline board

While inflation has almost halved to 10% last month, allowing the central bank room to cut its benchmark rate to a four-year low, companies are yet to reap the benefit from these moves as they struggle to repay older loans and access new credit.

Banks “said they are playing it safe because of a loans-defaulting trend,” Edem Harrison, an economist at Accra-based Frontline Capital Advisors, said by phone. “It looks most certain that the GDP growth target will be missed this year.”

Non-performing loans increased almost 21% to a record 8.63 billion cedis ($1.8bn) in April compared with a year earlier, the central bank said on Tuesday.

The Bank of Ghana has since last year tripled minimum capital requirements for lenders, liquidated two banks for failing to adhere to capital-adequacy requirements and placed UniBank under administration.

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Nigeria’s inflation increases to a record 28-year high in May

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According to official figures released on Saturday, Nigeria’s annual inflation reached a record 28-year high of 33.95% in May, exacerbating the hardships that have stoked popular ire against President Bola Tinubu’s economic reforms.

Inflation increased for the eighteenth consecutive month, up from 33.69% in the previous month.

Tinubu’s measures, which primarily cut energy and gasoline subsidies and devalued the naira twice in a single year, have increased price pressure.
Labour unions, who asked for a new minimum wage through an industrial strike that was called off after two days, have maintained that the reforms disproportionately affect the poor and have left millions of people facing the biggest cost-of-living crisis in decades.

The National Bureau of Statistics data indicated that in May, food and non-alcoholic beverages remained the main drivers of inflation.

The majority of Nigeria’s inflation was driven up by food prices, which increased to 40.66% from 40.53% in the previous month. Analysts say the major causes of Nigeria’s inflation are rising food prices and a declining value of the naira.

The report read, “In May 2024, the headline inflation rate increased to 33.95% relative to the April 2024 headline inflation rate which was 33.69 per cent. Looking at the movement, the May 2024 headline inflation rate showed an increase of 0.26 per cent compared to the April 2024 headline inflation rate.

“On a year-on-year basis, the headline inflation rate was 11.54 per cent points higher compared to the rate recorded in May 2023, which was 22.41 per cent. This shows that the headline inflation rate (year-on-year basis) increased in May 2024 when compared to the same month in the preceding year (i.e., May 2023).

For the third time this year, the central bank increased interest rates in May in reaction to the ongoing increase in inflation. Rates will remain high for as long as it takes to reduce inflation, according to Governor Olayemi Cardoso.

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Nigerian court voids tax evasion charges against executives of Binance

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A Nigerian court dismissed tax evasion charges against two executives of Binance on Friday, following the appointment of a local agent by the largest cryptocurrency exchange in the world to represent it in all legal proceedings about the accusations.

The accusations of tax evasion were refuted by Binance, Tigran Gambaryan, an American citizen who oversees financial crimes compliance for the company, and Nadeem Anjarwalla, a regional manager for Africa and a native of Kenya.

The court’s ruling, according to Binance, demonstrated that Gambaryan was “not a decision-maker at Binance and does not need to be held for Binance to resolve issues with the Nigerian government.”

“We await the court’s ruling on this, discharging Tigran from this matter completely,” a Binance spokesperson said.

Last month, an Abuja court determined that Gambaryan, who is representing Binance, might potentially face trial in the tax evasion case. When its executives were invited to Nigeria and then detained as part of an anti-crypto campaign, Binance CEO Richard Teng accused the country of setting a dangerous precedent in May. The company is opposing the proceedings because it allegedly evades taxes and launders money.

Binance and its executives, Gambaryan and Nadeem Anjarwalla, a British Kenyan who works as Binance’s regional manager for Africa, are accused of four counts of tax evasion. Failing to register for taxes with Nigeria’s Federal Inland Revenue Service is one of the allegations.

Anjarwalla departed the nation in March, but Gambaryan has been detained since February. The two executives were dropped from the tax evasion lawsuit by Nigeria’s Federal Inland Revenue Service, but they and Binance are still accused of money laundering.

Binance declared that the allegations ought to be withdrawn. Both Anjarwalla and Gambaryan refute these accusations as well.

Nigeria has laid the blame for its currency problems on Binance. The country’s currency sank to a record low as a result of persistent dollar shortages, and cryptocurrency websites became the preferred means of trading the naira.

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