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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.

Published

6 years ago

July 13, 2018

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.

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.

Related Topics:Banks reluctant to lend in Ghana.Ghana Gross domestic product President Nana Akufo-Addo

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VenturesNow

Food prices drive second straight monthly hike in Nigeria’s inflation

Published

33 minutes ago

November 17, 2024

Ifeoluwa Dada

According to official statistics released on Friday, Nigeria’s inflation rate increased for the second consecutive month in October, rising to 33.88% in annual terms from 32.70% in September, mostly as a result of increasing food costs.

In an attempt to boost economic development and strengthen public finances, President Bola Tinubu devalued the naira and reduced subsidies, which caused inflation to spike in the second half of last year.

As the effects of the naira devaluation started to lessen in July of this year, a slew of hikes in the price of petroleum and devastating floods that destroyed crops once again exacerbated pricing pressures, making the greatest cost-of-living crisis in decades worse in Africa’s most populous country.

According to the National Bureau of Statistics, price increases for basics such as rice, maize, bread, potatoes, and cooking oil prompted food inflation to surge from 37.77% in October to 39.16% year over year.

This year, more than 1.5 million hectares of agriculture have been damaged by torrential rain and floods in 29 of Nigeria’s 36 states, leaving millions hungry and displacing large numbers of people.

In an effort to curb inflation, the central bank has raised interest rates five times this year. On November 26, it is expected to make its final rate decision of the year.

VenturesNow

MTN financial report reveals drop in group service revenue

Published

40 minutes ago

November 17, 2024

Ifeoluwa Dada

Due to operational difficulties in Sudan and the depreciation of the Nigerian naira, MTN Group, Africa’s largest telecom provider, announced on Thursday an 18.5% decline in service revenue for the third quarter that concluded on September 30.

With 288 million users in 17 African regions, MTN said that its group service revenue dropped from 156.3 billion rand ($6.99 billion) in the same quarter of the previous year to 127.4 billion rand.

Despite stating that “the naira was less volatile on a sequential basis in Q3 than in preceding quarters,” the business reported a 48.7% decline in MTN Nigeria’s income due to the currency’s depreciation.

Due to a stronger Ugandan shilling than the previous year, Uganda’s largest contributor, MTN South Africa (MTN SA), expanded by a meagre 3.3%.

Due to “subscriber registration regulations in Nigeria and a decline in users in Sudan, where the conflict has displaced millions of people,” the business reported that its subscriber base increased by 1.6% to 288 million.

Given the higher demand in Nigeria despite the legal obstacles, MTN plans to increase its capital expenditures, which it expects would total between 28 and 33 billion rand for the entire year.