By Banking consultant Dr. Richmond Atuahene has emphasized that despite what he terms as “English,” the data on Ghana’s Banking Sector illustrates a sector that has been in a state of crisis for the past decade.
He made these remarks during an interview with Francis Aban, host of State of Affairs on GHOne TV, while addressing Societe Generale’s announced departure from Ghana after twenty years of operations in the country.
Citing Ghana’s banking sector’s non-performing loans, which have averaged around 16.5% over the past decade, the banking expert emphasized that ample literature from the International Monetary Fund (IMF) categorizes Ghana’s banking sector as being in a state of full-fledged crisis.
Dr. Atuahene highlighted, “Since 2014, our non-performing asset ratio has fluctuated between 11% and 24.9% as of December 2023. If you gauge the sector’s resilience using this metric, it is evidently lacking.
There exists literature authored by IMF staff in 1998, which asserts that any banking sector with non-performing assets exceeding 10% can be deemed to be in a state of full-fledged banking distress or crisis,” he elaborated.
According to data from Ghana’s Banking Sector performance, the year-on-year Non-Performing Loans (NPLs) stood at 11% in 2014, 14.7% in 2015, 17.6% in 2016, 22.7% in 2017, 18.2% in 2018, 14.7% in 2019, 15.7% in 2020, 15% in 2021, 15% in 2022, and spiked to 24.9% in 2023.
Richmond Atuahene argued that the Domestic Debt Exchange Program, coupled with the government’s failure to settle arrears owed to contractors, has significantly worsened the situation. This has rendered indigenous banks incapable of securing a strong foothold against their foreign competitors.
No Opportunity for Local Banks:
Examining the prospects of local banks leveraging the departure of a foreign bank to broaden their reach, Dr. Atuahene dismissed the notion, asserting that indigenous banks, whether privately owned or state-run, lacked the stability and strength to compete for the opportunities.
He also disclosed that the Ghana Amalgamated Trust, established to provide financial support to five banks that emerged from the banking sector cleanup to fulfill their minimum capital requirements, had instead burdened these banks with high costs associated with servicing the support transfers.
“In 2019 when the GAT came in, everybody thought it was going to lend money to the banks at a reasonable price. You will be shocked to learn that the amount of money given to them and the cost of that money, alone is killing the banks. If you are giving someone subordinated capital, you are not supposed to put a bond rate on it,” he opined.
GAT Plc, was set up in December 2018 as “an urgent” policy response to help support five local banks: Agricultural Development Bank (ADB), OmniBSIC, Prudential Bank, Universal Merchant Bank, and National Investment Bank (NIB), “as they were unable to raise equity to meet Bank of Ghana’s new mandatory minimum capital requirement (MCR) of GHS400 million by 31 December 2018”.
Multinationals Departing:
Dr. Richmond Atuahene pointed out the troubling trend of multinational brands, including Glovo, Nivea, Jumia Foods, Game, Bic, and others, ceasing their operations in Ghana over the past three years. He emphasized that the writing was on the wall.
He noted that many conglomerates might feel uneasy conducting business in Ghana due to the country’s unfavorable microeconomic indicators, which continue to be unstable compared to its neighbors in the sub-region.
“When you are a multinational going to invest; you look at microeconomic stability which includes a fairly stable currency, lower inflation, fiscal deficit control, a manageable public sector debt, positive balance of trade, etc. All these indicators do not look very good.
“They have shareholders to pay. If I invested US$100 million IN GHANA IN THE YEAR 2019 when the cedi was 5.17 to a dollar, today the cedi is 14 cedis. If I made the same investment in La Cote D’Ivoire where the currency has been fairly stable; I would prefer to go there to invest. After all, I am looking for good returns. I am not just a social company. I will have to pay my shareholders a return commensurate with their investments in the company, he elucidated.
Government Response:
The banking expert urged the government to move beyond polished speeches aimed at appeasing political sensitivities and instead thoroughly examine the factors driving away Foreign Direct Investments from Ghana.
“The managers of the economy should sit up and stop thinking all things are ok. I recently heard one of the ministers say that Ghana is the best place to do business.”
“If the IMF hadn’t pledged us this $360 million, I shudder to think where the cedi would stand. I believe the economic managers should adopt a comprehensive approach to tackle the underlying issues prompting these multinational exits,” he advised.
Background (Societe Generale):
The French bank Société Générale is not only exiting Ghana but is also withdrawing from other African nations, namely Tunisia and Cameroon. Investment bank Lazard has been tasked with identifying potential buyers for its subsidiaries in these three countries.
With more European banks discontinuing their operations in Africa, industry observers are tipping Nigerian and South African banks to emerge as the dominant players on the continent.
