Ghana’s banking sector is preparing to lower both lending and deposit rates after the Bank of Ghana delivered a second consecutive large easing step in 2025, but bankers warn that the transmission to customers rates will be uneven and may take time.
The central bank cut its Monetary Policy Rate by 350 basis points to 21.5% on September 17, 2025, following an earlier record 300 basis points reduction on July 30, 2025. Taken together the two moves have lowered the policy rate by 650 basis points over two consecutive Monetary Policy Committee meetings a dramatic shift from the tight monetary stance that prevailed through 2024 and early 2025.
Bank chiefs and industry groups say the cuts should, in time, feed through into lower bank reference rates and commercial lending alleviating the cost burden on businesses and households.
John Awuah, Chief executive of the Ghana Association of Banks told local media ahead of the previous MPC decision made in July that bank expected a substantial easing and that “a material cut in the policy rate should pave the way for significant reductions in lending rates,” a sentiment banker have reiterated after the September cut.
But several constraints will temper how quickly and how far headline rates fall. Banks cite legacy funding costs, the need to rebuild balance sheet cushions after recent financial sector stress, and high yields on outstanding 180 day and 364-day treasury bills issued and invested in before the sharp fall in rates over the past few months, as reasons for cautious phased adjustments to customer pricing. Industry data show that average lending rates have already been trending down from about 31.6% as at the start of 2025 to roughly 27.0% by June and 24.15% by August– suggesting transmission is underway but incomplete.
“Policy easing creates room for banks to reduce rates, but the pace depends on deposits and the relative attractiveness of government paper” said an economist who follows Ghana’s financial sector. “Banks will seek to protect margins and remain capital compliant while they reprice. “
That view echoes public comments from the BoG which signaled confidence in continued disinflation while urging banks to support the recovery by moderating lending rates. Indeed, the BoG Governor, Dr Johnson Asiama, last week said the central bank now expects inflation to fall to within its medium-term target of between 6% and 10% before the end of the year.
On the deposit side, bankers say retail rates will fall more slowly. Retail deposit rates are sticky; many banks rely on older, higher cost term deposits placed during earlier, higher-rate months, and customer bahaviour especially demand for real returns in an economy recovering from macro-stress – will influence how quickly institutions are willing to lower advertised savings rates.
“We expect a phased approach; wholesale and short-term corporate pricing will adjust first, retail rates later,” one senior bank executive said on condition of anonymity.
Analysts point to several indicators to watch for the speed of pass through. The BOG’s short term reference yields and interbank rates are key; a sustained decline in market reference rates typically forces banks to trim their reference and minimum lending rates. So far market reference rates have fallen but remain higher than pre-crisis norms, leaving space for further compression.
Rating agency commentary also matters; Fitch recently noted that most Ghanaian banks were on track to be capital compliant once regulatory forbearance ends, a condition that should bolster confidence but also incentivize prudence on interest margin compression.
How banks translate a lower MPR into cheaper credit will also depend on the risk outlook. Non – Performing Loans (NPLs) the mix of corporate versus retail loan book, and foreign exchange linked exposures influence banks willingness to cut rates.
“Lenders with stronger deposit franchises and lower NPLs will be the first movers” said Leslie Dwight Mensah, an economist with the Institute of Fiscal Studies in Accra. “For others, capital preservation will remain a priority.”
Market watchers expect the initial impact to show in reference rate announcements and in some wholesale lending lines within weeks, with broad retail mortgage small and medium sized enterprises and consumer lending repricing over the coming months. For businesses that rely on short term working capital, even modest cuts in reference rates could meaningfully reduce finance costs; for savers, the effects will be muted until banks unwind higher cost deposit stock. Analysts stress the final effect on bank profitability will be an outcome of the speed of asset repricing versus the rollback of deposit costs.
Regulators and policymakers appear to be nudging the banks towards faster transmission. The BoG’s statement accompanying the September rate cut decision emphasized monitoring progress on inflation and signaled continued vigilance, while industry bodies have publicly encouraged banks to translate easier policy into lower lending rates to support growth.
Whether market level transmission lives up to those calls depends on banks’ balance sheet dynamics and competition for deposits.
By Toma Imirhe
