News Guide Africa

Category: Technology

  • Interest payments to rise further as cost of borrowing increases

    Interest payments to rise further as cost of borrowing increases

    Government interest payments are expected to rise in the coming months as the cost of borrowing on the domestic market surpassed 25%.

    Though liquidity has fairly improved in the market, the increasing interest payments will come at a huge cost to the government.

    The government spent about ¢10.6 billion to pay interest on loans in the first quarter of this year, with a chunk being used to service domestic debt.

    However, with the current trend of rising interest rates, the government may spend more in the second quarter and probably the third quarter of this year to settle interest on loans.  

    The other concern is the ‘crowding out effect’ which is depriving businesses and certain retail consumers from accessing loans.

    According to the auctioning results, the interest rate on the 91-day Treasury bills shot up to 25.6%, from 24.5% recorded the previous week.

    That of the 91-day T-bills went up to 26.4%, from 25.98% the prior week.

    The one-year bill also went for 27.4%.

    Meanwhile, the government T-Bills sale (24th June, 2022) was marginally oversubscribed by about 21%.

    The government secured about ¢1.59 billion from the investors, which will be used largely to finance the 2022 budget.

    The present situation occasioned by higher interest rates seems to have improved liquidity in the market.

    Securities Bids Tendered (GH¢) Bids Accepted (GH¢) Interest rate

    91 Day Bill 1.165 billion 1.165 billion 25.63%

    182 Day Bill 230.74 million 209.15 million 26.40%

     364 Day Bill  197.51 million 66.90 million 27.42%

    Total 1.593 billion  1.441billion

    Target 1.311 billion

  • All banks debit will need Ghana card authentication from July 1 – BoG

    All banks debit will need Ghana card authentication from July 1 – BoG

    The Head of Financial Stability at the Bank of Ghana, Dr. Joseph France, says starting July 1, all persons who have failed to link their Ghana cards to their bank accounts will be unable to withdraw funds from their bank accounts.

    According to him, unlinked accounts will, however, be able to receive deposits till such a time when the owner finally links their Ghana card details to the account.

    He noted that the process of linking Ghana cards to bank accounts has no expiry date and clients only have to go to their banking centres to have their Ghana card details and biometric data collected.

    The linkage of Ghana cards to bank accounts is a government initiative to weed out fraudsters from the banking sector.

    He said, “The position is that you cannot transact banking, you cannot be involved in banking activity from 1st July. And so what it means is that you cannot go and withdraw money from your bank if you haven’t linked your Ghana card to your account.

    “However, there is no expiry date to when you can do so. Si there’s an expiry date to when you  can transact business, but there’s no expiry date to when you can link your account to your Ghana card. So you go tomorrow, you want to withdraw from your account, if you haven’t linked your account to your Ghana card, you won’t be able to withdraw, but you’d have the opportunity to link your Ghana card to your account then you withdraw.

    “And you can continually do so, or anybody who is not should not rush tomorrow or tomorrow next to go and withdraw. If you don’t have business of doing banking transactions to withdraw money, you can go anytime and withdraw money, and you’d be allowed to withdraw only when your account is linked.”

    He further explained that “the only deviation which I may have to come in is that if you’re going to put in money – let’s say you have deposits, you’re going to put into your account – you’d be allowed to do so.

    “Otherwise, you’d have to take the money home and then these same fraudsters will apprehend you and take the money from you. You’d be allowed to do so, but you’d not be allowed to withdraw. There will be no debits on your account so you’d not be allowed to withdraw.”

    However, for Ghanaians who are non-residing in Ghana and diplomatic missions, they can use their passports to conduct all banking transactions.

    “The next proviso which is an expansion of what we have said and not to deviate from that but an expansion is that Ghanaians who are living abroad, in other words, non-residents who are Ghanaians who are living abroad who through no fault of theirs have not been able to have access to Ghana cardwill be allowed to use their passports.

    “Again the diplomatic missions, the embassies, will be allowed to use their passports to do banking business. aside of this all other persons should have their Ghana cards and should link their Ghana cards before they’re allowed.”

    Meanwhile, Dr. France has warned against linking your Ghana crad to your bank account  via social media links.

    According to him, this may be the nefarious activities of fraudsters trying to take advantage of the system and phish for the banking details of unsuspecting customers.

    He has warned the general public to instead report to their banking centres and have their detail taken there.

  • Ghana’s policy rate of 19% second highest in Sub-Saharan Africa

    Ghana’s policy rate of 19% second highest in Sub-Saharan Africa

    Ghana’s policy rate of 19% is the second highest in Sub-Saharan Africa after Angola, Fitch Solutions tracking of 20 countries in the region has revealed.

    This is coming after the recent adjustments of the key lending rate of many central banks in the region.

    Ghana’s banking industry has been characterised by high lending rates, making cost of doing business expensive, compared to neighboring Côte d’Ivoire (policy rate of 4%) and Nigeria (policy rate of 11.50%).

    However, this is due to largely weak fiscal economy, compelling the Bank of Ghana to increase its benchmark indicator- the policy rate – to help control the rising inflation as well as the volatility of the cedi.

    The policy rate which is the key indicator that the Central Bank lends to commercial banks have gone up by 5.5% in the last nine months.

    Though some have argued that the Bank of Ghana’s Inflation Targeting framework is not the best tool to fight inflation, the Central Bank has refuted that claim.

    The policy rate is a key determinant of lending rates in the country, but that is not the only factor banks consider in pricing loans.

    Banks will usually not lend below 91-day Treasury bill rate which is presently above 24%.

    The financial intermediaries also prioritise inflation, cost of funds and non-performing loans as some key factors considered before lending.

    Meanwhile, Equatorial Guinea, Cameroon and Gabon have the lowest policy rate of 3.50% each in Sub Saharan Africa.

    COUNTRY POLICY RATE (%)

    Cameroon 3.50

    Guinea 3.50

    Gabon 3.50

    Congo Brazzaville 3.50

    Coted’lvoire 4.00

    Togo 4.00

    South Africa 5.25

    Botswana 5.50

    Tanzania 6.00

    Uganda 7.50

    Congo DRC 7.50

    Kenya 8.00

    Zambia 10.00

    Ethiopia 10.00

    Nigeria 11.50

    South Sudan 12.00

    Malawi 12.00

    Mozambique 15.75

    Ghana 19.00

    Angola 20.00

  • DBG barred from investing in gov’t securities – Management

    DBG barred from investing in gov’t securities – Management

    Adnan Adams Mohammed

    Management of the newly launched wholesale bank, Development Bank Ghana, has assured the business public that it will implement effective measures that will ensure they support key sectors of the economy.

    The bank, launched last week, in the wake years of lamentation by business players in the agricultural and manufacturing sectors of the economy of inadequate access to funding to start and or expand their businesses that could create more jobs and help spur the economy to achieve the industrialization agenda of the governments. DBG is a non-deposit taking wholesale bank that is expected to provide funds to existing commercial banks and other qualifying financial institutions to provide long-term lending to businesses.

    According to Bank of Ghana’s data, less than 15 percent of loans granted by banks and Specialised Deposit-taking Institutions (SDIs) are for 5 years or longer. This, according to finance experts has affected the structure of the country’s economy as the financial sector are not able to complement the industrial, agro-economy and infrastructural development agenda of the economy as those sectors mostly require long term investments. But, the managers of the DBG say they have put enough measures in place to ensure that funds it lends to banks are used as planned.

    “We have specifically put in place certain measures that will ensure that funds that get to the Commercial Banks we are working through eventually get through to the SMEs”, Deputy CEO of the Bank, Michael Mensah-Baah, noted when speaking to the media on steps taken by the DBG to ensure it doesn’t repeat the mistakes of current national banks.  

    “First of all, we will select Commercial Banks that are already lending to SMEs. Number two, we’re going to make sure that the Commercial Banks do understand the credit risk of the SMEs, and finally, we have an agreement with the Commercial Banks that specifically ensures the funds we give them to go to specific sectors of the economy, i.e agriculture, manufacturing, ICT and high-value services sectors. These are all enshrined in the master lending agreement that we have with the Commercial Banks.

    “Within that agreement, there’s a specific timeframe that the funds stay with the Commercial Banks. If the time (one month) elapses without the funds being given out, then the funds return to the DBG,” he added.

    Corroborating the Bank of Ghana’s data, universal banks in the country, for some time now, have been accused of using a chunk of their funds to invest in less risky government securities instead of giving such funds out as credit to the private sector.

    According to the May 2022 edition of the Bank of Ghana’s Monetary Policy Report, the asset and liability structure of the banking industry remained tilted towards less risky assets as of April 2022.

    Investments continued to dominate the asset mix, but its share declined from 47.0 percent in April 2021 to 43.2 percent in April 2022 while the share of “Cash and Due from banks” increased from 18.6 percent to 21.7 percent during the same comparative period.

    Loans and advances (net), however, remained the second-largest component of banks’ assets, recording a higher share of 27.4 percent in April 2022 from 26.5 percent in the previous year on account of the stronger growth in credit in April 2022.

  • Banks write-off ¢768.29m as bad debt

    Banks write-off ¢768.29m as bad debt

    Banks in Ghana has written off a little above ¢768.29 million as bad debt in the first four months of 2022, about 5.5% increase over the same period last year.

    According to the latest Monetary Policy report by the Bank of Ghana, the bad debt is made up of loan losses, depreciation, among others.

    Despite the increase in the provision of the bad debt, the banking industry’s asset quality improved year-on-year, evidenced by the decline in the Non-Performing Loans (NPLs) ratio from 15.5% in April 2021 to 14.3% in April 2022.

    The decline in the NPLs ratio was on the back of a higher growth in the stock of loans, from 7.0% to 25.8% during the review period.

    When adjusted for the fully provisioned loan loss category, the industry’s adjusted NPL ratio also declined sharply from 6.5% to 4.2%.

    On the other hand, the stock of NPLs, increased to ¢8.6 billion in April 2022, from ¢7.4 billion in April 2021, representing a growth of 15.8%.

    The increase in the NPL stock indicates that some asset quality risks still remain within the banking sector.

    Meanwhile, the extension of the loan repayment moratoria deadline by the Bank of Ghana to December 31st, 2022 is expected to provide relief to customers adversely impacted by the pandemic and help moderate the growth in non-performing loans within the banking sector.

    In terms of sectorial performance, all but three sectors recorded improvements in their NPL ratios during the period under review.

    These are electricity, water and gas (from 22.6% to 12.2%); manufacturing (from 18.3% to 10.9%); mining and quarrying (from 10.7 % to 6.5%); commerce and finance (from 21.9% to 18.9%) and the services sectors (from 9.1% to 8.7%).

    On the other hand, the sectors that recorded increases in their NPL ratio were construction (from 24.0% to 32.1%); transportation, storage and communication (from 10.4% to 12.4%) and the agriculture, forestry and fishing sectors (from 23.7% to 25.0%).

    The sector with the lowest NPL ratio was the mining and quarrying sector while the construction sector had the largest proportion of its loans impaired.

  • Using monetary policy to control inflation: Economists look elsewhere for solution

    Using monetary policy to control inflation: Economists look elsewhere for solution

    Adnan Adams Mohammed

    Two renowned economists from the country’s leading universities have all flagged down the potency of using the monetary policies to control the recent leapfrogging inflation rate.

    They believe the Bank of Ghana’s measures put in place to curb the consistent rise in inflation are either not working or the situation is not being diagnosed properly. Both, are thereby calling on the government through the finance ministry to consider other factors such as the fiscal space.

    The Ghana Statistical Service last week announced that, increment in transport fares and unbearable food prices pushed  May inflation rate to 27.6%. This is against 23.6% recorded in April which was about 4% jump from March inflation of 19.4%. The inflationary trend pushed the Monetary Policy Committee (MPC) of the BoG to tighten the policy rate by 200 basis points from 17% in April to 19% in May. Yet, the according to Professor of Finance and Economics at University of Ghana, the monetary policy has proven to be inefficient and has therefore asked the government to adopt a fiscal policy approach toward mitigating inflation in the country.

    “If you look at the disparity between the inflation and the policy rate and the Treasury bill rate, it tells you there’s a lot more work to be done and we cannot look to the monetary policy because the problem is from the fiscal side”, Prof. Godfred Alufar Bokpin of the UG Business School. “The monetary policy is constrained in terms of how we can deploy that effectively to contain inflation and engineer growth.”

    Also, an economist at the University of Cape Coast has opined that the Central Bank maybe misdiagnosing the problem. He said, the increase in the BoG policy rate by 200 basis points to 19% is in response to risk to the economy; high inflation, weak financial inter-mediation and fiscal stress, which is expected to trigger lending rate hike.

    “The measures taken in an environment of volatile depreciation promises rather further inflation”, Professor John Gatsi, Dean of School of Business and Finance at UCC said in reaction to the MPC’s announcement, last week. “High inflation and upward lending rate will undermine government contracts execution and create new levels of arears due to cost implications for procurement of materials.”

    Prof Gatsi expatiated that, a number of projects maybe abandoned due to inflation, depreciation and cost of borrowing and warned that there maybe too much pressure on the banks as cost of mobilizing funds continue to increase with the possibility of distorted returns on placement of funds with the banks.

    According to the Government Statistician, Professor Kobina Annim, the rate of inflation for Transport (39.0%), Household Equipment and Maintenance (33.8%), Housing, Water, Gas and Electricity (32.3%) and Food and Non-Alcoholic Beverages (30.1.6%) were higher than the national average (27.6%).

    In May, 2022, 12 of the 13 divisions recorded inflation rates higher than the rolling average from June, 2021 to May, 2022.

    The data showed that Food inflation in May, 2022 was 30.1%, compared with 26.6% in April 2022. Non-food Inflation was however 25.7% in May, 2022, as against 21.3% the previous month.

    Meanwhile, Prof Bopkin has posited that, we cannot look to monetary policy to tackle this.

    “We must shift our attention to the fiscal side so that the fiscal side will respond appropriately with the discipline that it requires,” he stressed.

    “Once the source of the inflation is largely fiscal, then there’s a limit to how far you can deploy the monetary policy to bring down inflation and then engineer growth.

    “More so, because of the monetary policy framework that we are using under inflation targeting, because for one key requirement for inflation targeting to be effective, it is fiscal discipline. Once you deny the monetary side the fiscal discipline, then there’s no way they can use the monetary policy effectively to bring down inflation and engineer growth.

    At a press briefing, fortnight ago, the central bank said the growth prospects in the domestic economy remain positive and the Bank’s high-frequency indicators point to continued and increased momentum in economic activities with private sector credit showing some improvement in real terms, despite the increased price pressures.

    “All these are resulting in a closure of the negative output gap. The banking sector remains robust, with sustained growth in total assets, investments and deposits. However, business and consumer confidence have dipped, reflecting the sharp depreciation of the currency and the general high inflationary environment, which has resulted in higher input costs for businesses. A quick turnaround, with more confidence-building measures to counter these conditions, would provide further boost to the real economy”, it added.

    On fiscal policy implementation, the Committee observed that execution of the budget for the first quarter was broadly in line with targets although there was a minor deviation in the deficit target, stemming largely from low revenue receipts.

    It is the expectation of the Committee that fiscal consolidation will take hold gradually and the mid-year budget review will provide further fiscal fine-tuning to ensure that the fiscal consolidation efforts stay on track.

    The MPC said despite the improvement in the trade balance due to favourable commodity prices, the external sector has weakened somewhat due to developments in the capital and financial account.

  • Ghana’s balance of payment deficit widens

    Ghana’s balance of payment deficit widens

    By Elorm Desewu

    Ghana’s balance of payment deficit has more than doubled for the first quarter of 2022, according to the Bank of Ghana, (BoG).

    This was due to the capital and financial account recording some significant outflows from net portfolio reversals and net private capital outflows, which resulted in an overall balance of payments deficit of US$934.46 million for the first quarter of 2022, compared with a deficit of US$429.93 million, same time last year.

    However, the trade surplus improved significantly recording US$1.3 billion in the first four months of the year, compared with a trade surplus of US$778.00 million in the same period of last year.

    The trade surplus was offset by investment income outflows and net services payments, resulting in a current account deficit of US$128.15 million (0.2 percent of GDP) for the first quarter of the year, representing a marginal improvement from the current account deficit of US$197.0 million (0.2 percent of GDP) recorded in the first quarter of 2021.

    Commodity prices have remained volatile due to the on-going geopolitical tensions. Average crude oil prices gained 42.0 percent on a year-to-date basis to settle at US$106.2 per barrel in April 2022, supported by supply constraints arising from the geopolitical tensions between Russia and Ukraine.

    Gold prices also gained 8.1 percent to settle at US$1,935.89 per fine ounce, on the back of increased safe-haven demand amid global inflation concerns. Similarly, cocoa prices went up by 4.4 percent to settle at US$2,591.06 per tonne in April 2022, compared to the US$2,481.95 per tonne in December 2021, due to unfavourable weather conditions across West Africa.

    The improvement in export earnings was attributed to crude oil and non-traditional exports. Crude oil export receipts recorded significant growth of 61.0 percent to US$1.9 billion, due to price effects, while gold exports improved by 3.6 percent, also supported by price effects.

    Non-traditional export receipts crossed the US$1.0 billion mark in the review period and contributed significantly to the trade surplus. These developments far outweighed the 7.7 percent growth in total oil imports in the review period, on the back of compressed non-oil imports.

    Gross International Reserves (GIR), at the end of April 2022, stood at US$8.34 billion, equivalent to 3.7 months of import cover.

    This compares with US$9.70 billion, equivalent to 4.3 months of import cover at end-December 2021. 21. In the foreign exchange market, the Ghana Cedi depreciated by 15.6 percent against the US dollar, 13.1 percent against the Pound Sterling, and 13.6 percent against the Euro, during the first quarter of 2022.

    From the beginning of April through 18th May 2022, there has been some moderation in the rate of depreciation. The Ghana Cedi depreciated by 0.2 percent against the US dollar, but appreciated by 5.7 percent against the Pound Sterling and 5.4 percent against the Euro, bringing the year-to-date depreciation against these currencies to 15.8 percent against the US dollar, 8.2 percent against the Pound Sterling, and 8.9 percent against the Euro.

  • High volatility of Cedi to discourage investment in Ghana’s infrastructure – Fitch

    High volatility of Cedi to discourage investment in Ghana’s infrastructure – Fitch

    Adnan Adams Mohammed

    Fitch Solutions forecasts Ghana’s construction industry to grow by 4.1% year-on-year in 2022, a slowdown compared to the estimated growth of 5.7% year-on-year in 2021.

    The rating agency notes that, despite the market’s strong fundamentals, including a track record of private investment in energy infrastructure, comparatively high political stability and security, and a relatively diverse competitive landscape, it expects that a substantial depreciation of the cedi against the US Dollar in 2022 will, in the near term, make private investors more reluctant to invest in Ghana’s infrastructure sector.

    Further indicating that, it do not expect that private investment will meaningfully cushion the negative impact of subdued public infrastructure spending on the market’s construction industry growth, the agency said.

    “We forecast that in 2022, the Ghana cedi will depreciate by 22.7% against the USD, significantly increasing revenue risks for the foreign investors that rely on expatriation of revenues”, Fitch Solutions, thus, said. “We forecast government capital expenditure to shrink to 3.3% year-on-year of GDP in 2022 and 2.9% year-on-year of GDP in 2023, down from 3.7% year-on-year in 2021”.

    “While this puts capital expenditure levels above those in 2018-2020 when Ghana’s construction industry growth averaged -0.1% per year, it remains below the comparatively high annual average levels of 4% of GDP between 2010 and 2017.”

    During the period between 2010 and 2017, the construction industry growth average of 8.1% per year.

    But the Governor of Bank of Ghana, Ernest Addison, said developments in the global capital markets, combined with internal challenges that resulted in the rating downgrade of Ghana’s economy, have played out to exacerbate price and exchange rate pressures in the domestic economy.

    The Ghana cedi, he noted, came “under severe pressure in the first quarter of 2022 as offshore investors exited positions in domestic securities at a time when domestic demand for forex had increased”.

    Speaking at the 6th CEO Summit in Accra, last week, Dr Addison said: “The FX pressures, coupled with tight forex liquidity due to absence from the international capital markets, contributed to the significant currency depreciation”.

    Cumulatively, he said the Ghana cedi depreciated by 15.8 per cent against the US dollar in the year to 18th May 2022, compared with an appreciation of 0.5 per cent in the same period of 2021.

    “To ease off increased volatility in the foreign exchange (FX) market, the Bank extended the forward auctions to include the Bulk Oil Distributing Companies”.

    “This formed part of the measures taken by the Bank to address the FX liquidity constraints within the local petroleum sector and aid price discovery, especially for the general pricing window within the downstream sector”, he noted.

    Also, Dr Addison said recent price developments indicate elevated pressures from both domestic and external sources.

    These include the global energy and food price shock, and its consequential upward adjustments on domestic ex-pump petroleum prices and transportation costs, domestic food prices, as well as the passthrough effects of the recent exchange rate depreciation.

  • E-cedi now accepted for transactions in Sefwi Asafo

    E-cedi now accepted for transactions in Sefwi Asafo

    Adnan Adams Mohammed

    The long awaited implementation of E-cedi is now accepted for daily transactions in Sefwi Asafo, a town in the Western North Region, on a pilot basis, the Bank of Ghana (BoG) has disclosed.

    The pilot is the offline version of the e-cedi which are used for buying daily necessities such as food, clothes etc.

    The e-cedi is a digital replica of the Cedi notes and coins which can be redeemed for physical cash and used for varied payments.

    “So far, the usage and uptake of the offline version of the e-cedi is being piloted in a small town called Sefwi Asafo, in the Western North Region”,  the Governor of the central bank, Dr Ernest Addison, last week, at the Ghana CEOs Summit in Accra.

    “Selected users in that community have been using the e-cedi for daily purchases such as food, groceries and drinks”.

    “The BoG will continue to work with these users to obtain the critical usage data that will inform the decision about the e-cedi’s future after the pilot.”

    He added, “these are clearly landmark events in providing digital leadership with the payment systems to lead to a digitalised economy in the near future.”

  • African DFIs tasked to enhance credit rating positions to boost investment

    African DFIs tasked to enhance credit rating positions to boost investment

    Development Finance Institutions across Africa have been tasked to beef up efforts to enhance credit rating positions to attract more global investments.

    According to the Bank of Ghana, access to global debt capital and loan markets continues to remain a problem hence the call for the financial institutions to implement policies that will attract investments on more favourable terms.

    Development Finance Institutions (DFIs) provide risk capital for economic development projects on a non-commercial basis.

    Ghana is currently in the process of setting up such an outfit called the Development Bank Ghana with funding from internal and global partnership sources.

    Among the objectives for setting up the bank is to position certain sectors of the Ghanaian economy to attract the needed global investment.

    Many DFIs across the continent are in the process of positioning their economies for similar investments.

    It is in this regard that the Bank of Ghana is asking these institutions to implement policies that will enhance their ratings in order to attract global investments.

    The Head of Banking Supervision at the Bank of Ghana, Osei Gyasi, was speaking on behalf of the Governor of the Central Bank at the 2022 annual general assembly of the Association of African Development Finance Institutions.

    “African DFIS should work at enhancing credit rating positions. In spite of the large number of African DFIs, access to global debt capital and loan markets continues to be dominated by a few leading multilateral African or regional DFIs largely due to innovations in credit enhancements and structuring. It is imperative, therefore, for DFIS to implement policies that will enhance their ratings in order to attract more global investments on more favourable terms, including longer tenors and lower interest rates.”

    Following the recent increase of the Monetary Policy Rate by 200 basis points to 19 percent due to the high inflation rate, it is expected that the cost of borrowing from financial institutions will go up at least for the next two and half months.

    It is for this reason that banks and other financial institutions will have to review their fees and charges to adjust to the current monetary policy situation.

    Managing Director of the National Investment Bank, Samuel Sarpong spoke to Citi Business News on the sidelines of the meeting.

    He said, “All banks are going through a period o adjusting to the various economic conditions as well as the monetary policy situation. For example, the cost of doing business has gone up significantly with the inflationary rate and all banks are adjusting their rates and fees to make sure that they make profit. So similar to other banks, NIB is looking at its interest rates, fees and cost of doing business and adjusting appropriately just as any other business will do.”

    The 48th Association of African Development Finance Institutions annual general assembly which was hosted by the National Investment Bank was under the theme, ‘Unlocking Innovative Resources for Development Finance Institutions: Agenda for African DFIs’.