By Adnan Adams Mohammed
Professional services firm Deloitte and the Bank of Ghana (BoG) have issued a dire warning: while Ghana’s macroeconomic indicators are brightening, a “stubborn mountain” of bad debt remains the primary threat to the stability of the banking sector.
In its latest commentary on the nation’s financial health, Deloitte highlighted that despite a general improvement in asset quality, the Non-Performing Loan (NPL) ratio stands at a staggering 18.7%. This “toxic asset” load continues to pose a significant risk, even as the Bank of Ghana moves to stimulate the economy through aggressive monetary easing.
In March 2026, the Bank of Ghana’s Monetary Policy Committee (MPC), chaired by Governor Dr. Johnson Asiama, slashed the monetary policy rate by 150 basis points to 14.0%. The decision followed a period of robust recovery, including a real GDP growth of 6% in 2025 and a dramatic fall in inflation to 3.3% by February 2026.
However, Deloitte warns that this shift is not without peril. “Although asset quality has improved, the NPL ratio remains a key risk,” the firm stated. They further cautioned that the pass-through effect of higher global crude oil prices and geopolitical tensions could trigger a resurgence in inflationary pressures, potentially undoing recent gains.
A “dual-speed” recovery
The BoG’s March 2026 Monetary Policy Report describes a “dual-speed” economy. On one hand, consumer and business confidence have surged to record highs as the Cedi stabilizes. On the other, the structural health of bank balance sheets is under intense pressure from legacy debts.
“Businesses are beginning to see a path toward expansion again,” Dr. Asiama noted. “But the NPL ratio is the Achilles’ heel. It creates a ‘liquidity squeeze’ that stalls the very recovery businesses are feeling optimistic about.”
Factors influencing the NPL ratio
The NPL ratio, the percentage of bank loans that are in default or close to it, remains elevated, posing what the BoG describes as a “key risk” to the industry’s stability.
High NPLs restrict a bank’s ability to lend anew to productive sectors of the economy. When a significant portion of a bank’s capital is tied up in non-performing assets, it creates a “liquidity squeeze” that can stall the very economic recovery that businesses are currently feeling optimistic about.
The drivers of these NPLs include legacy debt which are unresolved arrears from previous economic shocks; high borrowing costs because, despite the drop in inflation, the real cost of credit remains high for many SMEs; and sector-specific stress because certain industries, particularly construction and agriculture, are still struggling with long payment cycles.
The great divide: local vs. foreign banks
New data reveals a widening gap in how financial institutions are weathering the storm. Indigenous (local) banks are bearing the brunt of the crisis, with NPL ratios ranging between 18.5% and 22.0%. In contrast, foreign-owned subsidiaries have maintained much cleaner books, with ratios between 8.0% and 12.5%.
Experts attribute this disparity to local banks’ high exposure to small and medium enterprises (SMEs) and delayed government payments to contractors. Foreign banks, backed by parent company capital and stricter global credit scoring, have recovered faster from previous shocks like the Domestic Debt Exchange Programme (DDEP).
Risks on the horizon
While the external sector remains resilient, with reserves rising to US$14.5 billion, Deloitte pointed to emerging vulnerabilities:
Capital outflows: As interest rates fall, there is a risk of capital exiting the country in search of higher returns elsewhere.
Currency volatility: Increased liquidity in the banking sector could put renewed pressure on the Cedi.
Real returns: Currently, real returns on investment remain positive due to the wide gap between inflation and interest rates, but this window may narrow if global shocks persist.
Regulatory crackdown
The Bank of Ghana has signaled it will maintain a “hawkish” eye on credit risk. The regulator is currently pushing banks to adopt more aggressive recovery efforts and stricter frameworks for new loans.
“We cannot have a sustainable recovery if the banking sector is carrying a heavy load of toxic assets,” a senior BoG official stated.
As the second quarter of 2026 begins, the “Confidence vs. NPL” tug-of-war remains the defining theme for Ghana’s financial sector. For investors and consumers alike, the message from both Deloitte and the Central Bank is clear: the sky is clearing, but the ground remains muddy.
Comparative Analysis: NPL ratios (Q1 2026)
Feature Indigenous (Local) Banks Foreign-Owned (Subsidiaries)
Average NPL Ratio 18.5% – 22.0% 8.0% – 12.5%
Primary Risk Drivers High exposure to local SMEs and delayed government payments to contractors. Stricter global credit scoring and focus on multi-national corporations (MNCs).
Capital Adequacy More vulnerable to Domestic Debt Exchange (DDEP) shocks; slower recovery. Backed by parent company capital; faster post-DDEP recovery.
Recovery Strategy Heavy reliance on collateral foreclosure and debt restructuring. Aggressive write-offs and early-stage credit monitoring.
Sector Concentration Construction, Agriculture, and Retail. Extractives (Mining/Oil), Manufacturing, and Telecommunications.
The outlook for 2026
As the second quarter of the year approaches, the “Confidence vs. NPL” tug-of-war will define the strength of Ghana’s financial sector. If banks can successfully bring down their NPL ratios while capitalizing on the rising business sentiment, the economy could see a significant boost in credit-led growth.
For now, the central bank’s message to the market is one of “watchful optimism.” The sky is clearing, but the ground remains muddy.
