Ghana’s banking industry is facing mounting pressure, with alarming signs of financial stress highlighted in a new report by Fitch Solutions.
The country’s non-performing loan (NPL) ratio has surged to 21.8%, the highest among the top 10 Sub-Saharan African economies, while its Capital Adequacy Ratio (CAR) stands at a modest 14.0%, ranking as the third weakest in the region.
Fitch attributes this vulnerability to the combined impact of the Domestic Debt Exchange Programme (DDEP) and persistently high interest rates, which have strained banks’ ability to maintain strong balance sheets.
In its latest report titled “US Tariffs Increase Risks for SSA Banks”, Fitch warns that Ghana’s financial institutions are more exposed compared to peers like Nigeria and Kenya, where regulatory improvements and better economic prospects are expected to strengthen capital buffers in 2025.
Despite these challenges, the outlook across most SSA countries remains cautiously optimistic. Fitch projects a decline in interest rates across the region, which could ease loan repayment burdens and improve asset quality.
Additionally, record profits generated from previous rate hikes may offer banks a cushion to navigate short-term turbulence. However, monetary policy uncertainty, partly driven by U.S. tariff implications, could complicate strategic planning for banks.
If high interest rates persist longer than anticipated, it may dampen credit growth and raise default risks, discouraging borrowing among consumers and businesses.
Conversely, a rapid drop in rates due to economic slowdowns could squeeze profit margins and pressure earnings.
Fitch also highlights the paradox SSA banks face: while interest margins remain high (over 50% in most markets, except Nigeria), profits could be eroded by rising NPLs and slower loan growth.
In conclusion, while many SSA banks may be better positioned to withstand global shocks, Ghana’s financial sector is clearly in a fragile state, underscoring the need for prudent policy, regulatory support, and strategic adjustments by banks to weather the uncertainty ahead.
