The Bank of Ghana (BoG) has announced plans to introduce a directive that will cap the ratio of non-performing loans (NPLs) in the banking sector at 10% by December 2026, as part of a broader strategy to restore asset quality and safeguard the resilience of the financial system.
Governor Dr. Johnson Asiama, speaking at a meeting with commercial bank executives in Accra on Tuesday, said the forthcoming directive is aimed at curbing persistently high NPL levels, which remain a key risk to Ghana’s financial stability.
“We’ll soon introduce a directive to tackle the persistently high non-performing loans across regulated financial institutions,” Asiama stated. “These actions are part of our broader agenda to restore asset quality, promote sound lending practices, and safeguard the resilience of Ghana’s financial system.”
Background: Impact of Debt Restructuring and Inflation
Ghana’s banking industry has been under pressure following the country’s sovereign debt default in 2022 and subsequent debt restructuring. Banks—many of them heavily invested in government securities—were among the hardest hit, recording significant losses during the process.
At the same time, high inflation—driven by global shocks such as the COVID-19 pandemic and Russia’s invasion of Ukraine—soared to over 54%, severely weakening the ability of households and businesses to service their debts. Although inflation has since eased to 21.2%, the legacy of those economic shocks continues to weigh on loan performance.
As of April 2025, the average NPL ratio in Ghana stood at 23.6%, down from 25.7% a year earlier. This remains substantially higher than regional peers such as Nigeria (4.2%), Kenya (17.4%), and South Africa (1%).
Structural Challenges in the Banking Sector
Analysts say the high level of bad loans is largely driven by the government’s GH¢67.5 billion (approx. $6.6 billion) in arrears to local contractors and an additional $2 billion owed to independent power producers (IPPs). These entities, many of whom took loans from domestic banks—especially Ghanaian-owned ones—have defaulted due to delayed government payments.
“All of these contractors borrowed from the banks, especially the Ghanaian-owned banks,” said Richmond Akwasi Atuahene, an analyst with Salman Partners and Financial Consult Ltd. “If the government can pay them, it will improve the capital solvency of the banks.”
Key Features of the Upcoming Directive
According to Governor Asiama, the central bank’s NPL framework will include:
- Mandatory write-offs of fully provisioned loans with no realistic prospects of recovery.
- Restrictions on further lending to strategic or willful defaulters, aimed at curbing moral hazard and enforcing credit discipline.
The initiative is part of a broader financial sector reform programme intended to improve capital adequacy, rebuild trust in the banking system, and ensure that financial institutions are well-positioned to support Ghana’s economic recovery.
