Ghana’s banking sector has recorded a notable decline in reserves held with the central bank over the past six months, raising new questions about evolving liquidity patterns and lending activity.
According to data from the Bank of Ghana, the share of bank reserves in total reserve money dropped from a peak of 64.2% in October 2024 to just 16.8% by April 2025. This marks a steady decline over the review period, with the most significant monthly drops occurring in November (38.1%) and December (23.5%) of 2024.
The central bank’s monetary survey shows that in the earlier part of the year, particularly between May and October 2024, banks’ reserves consistently made up more than half of reserve money, reflecting a period of heightened liquidity absorption. However, by the start of 2025, the proportion began to fall, reaching its lowest in over a year by April.
During the same timeframe, the contribution of currency outside banks remained relatively high, peaking at 38.1% in October and still elevated at 20.0% in April 2025, suggesting sustained cash demand in the economy.
The decline in reserves held by banks with the central bank, from 64.2% in October 2024 to 16.8% in April 2025, is seen by observers as potentially signalling a shift in liquidity conditions within Ghana’s financial system. A lower reserve share is typically associated with banks holding less idle cash, and may indicate a reallocation of funds toward lending or investment activity.
Some readings of the data suggest this could reflect efforts by banks to stimulate credit growth or respond to shifts in monetary policy incentives. Others point to the risk of tighter interbank liquidity, particularly if credit demand continues to rise without a commensurate increase in overall money supply. In such scenarios, the system could become more sensitive to liquidity shocks, with possible implications for short-term interest rate dynamics.
The trend also coincides with a broader slowdown in reserve money growth, which fell from 104.5% in October 2024 to 38.0% in April 2025, an indication, some analysts note, of a more cautious liquidity environment taking shape.
Together, the observed developments in reserve composition and reserve money growth are being viewed within the context of an evolving monetary stance, as the central bank weighs its policy levers to balance inflation control, credit expansion, and financial stability.
