Ghana has found itself at the top of a ranking no economy wants to lead. According to Fitch Solutions’ latest financial outlook, the country’s banking sector is now the most exposed to non-performing loans (NPLs) among the ten largest Sub-Saharan African (SSA) economies.
Fitch’s report, titled “US Tariffs Increase Risks for SSA Banks,” revealed a staggering NPL ratio of 21.8% for Ghana, coupled with a Capital Adequacy Ratio (CAR) of just 14.0%, one of the weakest in the region. These figures underline the heightened vulnerability of Ghana’s financial institutions in an increasingly volatile global economic landscape.
The report attributes much of Ghana’s banking woes to the residual impact of the Domestic Debt Exchange Programme (DDEP), which significantly eroded banks’ balance sheets. Additionally, a persistently high interest rate environment has tightened the noose around credit quality, impairing the ability of borrowers to service their loans.
“Ghana ranks highest in NPLs and near the bottom in capital strength,” Fitch noted, painting a picture of a sector under pressure and in need of urgent reform.
Despite Ghana’s precarious position, Fitch maintains that the broader SSA banking landscape appears relatively resilient. Robust capital buffers in other markets such as Nigeria and Kenya have provided a shield against mounting macroeconomic pressures. Fitch expects further improvements in capital positions across the region, driven by regulatory reforms and a more optimistic economic outlook heading into 2025.
High interest margins, which exceed 50% in most SSA banking markets except Nigeria, have temporarily bolstered profitability. However, Fitch cautions that this margin advantage may be offset by slower credit growth and increased provisioning for bad loans.
The report also flags significant external threats, particularly the ripple effects of newly imposed US tariffs, which could influence global monetary policy. This, Fitch argues, may lead to prolonged high interest rates a scenario that could further constrain credit growth and depress loan quality in the region.
“If rates stay elevated beyond expectations, credit extension could shrink as households and firms grapple with borrowing uncertainty,” the report warns.
Paradoxically, a sudden and steep decline in rates perhaps due to a global downturn could pose its own set of risks, potentially eroding bank profitability and compounding challenges related to planning and asset quality.
Fitch concludes that monetary policy volatility is muddying strategic waters for SSA banks, complicating efforts to manage assets, pricing strategies, and revenue growth across interest, fees, and commissions.
In Ghana’s case, the path forward demands decisive regulatory and fiscal interventions to restore confidence and improve resilience. Without meaningful reform, the country’s banks may find themselves increasingly isolated in a region that, while not immune to shocks, appears better positioned to navigate the turbulent economic tides of 2025.
