Despite the existence of the African Continental Free Trade Area (AfCFTA), some Ghanaian traders say they are already losing the battle of competition due to the stifling interest rates on loans.
The Traders Advocacy Group Ghana (TTAG) says the high monetary policy rate which has culminated in the high interest rates on loans in Ghana is making nonsense the whole agenda of AfCFTA particularly for Ghanaian businesses.
The AfCFTA, at its inception, was touted as a game-changer for businesses in Ghana by offering a level playing field for traders to compete with their counterparts across continents.
President of TTAG, Kwadwo Amoateng says in reality, they can’t compete, thanks to astronomical rates on loans in Ghana.
Ghana’s policy rate at the last monetary policy committee sitting was maintained at 27%. Lending rates currently hover around 35% or more. Meanwhile, businesses in other African countries, also parties to AfCFTA, are securing loans at very low rates.
For instance, while Kenyan traders are securing loans at 12%, South Africans’ rate of borrowing is even lower at 10%. Even Nigeria, with all her troubles, Kwadwo Amoateng reveals has a lending rate of 18%.
Ghana, with the headquarters of the free trade area, rather has a lending rate exorbitantly high above 30%.
“If we are all at one marketplace selling our goods, and the Ghanaian has taken a loan with an interest rate of 36%. How can a Ghanaian compete with those people from Kenya, South Africa, and Nigeria?” the President of TTAG queried in an interview monitored by The Ghana Times.
“Right from the word go, the Ghanaian is at a loss,” he further lamented.
At the core of this high policy rate culminating in a high lending rate are the problems of inflation, economic instability, and structural defects of Ghana’s economy.
The Bank of Ghana since May 2007 has been practicing an inflation-targeting regime where the policy rate is used as a tool to control inflation. With structural defects of the economy leading to high importation, and currency depreciation, inflation has consistently spiraled out of control.
The high inflation has always forced the Monetary Policy Committee to maintain high policy rates leading to high lending rates.
Economists have consistently proposed that until the government addresses the fundamental challenge of the economy, important indicators such as inflation, exchange rate, policy rate, and lending rates will continue to spiral out of control bringing untold hardships to businesses and individuals.
Last Updated on March 16, 2025 by samboad
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