BoG to Cap Non-Performing Loans at 10% by 2026 in Bid to Stabilize Ghana’s Banking Sector

ACCRA— Ghana’s central bank is tightening its grip on credit risk.

In a decisive move aimed at restoring discipline and shoring up confidence in the banking sector, the Bank of Ghana (BoG) has announced plans to introduce a new directive capping non-performing loans (NPLs) at 10% by the end of 2026. The measure marks a significant escalation in regulatory oversight following years of turbulence triggered by sovereign debt default and macroeconomic instability.

“We’ll soon introduce a directive to tackle the persistently high non-performing loans across regulated financial institutions,” said Governor Dr. Johnson Asiama, addressing senior banking executives in Accra on Tuesday. “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.”

A Legacy of Crisis: Banks Still Reeling

The move comes on the heels of Ghana’s 2022 sovereign default and debt restructuring, which inflicted heavy losses across the financial sector—particularly among banks with outsized exposure to government paper. That restructuring, coupled with inflation peaking above 54% in 2023, pushed many households and firms into delinquency, driving a sharp deterioration in loan performance.

While inflation has since cooled to 21.2%, the average NPL ratio remains elevated at 23.6% as of April 2025—well above regional peers such as Nigeria (4.2%), Kenya (17.4%), and South Africa (1%).

Government Arrears Deepen the Wound

Beyond macro headwinds, analysts point to structural fiscal challenges as the underlying driver of Ghana’s NPL crisis. The government is estimated to owe GH¢67.5 billion ($6.6 billion) to local contractors and another $2 billion to independent power producers (IPPs). Many of these firms borrowed from domestic banks and have defaulted as government payments stall.

“All of these contractors borrowed from the banks, especially the Ghanaian-owned banks,” said Richmond Akwasi Atuahene, analyst at Salman Partners and Financial Consult Ltd. “If the government can pay them, it will improve the capital solvency of the banks.”

Inside the Directive: A Push for Discipline

The central bank’s forthcoming regulatory framework will include the following provisions:

• Mandatory write-offs of fully provisioned loans with no reasonable expectation of recovery.

• Lending restrictions for chronic or strategic defaulters, designed to curb moral hazard and reinforce credit discipline.

• Enhanced supervisory requirements to monitor bank performance against the 10% NPL threshold.

The initiative is part of a wider reform package aimed at improving capital adequacy, restoring public trust, and ensuring banks are adequately positioned to support Ghana’s economic recovery.

Editorial Outlook: A Balancing Act

BoG’s 10% NPL cap is an ambitious, if necessary, policy intervention. While the directive underscores a firm commitment to financial discipline, its successful execution will hinge on broader macro reforms—especially improved fiscal liquidity and timely settlement of government obligations to key sectors.

In a financial system where sovereign risk bleeds directly into private balance sheets, real reform will require more than prudential directives. It will demand political will, fiscal accountability, and stronger institutional mechanisms to separate commercial credit risk from state-induced defaults.

For now, banks have until December 2026 to clean up their loan books. But the clock is ticking—and this time, regulators aren’t blinking.

Last Updated on June 10, 2025 by emryswalker