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| S&P Global |
S&P Global Ratings has assessed Ghana’s banking sector non-performing loan (NPL) ratio of 16.1% as of June 2026 as remaining elevated and “still too high.” The rating agency attributes this to the lingering effects of the 2022 domestic debt exchange programme (DDEP), substantial government arrears to suppliers and contractors, and successive waves of exchange-rate depreciation and inflationary pressure that squeezed households and businesses.
In its broader assessment of Ghana (where it maintains a B-/B sovereign rating with a stable outlook), S&P noted that credit risk in the banking system stays elevated after years of macroeconomic instability, the government’s default, and subsequent debt restructuring. Thirteen local banks required recapitalization after the 2022 domestic debt restructuring. Most have since met requirements, yet five—including one state-owned bank—remain undercapitalized, according to the agency. This stands in contrast to Bank of Ghana (BoG) statements that all banks have met the new minimum capital requirements.
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Progress Amid Persistent Pressure
The 16.1% figure itself represents meaningful improvement. BoG data show the industry NPL ratio falling from 23.1% in June 2025, with the stock of NPLs declining to GH¢19.9 billion from GH¢20.7 billion a year earlier. The adjusted ratio (excluding fully provisioned loss-category loans) improved more sharply, to 4.6% from 8.5%. Private-sector borrowers account for roughly 98% of NPLs, up slightly from the prior year, while the public sector’s share has shrunk.
Asset quality strengthened across most sectors, though agriculture, forestry and fishing remain a stark outlier, with an NPL ratio climbing to 65.1% from 59.1%. Banks wrote off GH¢1.23 billion in bad debt in the first half of 2026, a 38% year-on-year increase, reflecting both cleanup efforts and ongoing recognition of impaired assets.
BoG has directed regulated institutions to bring NPL ratios below 10% by the end of December 2026, with graduated restrictions on dividends and bonuses for those above the thresholds. Industry capital adequacy stood at a robust 20.4% in June 2026 (later around 19.1% in August), well above regulatory minima and more than double the level seen in mid-2025 in some comparisons. Total assets expanded strongly (around 30.7% year-on-year to roughly GH¢502 billion in June), deposits grew, and gross loans and advances rose by nearly 40%.
Some individual banks have performed far better. UBA Ghana, for instance, reported an NPL ratio of just 1.7% in the first half of 2026 while more than doubling its loan book—illustrating that disciplined underwriting and recovery can coexist with growth.
Roots in the 2022 Crisis
The elevated baseline traces directly to Ghana’s 2022–2023 debt crisis. The DDEP, launched in December 2022, involved exchanging roughly GH¢137 billion in domestic notes and bonds for longer-maturity instruments with lower coupons. Banks, heavy holders of government securities, absorbed significant net-present-value haircuts and mark-to-market losses. Industry losses reached several billion cedis in 2022, capital was impaired, and temporary regulatory forbearance (lower capital buffers, adjusted risk weights) was introduced to preserve stability. A Ghana Financial Stability Fund was established to provide support.
Secondary effects compounded the problem: government payment arrears disrupted contractors and suppliers who in turn struggled to service bank loans; high inflation and cedi depreciation eroded real incomes and business cash flows; and risk aversion temporarily constrained new private-sector credit. NPL ratios rose sharply in the aftermath before the current gradual decline. International experience shows sovereign debt restructurings often leave banking systems with elevated bad loans for years as balance-sheet repair and economic recovery lag.
Inflation and Monetary Policy Context
S&P also addressed the broader macro backdrop. Inflationary pressures have been rising in 2026, yet the agency expects them to remain contained relative to Ghana’s historical norms. Monetary policy credibility is improving: after years of sizable fiscal deficit monetization, the government appears to have ended that practice. Still, S&P does not expect the very low inflation seen early in 2026 to persist; average inflation is more likely to sit at the upper end of the BoG’s 6–10% target band through 2029.
Recent BoG data align with a picture of contained but rising prices. Headline inflation was around 5% in August 2026 (up from lower levels earlier in the year), still below the lower bound of the medium-term target in some readings, with the policy rate held steady near 14%. Stronger external metrics—driven in part by gold exports—and reserve accumulation have supported the recovery narrative that underpinned S&P’s earlier upgrade from CCC+ territory.
Implications and Outlook
A 16% NPL ratio remains high by both regional and global standards and continues to tie up capital, raise provisioning and recovery costs, and constrain risk appetite—particularly for SMEs and higher-risk borrowers who most need credit to drive growth.
The improvement to date, combined with strong capital buffers and accelerating loan growth, shows the system is healing. Yet the five undercapitalized banks, the agriculture concentration, and residual government-related exposures highlight uneven progress.
Successful delivery on the BoG’s end-2026 10% target will require sustained recovery efforts, tighter underwriting, continued write-offs of unrecoverable loans, and a supportive macro environment with contained inflation and fewer fiscal arrears. For the wider economy, cleaner bank balance sheets should gradually translate into more affordable and available credit, reinforcing the post-crisis rebound.
S&P’s caution is a useful reminder: Ghana’s banking sector has moved from acute stress to managed recovery, but the scars of 2022 are not fully healed.
Persistent high NPLs are both a lagging indicator of past shocks and a forward-looking constraint on the system’s ability to intermediate fully. The coming months will test whether regulatory pressure, economic stabilization, and bank-level discipline can close the remaining gap.
Samuel O. Sulaimon is the founder and Editor-in-Chief of Naijapiz. He covers News, Sports, Finance, Faiths, Education, Technology.
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