Ghana’s Banking Sector Most Exposed to NPLs in Sub-Saharan Africa – Fitch Solutions
Ghana’s banking sector has emerged as the most vulnerable among the top ten Sub-Saharan African (SSA) economies, grappling with a high Non-Performing Loan (NPL) ratio of 21.8% and a relatively weak Capital Adequacy Ratio (CAR) of 14.0%, Fitch Solutions has disclosed.
According to Fitch Solutions’ latest report titled “US Tariffs Increase Risks for SSA Banks”, Ghana tops the list in NPLs and ranks third-lowest in CAR, highlighting the fragility of the local banking sector.
The rating agency attributed the sector’s weakened fundamentals to the fallout from the Domestic Debt Exchange Programme (DDEP) and the persistently high interest rate environment.
Despite these challenges, Fitch noted that banks across the SSA region are generally in a better position to weather upcoming headwinds, supported by robust capital buffers and relatively stable asset quality in most markets.
“We anticipate improvements in most sectors’ capital, driven by regulatory enhancements in markets such as Nigeria and Kenya, alongside improving economic conditions in most markets,” the report stated.
Fitch expects interest rates across most SSA countries to decline in 2025, a development it believes will support an improvement in loan quality. Moreover, it noted that the exceptionally high profits banks have posted in recent years—largely driven by aggressive interest rate hikes—will provide a financial cushion for institutions in the coming year.
Interest Rate Uncertainty Looms
Fitch cautioned, however, that the recent imposition of US tariffs and the associated impact on global monetary policy could create a wave of uncertainty for SSA banks.
“If interest rates remain elevated for longer than we currently expect, this could adversely impact loan quality and growth, potentially deterring credit extension if consumers and businesses remain uncertain about interest rates,” it warned.
Although high interest margins—exceeding 50% in all the major SSA banking markets except Nigeria—could temporarily boost banks’ profitability, this may be eroded by subdued credit growth and rising provisions for bad loans.
Conversely, a sharper-than-expected drop in interest rates triggered by a global economic slowdown could reverse these gains, further complicating the operating environment for banks.
Fitch concluded that the monetary policy uncertainty is clouding strategic planning for banks in the region, with implications for asset quality, lending activity, and revenue from interest, fees, and commissions.
