Top Nigerian bank to slow lending in Ghana after impairments
Guaranty Trust Holding Co., Nigeria’s biggest bank by market value, plans to slow lending and bond trading in Ghana following a 35.6 billion naira ($77 million) impairment in the West African nation.
The bank will instead focus at home and on other high-yielding African markets to boost lending by about 15% this year, according to Chief Executive Officer Segun Agbaje. That will help the firm increase its profit-before-tax growth by 31% from 214.2 billion naira in 2022.
Ghana is restructuring most of its public debt, estimated at 576 billion cedis ($49 billion) and that’s soured the outlook for Guaranty Trust in its second-largest market. The West African nation exchanged 87.8 billion cedis of notes that paid an average of 19%, with bonds returning as little as 8.35% — resulting in losses for financial institutions. Authorities are still negotiating with many overseas creditors.
“You’re talking about a country that has defaulted on its sovereigns, and has not even yet given complete clarity as to how it’s going to handle all the default scenarios,” Agbaje said at an investor conference call in Lagos. “If you’re running high inflation, it’s going to be very difficult for businesses to make money and pay back loans,” he said, referring to the inflation rate of 45% in West Africa’s second largest economy.
Banks from across Africa and even the UK have been affected by Ghana’s debt restructuring. That coupled with accelerating inflation and a weaker currency have deterred companies in a nation that once used to lure investors.
Guaranty Trust had 167.6 billion naira of debt securities in Ghana while rival lender Zenith Bank set aside 123.4 billion naira to account for the restructuring.
The Lagos-based lender doesn’t plan to expand credit by more than 5% in Ghana and will limit itself to treasury bills when it considers securities investments, Agbaje said.
“If you go out to book loans aggressively you are just going to make non-performing loans,” he said. “Obviously any country that defaulted, in terms of sovereigns means you have a harsh operating environment.”
Separately, Guaranty Trust predicts Nigeria’s next government will devalue the naira and work on converging multiple exchange rates in a bid to stimulate economic activities, according to Agbaje.
