The Bank of Ghana (BoG) has sounded the alarm over a significant increase in Non-Performing Loans (NPLs) within the country’s banking sector.
According to the central bank’s latest Monetary Policy Report, NPLs rose by nearly 50% to GH¢20.4 billion in June 2024, compared to GH¢13.7 billion a year earlier.
This alarming trend reflects a deterioration in both domestic and foreign currency-denominated loans. The industry’s NPL ratio climbed to 24.2% in June 2024, up from 18.7% in June 2023.
Even when adjusted for fully provisioned loan losses, the NPL ratio still increased to 10.8% from 7.8%, indicating a growing stock of nonperforming loans across all categories.
The BoG attributed the rise in NPLs to the faster growth in the stock of nonperforming loans compared to the overall growth in total loans.
Private Sector Bears the Brunt
The private sector, being the primary recipient of bank credit, accounted for the largest portion of NPLs.
While the proportion of NPLs attributable to the private sector increased slightly to 95.6% in June 2024, the public sector’s share declined to 4.4%.
Sectoral Breakdown
The agriculture, forestry, and fishing sector experienced the highest NPL ratio at 56.4%, followed by transportation, storage, and communication at 49.1%.
The construction, electricity, water, and gas sectors also recorded significant increases in NPL ratios.
Only the mining and quarrying sector saw a slight rise in its NPL ratio.
