- Ministry of Finance and Bank of Ghana design plan to address NIB challenges.
- Plan includes GHC2.3 billion recapitalization over 12 months.
- Governance structure to be strengthened for effective management.
- IMF approves recapitalization and will supervise implementation.
The Minister of Finance, Dr. Mohammed Amin Adam, has announced that the Ministry and the Bank of Ghana (BoG) will soon implement a comprehensive plan to address the challenges facing the National Investment Bank (NIB). The plan, described as credible, comprehensive, and cost-effective, aims to resolve the bank’s issues and restore its stability.
NIB has been experiencing turbulent years, having switched from its primary duties as a bank for local industries to a universal bank focusing on development and commercial banking activities. Established through an act of parliament and regulated by the Bank of Ghana, NIB currently has over 70% of its portfolio comprised of loans to the Ghanaian private sector.
The bank’s Non-Performing Loans (NPLs) to both the government and the private sector are expected to be high, potentially affecting its books negatively. However, the Finance Minister assured that the designed plan will address these challenges effectively.
During his monthly economic update in Accra on Friday, May 24, Dr. Amin Adam stated that the cabinet has approved a plan for the restructuring and recapitalization of NIB. The government will inject GHC2.3 billion into the bank over the next 12 months, with the first tranche of GHC400 million expected to be transferred before the end of May.
The plan includes measures to strengthen NIB’s governance structure, ensuring effective management of the injected funds. The government has intervened in NIB in the past, and this time, the capital intervention will be backed by governance reforms to assure the public that their money will be well-managed.
The International Monetary Fund (IMF) has allowed the government to recapitalize the ailing bank to improve its liquidity and solvency position. Banking Consultant Richmond Atuahene emphasized the need for good corporate governance practices, warning that poor governance would render the investment ineffective.
Atuahene suggested that NIB needs a thorough restructuring, starting from its board of directors, to maintain good corporate governance. He expressed optimism that the IMF will supervise and ensure a good governance structure is put in place as a conditionality for the capitalization.
Some have called for the privatization of NIB to enhance its operations, while others suggest a possible takeover or merger with the Agriculture Development Bank (ADB). Dr. Atuahene believes that, after capitalization, NIB can be listed on the Ghana Stock Exchange market for a few years to attract more investors and improve corporate governance.
The core purpose of NIB’s establishment by Dr. Kwame Nkrumah was to support local industries. If this purpose is no longer relevant, Dr. Atuahene suggests listing the bank for improved corporate governance. He questioned whether NIB should be sold as a development bank or a universal bank, considering its history and purpose.
The implementation of the plan is expected to restore NIB’s stability and effectiveness, ensuring its continued support for the Ghanaian private sector and local industries.
