New Prudential Limit: Ghanaian Banks Target Lower NPL Ratios
Ghanaian banks’ non-performing loan (NPL) ratios are likely to decrease significantly in the next few years to comply with new Bank of Ghana (BoG) regulations effective from 2026.
In a commentary note, Fitch ratings analyst expect the improvement will mostly be achieved through an acceleration in write-offs and stronger operating conditions.
The BoG measures, announced in August 2025, will require regulated financial institutions, including banks, to maintain their NPL ratios below a 10% prudential limit.
Banks with NPL ratios exceeding 15% will immediately be restricted from paying dividends and bonuses, while those with ratios between 10% and 15% will be subject to restrictions after two consecutive years of failing to restore compliance with the limit.
Fitch said only four of 23 banks had NPL ratios below the 10% limit at the end of first half of financial year 2025, according to interim disclosures, and more than half had ratios above 15%.
However, the vast majority of banks should be able to reduce their NPLs ratios below 15%, including through write-offs, by end-2026.
Fitch estimates that six banks are unlikely to be capital-compliant when forbearance covering losses on cedi government bonds expires at end-2025.
These banks will face the most difficulty in bringing their NPL ratios below 15% by end-2026 given their very high problem loans and constrained ability to write off such loans due to their limited capital buffers.
Ghanaian banks’ asset quality has been weak for the past decade, but deteriorated significantly following the sovereign debt restructuring that was launched in December 2022.
The sector NPL ratio peaked at 26.7% at end-1Q24 (end-2022: 14.8%) as a result of heightened macroeconomic volatility, payment arrears to government contractors, and slowed credit growth. The ratio has since improved only slightly to 23.1% at the end of first half of financial year 2025.
Most Ghanaian banks have not paid dividends in recent years due to the sovereign default and their reliance on the related regulatory forbearance measures.
Fitch expects most banks to be capital-compliant when forbearance expires at end-2025 and that the penalties on future dividend payments for exceeding the new prudential limit are a strong incentive to manage NPL ratios down.
The sector NPL ratio, excluding fully provisioned loans, was just 8.5% at the end of first half of financial year 2025, indicating that substantial write-offs can be made without incurring further provisions.
Strong pre-impairment operating profits, which are driven by large holdings of high-yielding sovereign securities, also provide a large buffer to absorb fresh provisions without affecting capital, particularly as net loans represented just 19% of total banking assets at end-4M25.
Fitch said compliance with the new NPL limit will therefore be driven primarily by write-offs. #New Prudential Limit: Ghanaian Banks Target Lower NPL Ratios Benchmark Yield on Nigerian Bonds Falls to 16.68%
