NPLs to drop further in 2017 first quarter – BoG

Business News of Monday, 30 January 2017



Dr Abdul Nashir Issahaku BoGDr. Abdul Nashir Issahaku – BoG Governor

The Bank of Ghana is optimistic of a further drop in the Non-Performing Loans (NPLs) of commercial banks at least by the first quarter of this year.

Figures from the central bank indicate that the NPLs which have been increasing since December 2015, started recording a marginal drop in November 2016.

The figure decreased from 19.0 percent in October 2016 to 18.8 percent in November of the same year.

The figure further dropped marginally to 17.4 percent in December 2016.

But comparing the year on year NPL portfolio of banks, the figure has increased by 18 percent.

The banks’ NPLs have increased from 14.7 percent in December 2015 to 17.4 percent in December 2016.

Governor Dr. Abdul Nashiru Issahaku explains that the restructuring and repayment of some of government’s debts should reflect a turnaround story for the commercial banks.

“We expect a further decline because what we put out was a restructuring that has taken place until November but we have had some pay downs in December to the BDCs among others which have not been factored into the calculation of the NPLs and that is expected to come down further. So by our next reporting, we should see the NPLs come down further expectedly,” he said.

Of the eleven months, the highest of 19.3 percent was recorded in May 2016.

This was followed by July, October, November and August with NPL rates of 19.1, 19, and 18.7 percent respectively.

Major contributors to the NPLs have been the over 4 billion cedis debt owed state institutions such as the VRA, GRIDCo and the ECG.

In addition, government indebtedness to over Bulk Oil Distribution Companies (BDCs) to the tune of 500 million cedis have been a huge challenge for commercial banks.

The development has equally affected the credit to the private sector over the period.

For instance, credit to the Private sector dropped from 163.2 million cedis in December 2015 to 159 million cedis in November 2016.

This translated into a drop in growth from 5.8 to negative 1.8 percent between the same period.