Commercial banks will have no choice but to pursue aggressive lending as returns on Treasury Bills and other government securities continue declining, Bank of Ghana (BoG) Governor Johnson Asiama has declared, signaling a fundamental shift in how financial institutions must generate profits.
Speaking during the 127th Monetary Policy Committee meeting, Dr. Asiama emphasized that falling yields on safe government instruments will force banks to refocus on their core business of extending credit to businesses and households. The Governor framed this transition as essential for supporting economic growth and job creation as Ghana moves from recovery toward expansion.
The central bank slashed its benchmark Monetary Policy Rate by 350 basis points to 18 percent on November 26, marking the third and most aggressive rate cut of the year. The cumulative reduction of 1,000 basis points throughout the year represents one of the sharpest easing cycles in recent history, driven by sustained progress in controlling inflation and stabilizing the currency.
Dr. Asiama set an ambitious target for his tenure, stating he wants to see lending rates fall below 10 percent before his four year term concludes. Ghana’s current lending rates hover around 27.4 percent, making access to affordable credit a significant challenge for businesses, particularly small and medium enterprises. The Governor insisted the target is achievable despite skepticism from some quarters.
Interest rates have declined broadly in response to monetary policy adjustments. The interbank weighted average rate fell to 21 percent in October, down from 27.7 percent in the same month last year. Treasury Bill rates have followed similar trajectories as the central bank signals readiness to continue easing policy alongside sustained disinflation.
The Governor’s comments underscore a strategic shift for Ghana’s banking sector, which has historically relied heavily on high yielding Bank of Ghana bills and government securities rather than expanding credit to productive sectors. Dr. Asiama warned that financial institutions are entering a phase where loan portfolio performance will determine profitability rather than safe returns from central bank instruments.
At a corporate forum organized by the Association of Ghana Industries earlier in the year, Dr. Asiama acknowledged that high lending rates continue stifling manufacturing sector growth despite the industry’s importance to economic development. He emphasized that banks must prepare for structural reforms designed to bring down borrowing costs sustainably while calling for greater industry led self regulation and cooperation.
The central bank has established a committee to reform the Ghana Reference Rate, the key benchmark used by banks to price loans and credit products. For June the rate stood at 23.08 percent, forming the baseline before institutions apply risk premiums. The reform aims to dismantle structural inefficiencies keeping credit costs elevated, with small and medium enterprises currently borrowing at rates exceeding 30 percent on average.
Banks have been urged to reduce lending rates further following the recent policy rate cuts, though the Governor noted that commercial rates have remained relatively high despite the central bank reducing its policy rate by over six percentage points in recent months. He expressed confidence that banks will realign their pricing models as the disinflation process continues.
Ghana’s headline inflation reached 8.0 percent as of the latest reading, with core inflation measures ranging between 5 and 7 percent. The Governor projected inflation will likely settle between 4 and 6 percent by year end and stabilize around the target band throughout the first half of 2026. He characterized current conditions as the strongest initial setup for a Monetary Policy Committee meeting in several years.
The economy is gradually transitioning from recovery to expansion, supported by robust performance in non oil sectors, agriculture and services. High frequency indicators including the Composite Index of Economic Activity point to continued growth, while both business and consumer sentiment remain firmly positive despite ongoing pressures from taxes, utility costs and credit affordability.
Dr. Asiama cautioned that global risks persist, including commodity price volatility, geopolitical tensions and tighter external financial conditions. Domestically, he acknowledged that tax and utility pressures continue affecting businesses even as confidence rises. However, he emphasized that Ghana’s macroeconomic path is stabilizing with foundations for sustained growth strengthening steadily.
The Governor stressed that policy decisions must reinforce confidence, signal predictability and keep the economy on track toward higher, job rich growth. The banking sector’s shift toward aggressive lending represents a crucial component of this broader transformation, moving financial institutions away from risk averse treasury investments toward actively supporting private sector expansion and economic development.