The sharp rise in non-performing loans (NPLs) in Ghana’s banking sector has been largely attributed to government delays in paying contractors, according to the Alliance for Development and Industrialization (ADI).
In a statement issued in Accra and signed by its Convener, Dr. Richard Nunekpeku, the ADI noted that government-awarded contracts have historically been a major factor contributing to high NPLs, which, in turn, have negatively impacted banks’ profitability.
The statement highlighted that these prolonged payment delays led to the collapse of nine domestic banks and over 400 financial institutions, including microfinance institutions and savings and loans companies.
The banking crisis, which unfolded between August 2017 and January 2020, saw the Bank of Ghana (BoG) allowing several indigenous banks to be taken over by private companies.
“Governments over the years have awarded contracts, but the recurring delays in payments—sometimes taking as long as eight years—have severely damaged banks’ balance sheets and investments. In many cases, bank boards and leaderships anticipated profits, only to see their expectations dashed while interest on these loans kept accumulating. The government, however, struggled to make payments, with no consideration given to the mounting interest,” the statement said.
The ADI argued that most of the affected banks had funded government contracts and were expecting payments, making it the Bank of Ghana’s responsibility to provide liquidity support to keep them operational.
However, due to political interference and blame-shifting, there was little empirical assessment of the real cost of restoring banks’ liquidity and compensating shareholders for lost profits. The statement cited the example of the U.S. under President Obama, where struggling banks were supported under strict supervision, allowing them to recover without massive job losses.
The ADI contended that had financial sector reforms under the Mahama/Asiama administration been implemented, banks would not have been forced to close, jobs would have been preserved, and the economy would have been shielded from severe financial instability. Instead of liquidation, struggling banks could have been given the opportunity to restructure and recover under enhanced supervision—preventing the economic downturn that led to widespread financial losses and the controversial “haircut” on investments.
According to the ADI, the NPP government’s insensitivity and poor economic decisions led to the economic turmoil of 2022. The organization commended former President John Mahama for ensuring policies that prioritize economic growth and citizen welfare.
A pressing question remains: How much did the banking sector cleanup truly cost the economy? The ADI estimates that the total economic loss—including job losses, idle assets, and missed projected returns—has exceeded GHC50 billion.
The group further criticized calls for the removal of Dr. Asiama as Governor of the Bank of Ghana, urging opposition figures and institutions to put aside political biases and adopt a more pragmatic approach to economic management.
“We urge political actors and stakeholders to mature beyond partisan politics and prioritize practical solutions for Ghana’s economic challenges, rather than relying on textbook economic models that have failed over the past eight years,” the statement concluded.
