Day: June 30, 2024

Nigeria’s debt-to-GDP ratio crossed 50% for the first time ever last week after the Debt Management Office published the country’s latest public debt figures.

According to the DMO, Nigeria now has a public debt portfolio of N121 trillion, consisting of domestic debt of N65.6 trillion and a foreign debt portfolio of $42.1 billion (which converts to N56 trillion when converted to Naira).

As of December 2023, Nigeria’s total gross domestic product (GDP) was N229.9 trillion in nominal terms, though it grew by only 2.74% in real terms. This suggests that the country’s debt-to-GDP ratio is now above 50% for the first time.

Nigeria’s latest Debt to GDP

In the first quarter of 2024, Nigeria recorded a nominal GDP of N58.5 trillion, up from N51.2 trillion in the corresponding period in 2023.

However, in the second and third quarters of 2023, the nominal GDP figures were N52.1 trillion and N60.6 trillion, respectively.

The fourth quarter GDP rose to N65.9 trillion, making the trailing four-quarters GDP total N237
.5 trillion.

Based on the 2023 GDP figure of N229.9 trillion, Nigeria’s debt-to-GDP ratio is 52.9%, marking the first time the country has reached such a high debt-to-GDP figure.

Using the trailing four-quarter GDP figure of N237.5 trillion, the country’s debt-to-GDP ratio also stands at 51.2%

Why this matters: Nigeria has often viewed its ‘low’ debt-to-GDP ratio as a sign of the country’s economic resilience, suggesting there was more room to expand its borrowing capacity.

For example, as of 2023, Ghana had a debt-to-GDP ratio of about 84.9%, while South Africa’s ratio stood at 72.2%. Kenya and Egypt had ratios of 70.1% and 95.8%, respectively.

While these countries have significantly higher debt-to-GDP ratios compared to Nigeria, the challenge has always been Nigeria’s ability to meet its debt service obligations due to its high debt service-to-revenue ratio.

Now, with Nigeria’s debt-to-GDP ratio surpassing 50% and continuing to rise, the country has limited room to further expand its borrowing capaci
ty while grappling with current economic challenges.

Nigeria’s rising debt profile

Nigeria’s debt profile has risen over the last 8 years as the country faced a string of fiscal challenges brought about by low crude oil proceeds amid rising budgetary expenditure.

For example, under the Buhari administration, public debt rose from N12.6 trillion in 2015 to N97.3 trillion in 2023. Between December 2023 and March 2024, public debt in Naira terms have risen by as much as N24.3 trillion.

However, the Debt Management Office (DMO) explained the increase noting that the N24.33 trillion increase in the total debt was a result of a combination of fresh borrowing and naira devaluation.

The DMO further clarified that Nigeria’s fresh borrowing was N7.71 trillion in the first quarter of 2024.

The fresh borrowing includes N2.81 trillion as part of the new domestic borrowing of N6.06 trillion provided in the 2024 Appropriation Act and N4.90 trillion as part of the securitization of the N7.3 trillion Ways and Means Adva
nces approved by the National Assembly.

Global ratings agency, Moody’s also stated that Nigeria’s interest spending on debt might consume up to 36% of the federal government’s revenue in 2024.

According to the firm, the hawkish monetary policy stance of the CBN has pushed interest rates for local borrowing by the federal government from an average of 12.8% in 2023 to around 19% in the first five months of 2024.

Source: Ghana Web

The Executive Board of the International Monetary Fund (IMF) on Friday June 28, 2024, completed the second review of Ghana’s US$3 billion, 36-month?Extended Credit Facility (ECF) Arrangement, which was approved by the Board in May 2023.

Completion of the second ECF review allows for an immediate disbursement of SDR?269.1 million (about US$360 million), bringing Ghana’s total disbursements under the arrangement to about US$1.6 billion.

Ghana’s economic reform program is delivering on its objectives.

Following acute economic and financial pressures in 2022, the Fund-supported program has provided a credible anchor for the government to adjust macroeconomic policies and implement reforms to restore macroeconomic stability and debt sustainability, while laying the foundations for higher and more inclusive growth.

These efforts are paying off, with growth proving more resilient than initially expected, inflation declining at a faster pace, and the fiscal and external positions improving. The medium-term outloo
k remains favorable but subject to downside risks-including those related to the upcoming general elections.

Ghana’s performance under the IMF-supported program has been generally strong. All quantitative performance criteria for the second review and almost all indicative targets were met.

Good progress has also been made on the key structural reform milestones, despite some delays.

The Ghanaian authorities have also continued to make progress on their comprehensive debt restructuring.

On June 11, 2024, the authorities reached agreement with Ghana’s Official Creditor Committee (OCC) under the G20’s Common Framework on a Memorandum of Understanding (MoU) formalizing the agreement in principle on a debt treatment, which was reached in January 2024.

This agreement on a debt treatment, consistent with program parameters, provided the financing assurances necessary for the second review under the ECF Arrangement to be completed.

The authorities have also recently reached agreement in principle with represen
tatives of Eurobond holders on a restructuring consistent with program parameters, subject to confirmation on comparability of treatment by the OCC.

Ghana’s primary fiscal balance improved by over 4 percent of GDP last year.

Looking ahead, the authorities are committed to further advancing fiscal consolidation, including by achieving primary fiscal surpluses of ½ percent of GDP this year and 1½ percent of GDP in 2025.

These efforts are underpinned by reforms to bolster revenue mobilization and streamline non-priority expenditures, while expanding social protection programs to mitigate the impact of fiscal adjustment on the most vulnerable.

The authorities are also taking steps to strengthen tax administration, expenditure controls and management of arrears, fiscal rules and institutions, and SOEs management-including in the energy and cocoa sectors.

The Bank of Ghana (BoG) has maintained a prudent monetary policy stance to sustain a rapid reduction in inflation and has taken steps to rebuild internationa
l reserves.

The BoG has also appropriately strengthened measures to preserve financial sector stability-including by ensuring implementation of banks’ recapitalization plans-while the Ministry of Finance has started recapitalizing state-owned banks consistent with available resources.

Ambitious structural reforms to help create an environment more conducive to private sector investment, and to enhance governance and transparency are gaining prominence and will be key to boosting the economy’s potential and underpin sustainable job creation.

Looking ahead, sustaining macroeconomic policy adjustment and reforms is essential to fully and durably restore macroeconomic stability and debt sustainability-especially during the upcoming electoral period-while fostering a sustainable increase in economic growth and poverty reduction.

Following the Executive Board discussion on Ghana, Deputy Managing Director Kenji Okamura issued the following statement:[1]:

“Ghana’s performance under its ECF-supported reform progr
am has been generally strong. The authorities’ strategy aimed at restoring macroeconomic stability and reducing debt vulnerabilities is paying off, with clear signs of stabilization emerging. Going forward, perseverance in macroeconomic policy adjustment and reforms is essential to fully restore macroeconomic stability and debt sustainability, while fostering a sustainable increase in economic growth and poverty reduction.

Ghana has made progress adjusting its fiscal position. Looking ahead, attaining the fiscal objectives under the Fund-supported program requires further mobilizing domestic revenue, streamlining public spending-including related to externally-funded expenditures, and finalizing Ghana’s comprehensive debt restructuring.

The authorities’ strong debt restructuring efforts are paying off with the reaching of agreement on a Memorandum of Understanding with the Official Creditor Committee and an Agreement in Principle with bondholders.

Resolve in keeping the domestic revenue mobilization agenda
on track and tightening expenditure commitment controls is critical to avoid policy slippages ahead of the December 2024 general elections.

These efforts should be supported by continued progress in improving tax administration, strengthening expenditure control and management of arrears, enhancing fiscal rules and institutions, and improving SOEs management.

Bolstering targeted social protection programs is needed to cushion the vulnerable from the impact of fiscal adjustment.

The authorities took decisive steps to contain inflation and rebuild foreign reserve buffers. Going forward, maintaining an appropriately tight monetary stance, and enhancing exchange rate flexibility are of the essence, along with timely implementation of Fund’s advice on safeguards.

The authorities have taken appropriate actions to ensure implementation of banks’ recapitalization plans and start recapitalizing state-owned banks. Sustaining these efforts, together with a cost-effective resolution of legacy issues, are essential to
ringfence financial sector stability going forward.

Greater focus on reforms aimed at private sector development is needed to foster inclusive growth and poverty reduction.

In this regard, a key step is to ensure that the policy interventions underpinning Ghana’s National Development Policy Framework are recalibrated to reflect the socio-economic impact of the shocks that occurred after the COVID-19 pandemic.”

Source: Ghana Web

The Office of the Registrar of Companies (ORC) has emphasised that business registration is not a lifetime commitment, highlighting the need for periodic renewal.

Registrar of Companies, Jemima Mamaa Oware, spoke with market associations in Greater Accra last week, noting a lack of awareness among traders regarding the necessity to re-register their businesses and file annual returns.

In response, the ORC is actively engaging with stakeholders to educate them about renewal requirements.

During the engagement, Madame Oware stated that many traders were unaware of the obligation to renew or submit financial statements.

She mentioned that ORC inspectors would assist traders facing renewal problems to facilitate compliance.

Madame Oware also clarified the straightforward renewal process, including options like *222# for mobile renewals and payments through Ghana.gov to prevent fraud.

She, however, cautioned against unauthorized payments, stating that the ORC does not use mobile money accounts.

‘I want to p
ut it on record that we do not use Mobile Money accounts, so do not let any charlatan or middleman convince you to pay any money to them to come and pay on your behalf. It is best to come to the onsite bank if you have to visit our offices and make any payments,’ the Registrar of Companies said.

‘We also have the Ghana.gov platform where that money will go, but I want to emphasize that as an organization, we do not have a Mobile Money number for payments,’ she added.

Regarding appeals for deadline extensions, Madame Oware mentioned considering amnesty requests from market associations based on renewal participation rates, adding that potential extensions hinge on business owners’ responsiveness, with penalties escalating after July 1, 2024.

This proactive approach, the ORC believes, is aimed at streamlining the renewal process while ensuring compliance to support businesses, particularly in the informal sector.

Meanwhile, effective June 30, 2024, businesses failing to renew will face penalties, starting a
t GHS1,000 monthly.

Additionally, the fee for renewing a business name is GHS60, while the fee for renewing a company is GHS90.

Source: Ghana Web

Standard Chartered Bank Ghana PLC produced a strong set of results in 2023, which saw a return to profitability compared to the prior year.

The Bank delivered strong results and improved returns alongside balance sheet growth and positive momentum across key metrics.

Return on Equity (ROE) increased to 45 per cent and Capital adequacy ratio (CAR) stands at 27.7 per cent well above regulatory threshold of 10 per cent.

‘Given the Bank’s capital position the Bank has received regulatory approval to pay dividend and will advise shareholders in due course,’ Chairman of the Board of Directors, Ebenezer Twum Asante, told shareholders at the 54th annual General meeting of the Bank.

‘The various strategic actions we initiated to improve the resilience of our business to external shocks, such as

tightening our risk and control measures, have positively impacted our results. We will continue to harness our key capabilities and the opportunities they present to deliver value in a strong safe, sustainable manner,’ he
added.

Alongside the importance of delivering improved financial performance, the Banks Purpose and brand promise to be here for good remain cornerstones of the business.

‘To further drive growth, we are taking action to transform the way we operate, addressing any structural inefficiencies and complexity of protected income,’ Mr Asante said.

The bank continues to support its clients and communities as they anticipate and respond to economic and social challenges. This is possible through the banks Stands – Accelerating Zero, Resetting Globalisation and Lifting Participation – through which positive impact is delivered across the country.

‘The board will ensure that management remains focused on the execution of the strategic priorities, maximizing opportunities while maintaining appropriate risk controls. We are confident that our applying commitment to excellence and ingenuity of our team, we will navigate the challenges and improve returns in a strong, safe and sustainable manner,’ Mr Asante added.

Co
mmenting on the impact the bank is making in the country, Chief Executive, Mansa Nettey emphasised the importance of collaborating to deliver impactful scalable interventions to support the vulnerable in society during challenging economic periods. She said ‘the world continues to experience some evolving trends including technological advancements, geopolitics and climate change. While these changes continuously trigger country and international policy shifts, the private sector remains in a good position to shape national and global discourse that will help sustain our economies and communities.’

‘As a Bank, we will continue to augment the efforts of government and support our communities through thought leadership and community impact programmes, as well as the provision of funding /capital to where it is needed most’. She added.

The bank delivered income growth of 42% over the previous year to $1.72 billion while Operating cost was at $582 million, that is a 33% hike over the previous year.

While the b
ank took a huge impairment charge of $1.16 billion in 2022 as a result of the debt exchange programme, it had a release of $220 million in 2023. This culminated in a profit before tax of $1.36 billion compared to the loss of $381 million in 2022.

‘We believe these results signal the beginning of a sustainable recovery as we close the year with good momentum across our business segments,’ Mrs Nettey said.

‘We continue to maintain a fairly strong balance sheet and are liquid and well capitalized. The significant progress we made against the backdrop of tough external environments is as a result of the deliberate actions we took to protect our franchise amid these challenges. And I would like to thank the Board for their guidance over the period,’ she added.

She said the headwinds the bank faced over the last couple of years had enabled it to become more resilient and remain focused on delivering its revised strategic actions and protecting the franchise, making good progress on four strategic priorities of N
etwork, Affluence, Mass Retail and Sustainability.

Mrs Nettey said the Bank aimed to deepen its support to clients through collaboration with the Africa Continental Free Trade Area Secretariat and also focusing on offering comprehensive solutions, personalized advice and exceptional client experience to Affluent clients.

‘We aim to focus on areas of opportunistic growth which are critical to the Ghanaian economy, to support clients and stakeholders like yourselves and drive our performance,’ she said.

Mrs Nettey said SCB would continue to augment the efforts of government and support communities through its flagship thought leadership programmes, community impact programmes as well as the provision of funding and capital where it is needed most.

Source: Ghana News Agency

GCB Bank PLC has posted a remarkable financial performance during the 2023 financial year, indicating resilience following a robust post-DDEP recovery and also laying the foundation for a sustainable future.

The Bank reported a substantial profit before tax of GHS1,547.4 million, transitioning from a loss of GHS743.5 million in 2022.

The performance is a demonstration of the strong earning capability of the Bank.

Commenting on the Bank’s performance, Mr. Kofi Adomakoh, Managing Director of GCB Bank PLC (GCB) said, ‘we reported our best ever profit before tax of GHS1,547.4 million in our platinum anniversary year. Our strong rebound to profit after the adverse effect of the Domestic Debt Exchange Programme (DDEP) in the prior year is testament to the successful implementation of our strategy and confidence and loyalty of our large and growing client base.

Our relentless focus on improving customer experience and commitment to make a positive impact to all our stakeholders will strengthen our competitive ad
vantage, enable us deliver sustainable and improved returns and dominate the market’.

The Bank achieved strong revenue growth across its business segments, emphasizing its diversified business model amid market challenges.

Total revenue for the period reached GHS3,784.2 million, marking a 26 percent increase from the previous period’s revenue of GHS3,005.7 million.

Net Interest Income (NII) reached GHS2,895.7 million, showcasing a substantial growth of 37 per cent compared to the prior financial year. Net fees and commission income for the year increased by 14 percent to GHS438.2 million, compared to GHS385.0 million in 2022.

Growth in client base combined with an intensified focus on transaction banking helped to improve net fees and commission income.

However, net trading income dipped 13 percent from GHS487.2 million in 2022 to GHS425.1 million in 2023 due to lower trading volume.

In 2023, the Bank ended the year with operating expenses totaling GHS 1,814.7 million, indicating a year-on-year growth r
ate of 11 percent. 

The impairment charge for the year decreased substantially by 79 percent settling at GHS 432.9 million in 2023 compared to GHS 2,74.1 million in 2022. The high impairment charge in the prior year reflects losses on government securities arising mainly from the DDEP.

The Bank’s balance sheet improved significantly over the previous year, growing from GHS 21,494.4 million in 2022 to GHS 27,155.7 million in 2023, indicating an increase of 26 percent.

This growth was primarily driven by an increase in customer deposits by 23 percent to reach GHS 21,781.4 million, compared to the GHS 17,775.1 million recorded in 2022.

Shareholders’ funds rose from GHS 1,998.9 million in 2022 to GHS 3,080.1 million in 2023, reflecting a 54 percent increase. 

In 2023, the Bank’s financial performance indicators showed a positive trend. The Bank recorded Earnings per share (EPS) of GHS 3.81, Return on Equity (ROE) of 40 percent and Return on Assets (ROA) of 4 percent.

The cost-to-income ratio improved to 48
percent from 54 percent, indicating robust cost optimization and containment despite persistent inflationary pressures and exchange rate depreciation.

Furthermore, the Capital Adequacy Ratio (with regulatory forbearance) stood at 19 percent, surpassing the regulatory limit of 10 percent and the prior year’s figure of 18 percent.

The 2023 performance exhibits the Bank’s commitment to deliver on its brand promise, ‘Your Bank for Life’, through a strong focus on its strategic objectives of revenue growth and profitability, operational excellence and people and talent development. 

During the year the Bank made significant progress in its efforts to drive revenue growth, improve profitability and grow its market share. The results for the year 2023 therefore benefitted from internal collaboration, enhanced relationship management and targeted marketing strategies. This helped to increase the customer base across all segments and transaction volumes.

The Bank also invested in a resilient IT infrastructure to s
upport scale, security and reliability.

It additionally rolled out its Leadership Development Programme aimed at preparing employees for leadership roles. This was in line with the strategic objective of ‘People and Talent Development’ which involved the cultivation of talent and nurturing of future leaders.

The Bank’s performance was further cemented by an expanded effort to support its communities and livelihoods with a key focus on youth, the environment, education and health.

A total of GHS6.3 million was invested into projects and initiatives which supports its social responsibility agenda. This brought benefit to millions of Ghanaians, guaranteeing them a better future.

GCB’s 2023 performance has certainly laid a solid foundation for a sustainable performance in the years ahead. This is evidenced by the impressive First Quarter 2024 results where the Bank posted GHS 411.6 million, marking a 37 percent increase compared to the prior year corresponding period.

The outlook of GCB is positive as convey
ed by Mr. Adomakoh to shareholders at the 30th Annual General Meeting.

He said ‘as I look to the future, I do so with a sense of optimism and confidence. Despite economic uncertainties and rapid technological disruption, GCB Bank is well positioned to advance further its market share and viability, leveraging its core strengths to effectively execute our strategy to achieve superior client experience, strong, sustainable and profitable busines growth and operational excellence’.

‘We will continue to leverage our respected brand and strategic partnerships and invest to capitalize on emerging opportunities that will strengthen our competitive advantages in 2024 and the years ahead,’ Mr. Adomakoh added.

Source: Ghana News Agency