The Bank of Ghana (BoG) has indicated that the developments in the banking sector over the first two months of 2022 show continued strong asset growth.
Total assets, according to the central bank, stood at GH¢187.8 billion in February 2022, representing 23.5 percent annual growth, compared with 18.5 percent growth in the previous year.
Speaking to journalists on their monetary policy on Monday, BoG Governor Dr. Ernest Addison added that the growth in assets was on the back of increased deposits and borrowing.
“Total deposits recorded a year-on-year growth of 18.2 percent to GH¢123.0 billion. Borrowing increased significantly by 78.8 percent to GH¢25.5 billion, relative to the contraction of 23.4 percent in the previous year.
“The rebound in credit growth continued in the first two months of 2022, with a 70.7 percent increase in New Advances to GH¢8.0 billion, compared with 24.6 percent growth in the same period last year.
Positive outlook
According to Dr. Addison, trends in the financial soundness indicators remained positive, underpinned by strong solvency, liquidity, and profitability.
“The Capital Adequacy Ratio of the Industry was 19.6 percent at the end-February 2022, well above the current 11.5 percent regulatory minimum threshold.
“Core liquid assets to short-term liabilities were 24.2 percent in February 2022, compared with 26.5 percent in the previous year.
“Improvements in asset quality continued into 2022, with the Non-Performing Loans (NPL) ratio declining to 14.4 percent on average, at the end-February 2022, compared with the NPL ratio of 15.3 percent in February 2021”, Dr. Addison added.
Improved profits
The BoG Governor indicated that the Banks’ profitability improved over the first two months of 2022, with profit before tax at GH¢1.3 billion, compared to GH¢1.1 billion in the same period last year.
He said net interest income grew by 10.3 percent to GH¢2.2 billion, compared to 10.9 percent a year ago as net fees and commissions grew by 11.8 percent to GH¢486.8 million, lower than the growth of 13.7 percent registered during the same period last year.
Other income of the banks, according to him, stood at GH¢383.2 million, representing 95.5 percent growth, compared with a contraction of 16.5 percent in the same period last year.
“These developments resulted in a 16.9 percent growth in operating income to GH¢3.1 billion, compared with a growth of 8.7 percent in the corresponding year.
“However, operating expenses went up by 21.3 percent on account of higher administrative costs and emoluments, relative to a contraction of 0.3 percent in the same period last year”, Dr Addison added.
External front
On the external front, the BoG Governor reiterated that commodity prices have increased sharply, driven in large parts by ongoing geopolitical tensions and increased demand pressures.
Average crude oil prices increased by 25.0 percent on a year-to-date basis to US$93.5 per barrel in February 2022.
“The sharp rise in prices was supported by supply restraint and political tensions between Russia and Ukraine, which added to concerns about further disruption in an already-tight market.
“Gold also gained from the escalating geopolitical tensions as demand for the safe-haven metal increased. Gold prices rose by 3.3 percent in the year to US$1,849.5 per ounce in February 2022. Cocoa prices rose to US$2,659.5 per tonne in February 2022 compared to US$2,545.9 per tonne a month earlier, as concerns about dry weather conditions boosted prices”, Dr. Addison pointed out.
Trade surplus narrowed
According to the Governor of the Central Bank, while commodity prices have impacted exports positively in the first two months of the year, their impact on imports has far outweighed the gains made in exports and has led to a narrowing of the trade surplus.
“Total exports amounted to US$2.7 billion, a growth of 5.5 percent year-on-year, compared with US$2.6 billion as of February 2021.
“The jump in export receipts was driven mainly by a 35 percent increase in crude oil exports, benefitting from price effects as volumes declined. Other exports, mainly non-traditional exports, also registered an increase of 27.2 percent”, he added.
Economic activities pick-up
Dr. Addison pointed out that consistent with a pick-up in economic activities, imports grew by 7.9 percent to US$2.3 billion compared with US$2.2 billion same period last year.
The growth, he noted, was reflected mainly in oil and gas imports (primarily refined petroleum products), which went up by 80.1 percent year on year.
“The developments in exports and imports translated to a lower trade surplus of US$404.9 million in the first two months of 2022, compared with US$432.7 million in the first two months of 2021.
“Looking ahead, these trends together with developments in the services and income account will likely result in a widening of the current account deficit by the end of the first quarter”, the BoG Governor stated.
Impact of Russia-Ukraine war
The Russia Ukraine war, according to Dr. Addison, is likely to impact negatively on Ghana’s external sector, particularly in the area of some key construction and agricultural commodities.
He pointed out that in the recent past, an average of about 2.5 percent of Ghana’s total non-oil imports have originated from Russia and Ukraine and around 0.4 percent of Ghana’s total exports are destined to Russia and Ukraine.
“The main import items from Russia are grains, wheat flour, and fertilizers. In 2021, around 28.7 percent of Ghana’s grains imports came from Russia and for the first two months of 2022, grains imports from Russian accounted for 31.2 percent of the total grain imports. And about 50.0 percent and 39.2 percent of flour and fertilizer imports respectively, were sourced from Russia in the first two months of this year.
“Ghana’s main exports to Russia are cocoa beans and products and it accounted for 0.2 percent of total cocoa exports.
“These have important implications for the supply and prices of these major items imported from Russia”.
Imports from Ukraine
Dr. Addison said Ghana’s major imports from Ukraine are iron ore and steel accounting for over 60 percent of the total iron ore and steel imports. He said as a result of this fact, the construction industry will likely face some challenges in terms of supply disruptions and prices of steel and iron ore imports.
“With regards to exports, manganese is the major item exported to Ukraine and for the first two months of this year manganese shipment to Ukraine accounted for around 12 percent of the total manganese exports.
“Over the past few years, manganese exports to Ukraine have accounted for over 20 percent of the total manganese exports”, Dr. Addison concluded.
