With macroeconomic indicators – particularly inflation and fiscal deficit – showing signs of stability in the past 12 months, the banking sector could be in for a good time this year, corporate governance expert and lecturer at the Ghana Banking College, Dr. Richmond Atuahene, has said.

“The way government is going about the macroeconomic issues is very good. Government has curtailed inflation from over 13 percent beginning 2017 to 11.8 percent, and that is a good sign,” he told the B&FT.

“Also, the Finance Minister said that the budget deficit is coming down to 6.3 percent, which is a reasonable thing they have done considering it is within a space of just 12 months. So, I think these will be good for the banking sector in 2018,” he said.

Even though he argues the banking sector will see a better economy this year, he further cautioned that Non-Performing Loans (NPLs) are still high and need to be addressed by banks.

“The challenges still hang on the Non-Performing Loans. As at December they stood at 21.6 percent, and banks will have to clean their books very well…the Governor has said it over and over again. So, the challenge for the banking sector is to be able to minimise or reduce the Non-Performing Loans,” he said.

He further maintained that the new GH¢400million minimum capital requirement, high cost of power and policy rate will all prove to be challenges for the banking sector.

“The capitalisation will also present some challenges for some banks. The governor is bent on doing what he wants to do. If you don’t meet it, then definitely he has to change your status; and that is something the banks have to battle with.

Another challenge for the industry is how to reduce the high operations cost. And that one is partly due to the cost of power in the country. Banks incur a lot of cost on energy for their operations; so, if the cost of power comes down, their operation costs will also go down.

If the policy rate does not come down very well, it will be very difficult for the banks to reduce interest rates. If the economic indicators come down, certainly the policy rate will also go down. But if the inflation doesn’t come down and the exchange rate does not stay where it is, then it will be very difficult for the Governor to look at the policy rate,” he said.

Analysis by C-NERGY Ghana Ltd., an investment and banking services advisory firm, shows that government can achieve its macroeconomic targets for 2018 if proactive measures are taken to shore-up revenue.

According to the analysis that was published in the B&FT last Wednesday, the GDP growth of 6.2 percent outlined in the 2018 budget is “achievable and could be improved, particularly through aggressive infrastructure development”.

The publication also notes that government’s investment and focus on agriculture could provide an impetus for growth, considering that agriculture still accounts for a substantial portion of GDP.

However, it noted that one of government’s major challenges in 2017 was revenue mobilisation, hence it will require further intensification of tax compliance measures this year.