Industry stakeholders have questioned the ability of Ghanaian businesses to remain competitive in the era of the African Continental Free Trade Area, following the maintenance of the Monetary Policy Rate by the Bank of Ghana for the 4th consecutive time at 14.5 percent.

The reduction in the rate, which determines the percentage at which the Bank of Ghana lends to commercial banks, and subsequently influences the interest rate on loans, from 16 percent to 14.5 percent in March this year, has influenced average lending rates to also drop from 23 percent at the start of the year to 21.3 percent as at October 2020.

But according to stakeholders, the lending rate is still high when compared to rates in other countries on the continent.

Available data indicates that whereas countries like South Africa, Gabon, Togo, Ivory Coast and Benin have base rates or policy rates below 5 percent, others like Nigeria, Kenya and Egypt have rates below 12 percent.
Banking Consultant Nana Otuo Acheampong stated that despite the many positive developments in Ghana’s banking sector, the maintenance of the policy rate was going to deprive businesses of much-needed cheap credit to boost their activities to support the Ghana beyond aid agenda.

“The government has set for itself a target of a Ghana Beyond Aid. This means we are self-sufficient and are able to produce what we want and eat what we produce. But this production cannot go on with these levels of high-interest rates.”

For former President of the Association of Ghana Industries (AGI), Dr James Asare-Adjei, the slow transmission from the policy rate to lending rates will impact the ability of businesses to compete with their peers on the continent especially as preparations are underway to see to the commencement of the AFCFTA in January 2021.

“The sub-regional market and for that matter, countries, especially Francophone countries around Ghana, have very low interest rates. So if you have Togo and Benin and probably even Nigeria having interest rates and policy rates which are relatively lower than that of Ghana’s, the question is, ‘Can Ghana be competitive if cost of borrowing is still high?”

“The second thing is that, to what extent can we then be able to take advantage of the bigger African market to ensure that now, whereas other African countries and other businesses in other African countries come into our market, then we also build the capacities to be able to enter into this but one-continent market. These are some of the challenges because definitely, we cannot be competitive if our interest rates continue to be that high,” he added.