Although Ghana has been able to heave a sigh of relief following the International Monetary Fund’s approval of its $3bn loan request, the financial books of some Nigerian banks took a hit due to the country’s debt restructuring. While the impact is reflected in the loan provisions of the affected lenders, stakeholders believe all is not gloomy, Oluwakemi Abimbola reports
Although Ghana has been able to heave a sigh of relief following the International Monetary Fund’s approval of its $3bn loan request, the financial books of some Nigerian banks took a hit due to the country’s debt restructuring.
Amid economic and financial hurdles, the Ghanaian government declared a suspension of its external debt service payments in December 2022, aiming to revive the country’s macroeconomic steadiness. It also set up a voluntary Domestic Debt Exchange Programme; an invitation for the voluntary exchange of approximately US $15.99bn of existing domestic notes/bonds held by various local investors, for a package of new bonds with extended payout dates and reduced coupon rates.
In December, Ghana secured a staff-level agreement with the IMF for a $3bn loan, but the IMF’s conditions include a successful restructuring program of domestic and external debt. Apart from the impact on Nigerian banks, some South African banks also took a hit via Ghana’s debt restructuring. The Standard Bank Group, Nedbank Group, Absa Group and First Rand set aside R4.87bn to account for the losses incurred in the West African country.
“However, the quantum vis-à-vis our activities are very insignificant, so, the effect of it is less. We were expecting huge effects, but it was lesser and we can see that comfortably, most of the banks made the provisions without it affecting their liquidity ratio. “Our banks have much exposure outside Nigeria, particularly in Africa. It shows the relationship of the economy of the other countries with ours and it is making us bigger and better. It is bigger in the sense that we are now related politically and financially. Therefore, we matter and our voices must be listened to. Because when you have banks that have entered into another country, the country cannot shut you out; they know that financially, you can affect them and politically too.
For senior research analyst at Rand Merchant Bank, Joshua Odebisi, the banks were all profitable, but “the impairments definitely dragged ROE to varying degrees”.
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