Debt Restructuring: GTBank to slow lending in Ghana after substantial loss

*Segun Agbaje, CEO of Nigerian-owned Guaranty Trust Holding Company, laments the difficulties businesses in Ghana are currently facing to make money, pay back loans, and returns to investors due to the 45 percent inflation rate in the second largest economy in West Africa

Isola Moses | ConsumerConnect

Guaranty Trust Holding Company, Nigeria’s acclaimed biggest bank by market value, plans to slow lending and bond trading in Ghana, following a N35.6 billion ($77 million) loss in the neighbouring West African country.

Mr. Segun Agbaje, Chief Executive Officer (CEO) of the Nigerian-owned financial institution, noted the bank instead, would focus on home and on other high-yielding African markets to boost lending by about 15 percent 2023

This move will help the commercial bank to increase its Profit-Before-Tax (PBT) growth by 31 percent from N214.2 billion 2022, Bloomberg report said.

It was learnt that Ghana is restructuring most of its public debt, estimated at 576 billion Cedis ($49 billion), and this development has negatively affected the outlook for the GTBank in its second-largest market, report noted.

The West African country exchanged 87.8 billion Cedis of notes that paid an average of 19 percent, with bonds returning as little as 8.35 percent — resulting in losses for a lot of financial institutions operating in the former Gold Coast.

However, Ghanaian authorities are still negotiating with several  overseas creditors.

Inflation rate and business RoIs in Ghana, by Agbaje

The GTBank CEO also explained the current scenarios in regard to high inflation rate in Ghana.

He stated in a conference call: “You’re talking about a country that has defaulted on its sovereigns, and has not even yet given complete clarity as to how it’s going to handle all the default scenarios.

“If you’re running high inflation, it’s going to be very difficult for businesses to make money and pay back loans.”

Besides the GTBank, there are other banks from across Africa and even the UK that have been affected by Ghana’s debt restructuring, according to report.

This scenario, coupled with accelerating inflation and a weaker currency has deterred companies in a country that once used to lure investors.

What GTBank, others owe in Ghana

Guaranty Trust reportedly has N167.6 billion of debt securities in Ghana, while rival lender Zenith Bank Plc has set aside N123.4 billion to account for the restructuring in the country.

Agbaje further noted that the Lagos-based lender does not plan to expand credit by more than 5 percent in Ghana, and will limit itself to treasury bills when it considers securities investments.

The GTBank Chief said: “If you go out to book loans aggressively, you are just going to make non-performing loans.

“Obviously any country that defaulted, in terms of sovereigns means you have a harsh operating environment.”

Meanwhile, the bank was quoted to predicted that the incoming administration in Nigeria would devalue the Naira, the country’s currency, and work on converging multiple exchange rates in a bid to stimulate economic activities, report stated.