Togbe Afede XIV, the Paramount Chief of the Asogli Traditional Area, has blamed the Bank of Ghana for the high lending rates in the country.

He said the Bank of Ghana has lost focus, competing with the banks for profits, instead of contributing to the macro-economic objectives of stability, growth and employment creation.

According to him, the government cannot take the blame for the high cost of credit in the country.

“The scapegoat has always been government borrowing, the high indebtedness of government. But I don’t think that is where all the problem”, he disclosed this when he paid a courtesy call on the Speaker of Parliament, Alban Bagbin.

“The UK’s debt to GDP ratio is about 104%. Ghana’s is 81%. Relatively, we are better. The per capita indebtedness of the UK is $42,000, ours is $1,400. Compared to income per capita, we are much better. Our income per capita is $2,300 that of the UK is $40,000. So UK’s debt per capita, $42,000, is higher than income per capita, $40,000. Our debt per capita $1,400, is much less than our income per capita, $2,300”, the renowned Paramount Chief said.

“So relatively, the UK is more indebted than Ghana, yet the rate at which the Bank of England lends to banks currently is 0.1%, while Bank of Ghana lends to our banks at 13.5%. That is a whopping one hundred and thirty-five times the Bank of England rate! Astonishing!!”, he added.

Continuing, he said “the UK GDP, which reflects the size of the economy, is $2.7trillion, almost 40 times the size of our economy, which is $72billion (GDP). But guess what? Bank of England made a profit of £57million ($76million) in 2020/21, down from £72million ($96million) in 2019/20. Bank of Ghana, on the other hand, made a profit of GHS1.57billion ($270million) in 2020, down from GHS1.8billion ($310million) in 2019. The question is, doing what?!”

“Yes, that is the benefit from their 13.5% lending rate.  Mr. Speaker, this is where the problem has been, but we don’t seem to know.  Bank of Ghana has lost focus, competing with the banks for profits, instead contributing to the macro-economic objectives of stability, growth and employment creation”, he further explained.

“Now let’s look at our commercial banks, he said, adding “Ecobank in the first nine months of this year, January to September, made a net profit of ¢468million. In a pandemic environment, ¢468million net profit! The equivalent figure for Standard Chartered Bank was ¢385million. These are big increases from the corresponding figures of the previous year. If the economic environment is so difficult, and their costs are high, as they often claimed, how did they make so much profit?”, Togbe Afede XIV questioned.

He again asked “now, how do the high interest rates help in managing the economy when the high interest the banks charge is not even shared with depositors?”, .

“So the banks are making incredible amount of money from the high interest rate environment at the expense of the people, industry, the private sector, the government, and at the expense of our growth. Why do we have to set interest rates so high?”  

He noted that the arguments he made in 2003, which led to President Kufuor appointing him to the Board of Bank of Ghana, are still relevant today.

Togbe Afede XIV continued saying “the most important, of course, is to ensure better planning and management of our economy, and this, coincidentally, is what has brought you here. For now, I want to focus on our monetary policy. That is one segment of policy that has received the least scrutiny. Not since 2003 when I complained about monetary policy in this country has there been any open debate about how monetary policy has been conducted.”  

“We have always been in a high inflation and high interest rate environment. Mr. Speaker, you spoke quite rightly about the need for the private sector to lead the development of this country. But how can the private sector do it, if it has to borrow at very atrocious rates, even in a pandemic environment, of between 25 and 30%. The COVID pandemic led to a fall in demand and incomes across board, and many countries relaxed monetary policy in order to stimulate their economies. In Ghana, we appeared to have done the opposite”, he lamented.

He opined that private entrepreneurs or enterprises don’t have stacks of money that they dip into to fund their businesses, explaining that “they have to depend on the banking system. So no amount of your hard work would bring the development that we need when borrowing rates are so high. We want the youth to go into private business, but with what kind of capital? Expensive, highly priced 25% or 30%? Those cannot do it, and we have been victims of this over the years.”

Togbe Afede XIV concluded saying he wants the best for the country, and as such it’s about time the Bank of Ghana Act is reviewed and go for a separation between chairmanship and governorship. 

“It’s important that we seek improvement in everything that we do and remove lapses wherever we find them, at least for the sake of the future. Our people are suffering, and our youth are suffering from joblessness. These are threats to our security and our future”.