Here’s why interest rates are still high in Ghana

Apart from the high cost of doing business in Ghana, another major challenge the business community faces is the high interest rates on loans acquired from financial institutions.

Despite bemoaning how this particular problem – high interest rates – keeps having dire consequences on their business, the government has done little to allow these businesses to heave a sigh of relief.

Speaking on this growing development on GhanaWeb TV’s The LowDown programme hosted by Daniel Oduro, lecturer at the University of Ghana Business School, Professor Lord Mensah, gave some insights into why interest rates have been on an upward trajectory.

Professor Lord Mensah noted that lenders always increase their interest rates when they know the borrower needs the money to pay off existing debt.

Also, the high interest rate is a means to ensure that lenders recoup their capital invested within the shortest possible time.

“Every time we are going to borrow, in the prospectus, we indicate that we are borrowing to offset existing debt and the lender knows. Possibly that is why the interest rates is not able to come down very well in this country because if I am lending to you, and you tell me that you are borrowing to go and pay off already existing debt, I will increase my interest,” Professor Lord Mensah said on GhanaWeb TV’s The Lowdown programme.

He added that, “If I know you cannot pay, I need to increase my ability to recoup my money as quick as possible.”

Ghana maintains position with highest interest rates in Africa in 2023

Meanwhile, a new report released by investment firms has indicated that Ghana’s interest rates were still the highest in Africa.

This year, after the country received the first tranche of the loan from the International Monetary Fund coupled with the completion of the debt exchange program, interest rates on treasury bills saw a decline.

Despite the decline, a report by myjoyonline.com curated from investment firms has noted that the rates of about 29.24% and 31.88% for the 91-day and 182-day treasury bills respectively are still high.

Also, yields on the 91-day and 182-day fell by 6.12% and 4.10% respectively in 2023.

Currently, interest rates are hovering around 32%, putting Ghana first among the highest on the African continent.

Egypt followed Ghana closely with the second highest interest rates in Africa (91-day bill: 25.68%, 182-day bill: 25.95%).

Cape Verde and Seychelles recorded the lowest interest rates in Africa.

Some African countries with the highest interest rates:

COUNTRY INTEREST RATE (91-DAY BILL) RANKING
Ghana 29.24% 1st
Egypt 25.68% 2nd
Kenya 15.98% 3rd
Malawi 14.70% 4th