Investment banker Togbe Afede XIV has stated that Ghana’s banking industry is the most profitable in all of Africa. This statement was made in reference to the continent as a whole.
The Agbogbomefia of the Asogli State explained this by citing the high interest rate.
According to him, raising interest rates not only benefits financial institutions like banks and the central bank, but it also does nothing to promote expansion in the real and private sectors of the economy.
On Thursday, February 9, a former member of the Council of State was speaking to journalists on the sidelines of the launch of the 53rd General Assembly of the World Trade Centers Association. He said, “Get inflation down, get the interest rate down, and the cedi will maintain good stability against the dollar.
” Maintaining high interest rates alone will not be sufficient to bring inflation under control. Why do I say so? In developed nations, raising interest rates is a common strategy for discouraging consumers from making large purchases; as a result, demand for goods falls, which brings inflation under control.
“But you can’t expect people in Ghana, where the typical person has a terrible time making ends meet, to reduce their spending and put away more money if you raise interest rates. That’s not how things are done in this country; there’s no way around it.
Togbe Afede XIV continued by saying, “When you raise the interest rate, it only rewards the banks; this is why the Ghanaian banking sector is about the most profitable in Africa; this is also the reason why the Bank of Ghana itself made about four times as much profit as the Bank of England.” The economy that is overseen by the Bank of England is 2.7 trillion dollars, which is forty times larger than our economy, which is only 70 billion dollars.
How is it possible for the Bank of Ghana to have a higher profit margin than the Bank of England?.
They also profit from the high interest rate, so the high interest rate does not benefit the economy; rather, it benefits the banking system, which in turn makes the Bank of Ghana profitable and the banks very profitable, crowding out the private sector, inhibiting the growth of the private sector, inhibiting the growth of the real sector of the economy, and therefore inhibiting the creation of jobs for the teeming masses of people.
Recent events have resulted in the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) deciding to raise the policy rate to 28 percent. This represented an increase from the previous rate of 27%.
At the 110th monthly policy committee press conference, which took place in Accra on January 30th, the governor of the BoG made this announcement.
The increase in price reflects the consistently rising rate of inflation, which reached a new all-time high of 54.1% in December of the previous year.
“In the meantime, the Monetary Policy Committee sees the need to be attentive and manage liquidity in the system to reinforce macroeconomic changes that are taking place to push inflation on a lower path.”
The Monetary Policy Committee (MPC), which Dr. Ernest Addison, Governor of the Bank of Ghana, chairs, disclosed that “the Committee determined that under the circumstances, the policy rate should be increased by 100 basis points to 28%.”