(Ecofin Agency) - At the end of April 2019, the market capitalisation of financial companies listed on the Ghana Stock Exchange was GHS13.7 billion ($2.6 billion), according to figures published by the Bank of Ghana.
This represents a 6.2% drop compared with the market capitalisation of these companies at end January 2019 (GHS14.3 billion).
The central bank provided no direct explanation for that decrease. In its May 2019 monetary policy report, it simply indicated that the banking sector was well and best capitalized.
To reach this level, many banks had to avoid distributing dividends to their investors and use their own equity while others had to increase their equity and dilute shareholdings.
In the short-term, the economic outlook is rather optimistic since the country benefited from the rise in the price of oil and gold that are now its two main export products. Thanks to these price rises, the country’s trade balance improved during the period under review. In additon, the recent $3 billion Eurobond also boosted the foreign reserves and eased pressure on the local currency.
During the period under review, banking loans to the private sector increased by 19.8% with a balanced distribution between households and companies. According to the central bank, this increase is due to the capital base increase which provided more lending possibilities.
However, authorities are still unable to bring the inflation below the less than 7% target. Ghanaians now pay 1.6 times more than they had to in 2012 for food products and 2.3 times more for non-food products. This affects households revenues and companies’ production factors. Commercial banks and insurance companies, therefore, have to closely watch this situation as in other countries, high inflation was correlated to a rise in bad debts and a decrease in insurance premiums.