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Ghana’s worsening debt outlook creates cash-call danger for the country’s Nigerian banks

By David Whitehouse
Posted on Wednesday, 7 July 2021 17:32

Guaranty Trust Bank building in the central business district in Abuja, Nigeria REUTERS/Afolabi Sotunde

Nigerian banks operating in Ghana may take a hit as the country’s sovereign-debt outlook deteriorates, analysts say.

On June 22, Fitch Ratings revised its outlook downwards on Ghana’s long-term foreign-currency issuer default rating of B to negative, from stable. The ratings service cited “significant deterioration in public finances” due to Covid-19, delays to the government’s fiscal consolidation efforts and increased risk of fiscal slippage due to the lack of a clear government majority in parliament.

The risk of further rating downgrades for Ghana is “likely to rise over the next year” as the government will continue to borrow heavily in the domestic market, says Mark Bohlund, senior credit research analyst at REDD Intelligence in London.

Ghana faces a sharp rise in domestic bond redemptions in the second half of this year and “inability to hit fiscal deficit targets is likely to impair external borrowing options” in 2022, Bohlund says.