Ghana's debt default causes widespread loss among Nigerian banks, as Zenith Bank, others bleed

According to a recent report, Nigerian banks recorded huge losses on their investments in Ghanaian bonds, which caused delays in releasing their financial statements and audited accounts.

Nairametrics reports that Access Bank, FBN Holdings, and Fidelity Bank are yet to release their financials.

Ghana is battling debilitating economic crises caused primarily by lower commodity prices that have reduced its fiscal revenue cushions.

The country's economic hardship has also caused inflation, increased discount rates, and a faster exchange rate devaluation.

The inflation rate in the West African country is currently above 50%, and the country's currency has weakened against the US dollar.

As a result, the Ghanaian government announced a debt exchange programme to restore public finance and sustainable debt levels.

The country has also suspended coupon payments for its loans, forcing bondholders to take a haircut, a term for loss of bond value.

The ex-Gold Coast undertook the bold step of buying oil with gold as it struggled to find forex to pay for essential imports. Ghana is negotiating with the International Monetary Fund (IMF) to seek concessionary funding.

Its debt restructuring moves added enormous pressure on some Nigerian banks, including the impacts of the devaluation of the naira. The debt crisis in Ghana resulted in Nigerian banks earmarking billions for impairment losses.

Banks such as Ecobank, GTCo, UBA, and Zenith Bank have made provisions for impairment losses.

In their 2022 financials, four Nigerian banks revealed that they incurred an impairment loss of about N207 billion in 2022 due to Ghana's debt restructuring.

Zenith Bank reported a net impairment loss of N58.7 billion from its Ghanaian operations for 2022.

UBA Ghana specifically incurred about N14.2 billion of the losses.

Ecobank International incurred losses of up to N69.2 billion GTCO incurred a loss of about N35.6 billion on Ghanaian Bonds.

The casualties include exposure to Treasury Bills, Local bonds, and Eurobonds issued by Ghana.