Ghana’s banking sector has entered 2026 with renewed optimism following the conclusion of the Domestic Debt Exchange Programme.
According to Fitch Solutions, the end of the DDEP has eased pressure on banks’ balance sheets and helped restore capital buffers that were heavily eroded during the restructuring of government bonds. For many banks, the closure of the programme represents a turning point after two difficult years marked by asset write downs, reduced income streams and weakened investor confidence.
The debt exchange had forced banks to absorb losses on government securities, traditionally viewed as low risk assets. With the programme now concluded, banks are gradually rebuilding capital adequacy levels, improving liquidity positions and stabilising their overall financial health.
Fitch Solutions notes that this recovery creates room for renewed lending activity and a more supportive operating environment, particularly as macroeconomic conditions show signs of improvement.
High NPLs Continue to Weigh on Profitability
Despite the relief brought by the DDEP’s closure, Fitch Solutions cautions that profitability challenges remain significant. A major constraint is the elevated level of Non Performing Loans, which stood at 9.5 percent as of October 2025. This ratio remains well above levels considered comfortable for sustained profitability and poses ongoing risks to asset quality.
High NPLs increase provisioning costs, weaken earnings and limit banks’ capacity to expand credit aggressively. They also reflect lingering stress among borrowers, particularly businesses that struggled through periods of high inflation, elevated interest rates and reduced consumer demand.
While economic recovery is expected to support gradual improvement in loan performance, Fitch warns that the adjustment process will take time and will continue to drag on returns in the near to medium term.
Easing Monetary Policy to Support Loan Growth
Fitch Solutions expects a more accommodative monetary policy environment across Sub Saharan Africa, including Ghana, to support improved credit conditions in 2026. Since February 2025, central banks in the region’s largest economies have either reduced policy rates or held them steady following earlier cuts. This easing trend is expected to continue through 2026 as inflation moderates and growth considerations take centre stage.
For Ghanaian banks, lower policy rates could help reduce funding costs and stimulate loan demand from both households and businesses. Fitch forecasts that loan growth will accelerate across major African banking markets, driven by pent up demand, improving economic prospects and a gradual decline in government crowding out. In Ghana’s case, easing financial conditions could provide much needed support for private sector activity after a prolonged period of tight credit.
Shift Away from Government Securities
In recent years, many banking sectors across Sub Saharan Africa increased their exposure to government securities, attracted by high yields and relative safety. In some markets, government securities now account for between 20 and 35 percent of bank assets, compared with 10 to 15 percent before the pandemic. Ghana followed a similar pattern prior to the DDEP, with banks heavily invested in domestic bonds.
As policy rates fall and yields on government securities compress, Fitch Solutions expects banks to face growing pressure to redeploy capital into private sector lending in order to maintain returns. This shift represents both a challenge and an opportunity. While private sector lending carries higher credit risk than sovereign exposure, it also offers better prospects for income diversification and long term growth.
Fitch Solutions believes that a gradual reallocation of capital toward private sector lending will be positive for businesses and the broader economy. Increased access to credit could support expansion plans, boost productivity and help firms take advantage of improving economic conditions. For Ghana, this transition aligns with ongoing fiscal consolidation efforts, which are expected to reduce the government’s domestic borrowing requirements.
As the state relies less on domestic financing, banks will have greater incentive to channel funds into productive sectors of the economy. This could strengthen the link between the banking sector and real economic activity, supporting job creation and sustainable growth. However, the success of this transition will depend on effective risk management and improved credit assessment practices to prevent further deterioration in asset quality.
Balancing Recovery and Risk in 2026
Fitch Solutions, meanwhile, expects Ghanaian banks to navigate a delicate balance between recovery and risk. The end of the DDEP and easing monetary conditions provide a supportive backdrop for growth, but high NPLs remain a clear warning sign. Banks will need to prioritise loan recoveries, strengthen underwriting standards and carefully manage their expansion strategies.
While profitability is likely to improve gradually, it will remain constrained by legacy issues from recent economic shocks. The pace at which banks can clean up their loan books and adapt to a shifting interest rate environment will be critical in shaping sector performance in 2026. For now, the outlook reflects cautious optimism, with clear opportunities tempered by persistent vulnerabilities.
