NIB to benefit from GH¢4bn govt support

Government has made a provision of GH¢4 billion to address the liquidity issues of the National Investment Bank (NIB), and other distressed Special Deposit taking Institutions (SDIs) in the country.

The amount which was announced in the 2024 budget is also expected to take care of some outstanding legacy challenges in the financial sector.

This forms a critical component of the three-year International Monetary Fund Programme.

Under the IMF programme, the Bank of Ghana (BoG) has committed to completing the remaining tasks from the financial sector cleanup, and these tasks include addressing the insolvency of NIB as well as the long-standing under-capitalisation of several special deposit-taking institutions (SDIs).

Addressing the media at the Monetary Policy Committee press conference in July, the Governor of the Bank of Ghana, Dr Ernest Addison, said the issue of NIB and other under-capitalised institutions would obviously form part of the financial sector policy under the IMF programme.

He said once the government was done with the immediate issues of the impact of the Domestic Debt Exchange Programme (DDEP) on banks, it would go back and relook at these institutions and make an assessment on whether they are still viable or not.

“The NIB is one of the banks that we will make that assessment on, to ascertain whether it is still viable or not. If it is viable and the government can find money to recapitalise it, then Yes. But if it is not viable, then, obviously, we will have to find a different use for that instrument.

“These are ongoing discussions between us and the international partners and I believe that in the next year or so, we will get a clearer sense of how to handle those particular institutions that are very weak,” he stated.

The announcement of the GH¢4 billion package is therefore an indication that the government together with the BoG has agreed on the viability of NIB.

Capital challenges

Following the completion of the financial sector reforms, all the banks operating in the country successfully recapitalised to GH¢400, except NIB, who are yet to do so.

The NIB, together with four other banks namely ADB Bank, OmniBSIC, UMB Bank and Prudential Bank, were given government guarantee through the Ghana Amalgamated Trust (GAT), which was a special purpose vehicle set up to help these five banks recapitalise.

NIB, however, failed to utilise this opportunity as its liquidity and capital challenges far exceeded what was originally envisaged and have still remained under-capitalised.

With the bank being a state bank, the considerations were different, and, therefore the bank has continued to operate till now, despite not meeting the new minimum capital requirement.

ADB take over

The announcement of this support to NIB is also expected to put to rest recent speculations that the government was considering the takeover of the bank by ADB Bank.

Talks of a merger between the two state owned banks were not new, as the Finance Minister, Ken Ofori Atta, in 2017 hinted of a merger of the two banks to form a Development Bank.

The Finance Minister at the time argued that a merger of the two banks could help create a development-oriented bank that could finance the government’s vision of transforming the economy through increased investments in agriculture and industrialisation.

This position was then supported by the Governor of the Bank of Ghana, Dr Ernest Addison, who also argued at the time that it made sense for the government to merge the two banks, citing the challenge of the state having to recapitalise the two banks separately.

It appears this will not be happening now though as the government has taken a step to help recapitalize NIB.

Source: Emmanuel Bruce

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