New data shows that Ghana presently has the highest interest rates among top 11 African countries.
According to Databank Weekly Fixed Income Update, the country’s 18.23% and 19.26% rates for the 91-day and 182-day Treasury bills respectively are the highest on the continent.
The Treasury bill rates in the country are however lower than the inflation rate of 23.6%.
Indeed, the relentless pace of inflation has stretched real returns on short term securities further down into the negative territory. So if you have bought Treasury bills in recent times, the return on your investments is negative.
This situation will compel the Bank of Ghana to increase its Monetary Policy Rate which currently stands at 17% further, to help mop up excess liquidity in circulation, and consequently halt the rising inflation rate.
“Real returns on fixed-income securities are depressed with the high inflation profile, continually undermining the Treasury’s financing operations. We note that short-term interest rates are misaligned, resulting in negative real yields, which could prompt the Monetary Policy Committee (MPC) to act in the week ahead”, Databank Research.
“However, Ghana cedi liquidity levels are already tight on the interbank market, and a further tightening of the MPR could stifle economic growth. So, while we maintain an additional 200 basis points (2%) hike in the policy rate in 2022, we expect the MPC to exercise restraint in May 2022, deferring a potential 100 basis points (1%) hike in MPR to July 2022.
The rising interest rates are expected to increase the cost of borrowing and production cost per unit of most businesses.
At the same time, government will borrow at a higher cost on the financial markets.
Meanwhile, Egypt follows Ghana closely with a 91-day Treasury bill rate of 13.67%.
Its currency – the Egyptian Pound – has been recording rapid depreciation to the dollar.
Nigeria has the lowest interest rate of 1.74% among the top 11 African countries.
Countries with lowest interest rates
Source: Joy Business