TGB Regional Banking Monitor: Sub-Saharan Africa — Q1 2025

The regional picture

The International Monetary Fund's April 2025 Regional Economic Outlook recorded regional growth of 4% in 2024, up from 3.6% in 2023. It expected growth to ease to 3.8% in 2025 before picking up to 4.2% in 2026. On banking, it said indicators suggested the region's banks remained generally well capitalised, liquid and profitable, but that low-income and fragile countries faced vulnerabilities, including from high non-performing loans and increasing reliance on domestic public debt, which had raised bank exposure to sovereign risk. It described middle-income countries, a group that includes Ghana, Kenya, Nigeria and South Africa, as having strong financial sectors with sound banking practices. The country data published since then support the finding on capital, but they also show high non-performing loans in two of those middle-income markets.

Monetary policy moved in opposite directions across the region. In South Africa, the Reserve Bank's Monetary Policy Committee (MPC) cut the repo rate by 25bp to 7.50% at its 30 January 2025 meeting, held it there on 20 March, and cut again to 7.25% on 29 May. In Kenya, the Central Bank of Kenya lowered its Central Bank Rate (CBR) by 50bp to 10.75% on 5 February, by 75bp to 10.00% on 8 April and by 25bp to 9.75% on 10 June. The two CFA franc zones also eased: the Bank of Central African States (BEAC) cut its main tender rate from 5.00% to 4.50% on 24 March, and the Central Bank of West African States (BCEAO) cut its main rate from 3.50% to 3.25% with effect from 16 June.

Nigeria and Ghana went the other way. The Central Bank of Nigeria (CBN) retained its Monetary Policy Rate at 27.50% at its meetings in February, May and July 2025, with the cash reserve ratio for deposit money banks unchanged at 50.00%. The Bank of Ghana raised its Monetary Policy Rate by 100bp to 28.0% on 28 March 2025 and held it there on 23 May.

South Africa: easing with strong buffers

The January 2025 cut was not unanimous: four MPC members preferred the 25bp reduction and two supported an unchanged stance. The committee noted that headline inflation had averaged 4.4% in 2024 and slowed to 3% in December. In March the vote was again four to two, this time with two members favouring a 25bp cut, and the 2025 growth forecast was trimmed from 1.8% to 1.7%. The March forecast put headline inflation at 3.6% in 2025 and 4.5% in 2026, including about 0.2 percentage point from proposed VAT increases.

By May the outlook had weakened further. The MPC cut the growth forecast from 1.7% to 1.2% and lowered the repo rate to 7.25%, with five members favouring a 25bp cut and one preferring 50bp. Inflation was below 3% again in April, and core inflation was 3%. The committee said that internal and external analysis had shown its inflation target to be too high and too wide. In a scenario with a 3% objective, the policy rate falls to just under 6% rather than staying above 7%, as in the baseline. For banks, a lower inflation objective would therefore mean a lower interest-rate path than in the baseline.

Banking system: capital steady, impairments high

The Reserve Bank's first Financial Stability Review of 2025 covers the six months from December 2024 to May 2025. Its banking indicators are annual averages, with 2025 covering the year to date to March 2025. On that basis, asset growth picked up to 6.37% from 5.33% in 2024, and loan growth to 5.59% from 5.28%.

South African banking sector indicators (annual averages, %, unless stated)

Source: South African Reserve Bank, Financial Stability Review, First edition 2025, 19 June 2025.

Capital was broadly flat, with the CET1 ratio 0.40 percentage point below its 2022 level of 13.63%. Impaired advances rose to R304.5 billion from R300.7 billion but stayed at 5.3% of gross loans. Profitability edged up, liquidity stayed ample with a liquidity coverage ratio of 148.8%, and the five largest banks held 92.34% of sector assets. The Review's breakdown of non-performing loans shows the pressure shifting from households to firms. Non-performing loans increased in the corporate and SME portfolios but decreased in both secured and unsecured retail portfolios since September 2024, and the NPL ratios of all four asset classes remained above their long-term averages. The Reserve Bank judged that conditions in 2025 had been more challenging, with global systemic risk rising mainly because of a surge in policy uncertainty around trade conflicts. It found that prudentially regulated institutions remained resilient, partly because they could maintain adequate capital buffers, but warned that downward revisions to the growth forecast would likely test that resilience beyond the forecast period. Credit is not running ahead of the economy: the credit-to-GDP gap has been negative since the fourth quarter of 2020. Just after the review period, the FATF statement of 13 June 2025 confirmed that South Africa had addressed or largely addressed all 22 action items agreed after its February 2023 greylisting. The Reserve Bank concluded that the risk of South Africa remaining on the greylist over the medium term had reduced significantly.

Nigeria: policy on hold, GTCO provisions ahead of forbearance timeline

The CBN kept every monetary policy setting unchanged at its 299th meeting on 19 and 20 February 2025: the Monetary Policy Rate at 27.50%, the asymmetric corridor at +500/-100 basis points, the cash reserve ratio at 50.00% for deposit money banks and 16% for merchant banks, and the liquidity ratio at 30.00%. It retained the policy rate at 27.50% again at its 300th meeting on 19 and 20 May. At its 301st meeting on 21 and 22 July 2025 it held all four parameters once more. The 50.00% cash reserve ratio for deposit money banks dates from the 297th meeting in September 2024, which raised it from 45.00%. A cash reserve ratio of 50.00% keeps a large share of deposits out of banks' lending capacity, whatever the level of the policy rate.

Guaranty Trust Holding Company (GTCO) reported group profit before tax of ₦1.266 trillion for 2024, up 107.8% from ₦609.3 billion in 2023. Its net loan book grew 12.3% to ₦2.79 trillion, while deposit liabilities grew 37.8% to ₦10.40 trillion. The group reported a capital adequacy ratio of 39.3% and a pre-tax return on average equity of 60.5%. Its IFRS 9 Stage 3 loans rose to 3.5% at bank level and 5.2% at group level in December 2024, from 2.5% and 4.2% a year earlier, and cost of risk increased to 4.9% from 4.5%. GTCO said it had provided for all its forbearance loans well ahead of the June 2025 timeline, while fully accruing for the windfall tax. For GTCO, the cost of the forbearance timeline was therefore taken through provisions in its 2024 results.

Kenya: three cuts, rising bad loans

The Central Bank of Kenya eased in each of its first three meetings of 2025. On 5 February it lowered the CBR by 50bp to 10.75% and cut the cash reserve ratio by 100bp to 3.25%, from 4.25%, to support lower lending rates. On 8 April it cut by 75bp to 10.00%, and on 10 June by 25bp to 9.75%. The rate therefore fell by 150bp over the three meetings. In April it also narrowed the interest rate corridor around the CBR from ±150bp to ±75bp. It set the Discount Window rate at 75bp above the CBR, against 300bp before, making it the upper bound of the corridor. Inflation gave room to ease: it was 3.6% in March 2025 and 3.8% in May, below the 5% mid-point of the target range.

The pass-through to borrowers was slow at first. In February the central bank observed that the CBR had been lowered substantially since August 2024, yet lending rates had declined only marginally. It said it had begun on-site inspections to check that banks were cutting rates in line with the Risk-Based Credit Pricing Model, and that under amendments to the Banking Act any bank not passing on lower funding costs would be penalised. Average lending rates then fell from 17.2% in November 2024 to 15.4% in May 2025, and private-sector credit growth turned positive.

Kenya: lending rates, credit growth and asset quality, %

Source: Central Bank of Kenya, MPC press release: meeting of February 5, 2025, 5 February 2025; Central Bank of Kenya, MPC press release: meeting of April 8, 2025, 8 April 2025; Central Bank of Kenya, MPC press release: meeting of June 10, 2025, 10 June 2025.

Asset quality moved the wrong way: the gross NPL ratio rose by 1.2 percentage points between December 2024 and April 2025. The central bank noted increases in non-performing loans in trade, personal and household, tourism and hotels, and building and construction, and said banks had continued to make adequate provisions. It described the sector as stable and resilient, with strong liquidity and capital adequacy ratios.

The structure of the sector is also changing. On 16 April 2025 the central bank announced that it would lift, from 1 July 2025, the moratorium on licensing new commercial banks that had been in place since 17 November 2015. The Business Laws (Amendment) Act, 2024 raised the minimum core capital for commercial banks to KSh10 billion, and new entrants must show that they can meet it. Real GDP growth slowed to 4.7% in 2024 from 5.7% in 2023, and in June the central bank cut its 2025 forecast to 5.2% from 5.4%, citing higher tariffs on trade.

Ghana: tightening, then rapid disinflation

The Bank of Ghana moved against the regional trend in March. On 28 March 2025 its MPC, by a majority decision, raised the Monetary Policy Rate by 100bp to 28.0%, from 27.0%. Headline inflation had eased only marginally, from 23.8% in December 2024 to 23.1% in February 2025. The central bank also said it would introduce a 273-day instrument to add to its sterilisation toolkit. On 23 May the MPC unanimously held the rate at 28.0%, and it required banks to hold cash reserves in the currency of their deposits from 5 June 2025.

Disinflation then accelerated. Headline inflation fell to 21.2% in April 2025. At an emergency meeting on 17 July 2025 the MPC noted that inflation had fallen for six consecutive months to 13.7% in June. The cedi had gained 42.6% against the US dollar so far in 2025, and gross international reserves had risen to US$11.1 billion at end-June, equal to 4.8 months of import cover. Real GDP grew 5.3% in the first quarter of 2025, after 5.7% in 2024. Public debt was 55.0% of GDP at end-March 2025.

Banking system: growth, reliefs and elevated NPLs

Total bank assets grew 34.0% in the year to end-February 2025, and private-sector credit 26.9%, or 3.1% in real terms. By April, asset growth had slowed to 27.2%, with total assets of GH¢390.1 billion, and growth in total advances had eased to 18.3% from 24.3% in December 2024.

Ghana banking sector indicators, %

Source: Bank of Ghana, Summary of Economic and Financial Data, May 2025, 22 May 2025; Bank of Ghana, Monetary Policy Committee press release, March 2025, 28 March 2025.

Capital ratios stepped up in March. The industry capital adequacy ratio with regulatory reliefs rose from 14.4% in February 2025 to 17.1% in March and 17.5% in April, and the ratio without reliefs rose from 12.1% to 15.8% over the same period. The Bank of Ghana's series has been adjusted for regulatory reliefs since April 2023. Asset quality did not improve with it. The NPL ratio climbed to 23.6% in April 2025, although it was below the 25.7% of April 2024; 14.6 percentage points of the April ratio were loss-category loans, which the Bank of Ghana describes as fully provisioned. In March the central bank said credit risks remained elevated and that it would continue to monitor undercapitalised banks closely.

The CFA franc zones: easing from low rates

The BCEAO kept its main policy rate at 3.50% on 5 March 2025, a level in force since 16 December 2023. Bank credit to the private sector in WAEMU had grown 6.3% year on year at end-December 2024. By June conditions allowed a cut: on 4 June the BCEAO lowered its main rate to 3.25% and its marginal lending rate to 5.25%, with effect from 16 June, leaving the reserve requirement at 3.0%. Inflation in WAEMU fell to 2.3% in the first quarter of 2025 from 2.9% in the fourth quarter of 2024, and real GDP grew 7.1% in the first quarter. Credit to the economy grew 5.0% year on year at end-March 2025, bank liquidity strengthened, and the average interbank rate fell to 6.0%.

In CEMAC, the BEAC cut its tender rate from 5.00% to 4.50% on 24 March 2025 and kept its deposit facility rate at 0.00%. Its staff projected inflation of about 2.9% in 2025, down from 4.1% in 2024. With inflation at 2.3% in WAEMU in the first quarter of 2025 and forecast at about 2.9% in CEMAC, the two regional central banks had room to ease, whereas the Bank of Ghana raised its rate in March with inflation at 23.1%.

Cross-country comparison

Sub-Saharan Africa banking monitor: policy and system indicators (reference dates in brackets)

Source: South African Reserve Bank, Statement of the Monetary Policy Committee, May 2025, 29 May 2025; South African Reserve Bank, Financial Stability Review, First edition 2025, 19 June 2025; Central Bank of Nigeria, Monetary Policy Decisions: key decisions of the 299th, 300th and 301st MPC meetings (February, May and July 2025), 22 July 2025; Central Bank of Kenya, MPC press release: meeting of June 10, 2025, 10 June 2025; Bank of Ghana, Monetary Policy Committee press release, May 2025, 23 May 2025; Bank of Ghana, Summary of Economic and Financial Data, May 2025, 22 May 2025; Bank of Ghana, Emergency MPC press release, July 18, 2025, 18 July 2025; Banque Centrale des Etats de l'Afrique de l'Ouest (BCEAO), Réunion ordinaire du Comité de Politique Monétaire de la BCEAO tenue le 4 juin 2025, 4 June 2025; Banque des Etats de l'Afrique Centrale (BEAC), Comité de Politique Monétaire, séance ordinaire du 24 mars 2025: communiqué de presse, 24 March 2025.

The comparison points to asset quality as the common weakness. Ghana's NPL ratio of 23.6% and Kenya's 17.6% in April 2025 were several times South Africa's impaired-advances ratio of 5.3% for 2025 to March, on national definitions, even though Ghana's reported capital adequacy ratio of 17.5% was close to South Africa's 17.22%. The IMF placed high non-performing loans among the vulnerabilities of low-income and fragile countries, yet Ghana and Kenya are both in its middle-income group. On these figures, weak asset quality is not confined to the region's poorest economies.

Outlook risks

In South Africa, the Reserve Bank's own warning is that weaker growth will test bank resilience, and NPL ratios in all four main asset classes are already above long-term averages. In Kenya, NPLs rose to 17.6% in April 2025 even as rates fell, so the risk is that credit recovery outpaces credit quality. In Nigeria, a 27.50% policy rate and a 50.00% cash reserve ratio keep conditions tight, and without system-level asset-quality data the effect of the June 2025 forbearance timeline cannot be measured beyond GTCO's own provisions. In Ghana, inflation had fallen to 13.7% by June ahead of the 28-30 July MPC meeting, but an NPL ratio of 23.6% and the regulatory reliefs embedded in reported capital remain constraints on the banks. In the CFA franc zones, inflation of 2.3% in WAEMU in the first quarter and a forecast of about 2.9% in CEMAC for 2025 left room for the easing already delivered, and WAEMU bank liquidity strengthened.

Primary sources: South African Reserve Bank, Statement of the Monetary Policy Committee, March 2025, 20 March 2025; Central Bank of Kenya, MPC press release: meeting of February 5, 2025, 5 February 2025; Central Bank of Kenya, MPC press release: meeting of April 8, 2025, 8 April 2025; Central Bank of Kenya, MPC press release: meeting of June 10, 2025, 10 June 2025; South African Reserve Bank, Statement of the Monetary Policy Committee, January 2025, 30 January 2025; South African Reserve Bank, Statement of the Monetary Policy Committee, May 2025, 29 May 2025; Central Bank of Nigeria, Monetary Policy Decisions: key decisions of the 299th, 300th and 301st MPC meetings (February, May and July 2025), 22 July 2025; Bank of Ghana, Monetary Policy Committee press release, May 2025, 23 May 2025; Bank of Ghana, Summary of Economic and Financial Data, May 2025, 22 May 2025; South African Reserve Bank, Financial Stability Review, First edition 2025, 19 June 2025; Bank of Ghana, Monetary Policy Committee press release, March 2025, 28 March 2025; International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2025: Recovery Interrupted, 25 April 2025; Banque des Etats de l'Afrique Centrale (BEAC), Comité de Politique Monétaire, séance ordinaire du 24 mars 2025: communiqué de presse, 24 March 2025; Banque Centrale des Etats de l'Afrique de l'Ouest (BCEAO), Réunion ordinaire du Comité de Politique Monétaire de la BCEAO tenue le 4 juin 2025, 4 June 2025; Guaranty Trust Holding Company Plc, GTCO Plc releases 2024 full year audited results, 31 March 2025; Central Bank of Kenya, Press release: lifting of moratorium on licensing of new commercial banks in Kenya, 16 April 2025; Bank of Ghana, Emergency MPC press release, July 18, 2025, 18 July 2025; Banque Centrale des Etats de l'Afrique de l'Ouest (BCEAO), Réunion ordinaire du Comité de Politique Monétaire de la BCEAO tenue le 5 mars 2025, 5 March 2025.