Is the Easing Cost of Credit a Sign of Good Times to Come?

After months of economic turbulence and tightening monetary conditions, there are now early signs that Ghana‘s cost of borrowing is finally beginning to ease, although interest rates remain significantly high compared to other countries. Recent data from the Bank of Ghana shows that the average lending rate has dropped to 27.4 percent as of April 2025, its lowest level in nearly two years. Alongside this, the Ghana Reference Rate, the benchmark upon which commercial banks typically base their lending offers, has also fallen sharply to 23.99 percent. For many in the private sector, this shift may feel like long-awaited breathing space in an economy where access to affordable credit has been a stubborn challenge. Interest rate of about 27% will still not make businesses competitive although it gives some hope should the rates continue to trend downwards.

This easing marks a significant turning point. It was not too long ago that the cost of credit was soaring at uncomfortable levels. In the latter half of 2022 and through early 2023, Ghana saw an aggressive round of monetary tightening in response to a worsening economic environment. Inflation was climbing, the cedi was depreciating rapidly, and fiscal uncertainty loomed large. As the central bank raised its policy rate to contain inflationary pressures, commercial lending rates responded in kind. By February 2023, borrowers were facing rates as high as 36 percent. For small businesses and even larger firms, this meant difficult choices, postpone investments, delay hiring, or in many cases, opt out of borrowing altogether.

But by April 2023, a subtle shift began to emerge. That month alone saw a significant drop in both the lending rate and the reference rate. It was not a fluke. The macroeconomic outlook was beginning to stabilize, helped in part by Ghana’s engagement with the International Monetary Fund and fiscal consolidation efforts on the part of the government. The central bank, likely observing improving inflation data and a more stable currency, began to pull back slightly from its aggressive posture.

Since then, the data has shown a fairly consistent downward movement. While the change has not been dramatic month to month, it has been steady enough to build a sense of direction. By late 2023, both rates had begun to float closer to the 30 percent mark. And now, in the first quarter of 2025, they have finally broken below that psychological threshold. For the business community, particularly for small and medium-sized enterprises that depend on bank loans for working capital and growth, this matters. Even a few percentage points shaved off the cost of credit can improve margins, enable expansion, and reduce the likelihood of loan defaults.

Of course, a declining lending rate on paper does not automatically translate into widespread access to affordable credit. The banking sector still contends with high non-performing loans in certain categories, and lenders may remain cautious. Even so, the broader environment appears to be shifting. With inflation now more contained and the cedi relatively stable, there’s more room for optimism that interest rates may continue to fall, or at the very least, hold steady at more manageable levels.

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