Recapitalization of Ghana’s State-Owned Banks: A Turning Point?

Ghana’s state-owned banks have long been at the centre of a complex, unresolved tension between their original development mandates and the commercial realities of modern banking. Among these, the National Investment Bank (NIB) and Agricultural Development Bank (ADB) stand out for their persistent financial fragility, chronic undercapitalization, and recurring need for government bailouts stretching back decades.

NIB was founded in the 1960s to finance Ghana’s industrialisation, while ADB was established to channel credit to farmers and agribusinesses. For decades, they operated as policy banks, largely government-controlled, with lending priorities shaped by political goals rather than strict commercial viability. This model worked unevenly even in the early years, but the sector saw a profound shift starting in the 2000s when both institutions acquired universal banking licences. The idea was to modernize them, diversify their revenue sources, and reduce their dependence on government subventions.

However, this shift also blurred their mandates. Instead of remaining focused on targeted development lending, NIB and ADB increasingly competed as commercial banks, often without the operational independence, governance reforms, or risk management capacity needed to thrive. Over the years, successive governments continued to influence lending decisions and board appointments, undermining efforts at sound governance and risk control. The result was a build-up of non-performing loans, mounting losses, and repeated warnings from the Bank of Ghana about inadequate capital levels.

Unlike the failed private banks whose licenses were revoked during Ghana’s 2017–2019 financial sector cleanup, leading to the creation of Consolidated Bank Ghana (CBG), NIB and ADB were never shut down. Their strategic role in financing agriculture and industry meant the state could not afford to let them collapse outright. Instead, they have been subject to periodic rescue packages, ranging from direct cash injections to debt guarantees. ADB, for instance, underwent partial privatisation and stock exchange listing in 2016 to raise capital, but the government remained the dominant shareholder, limiting true governance reform.

The latest wave of trouble emerged in the aftermath of Ghana’s COVID-19 economic downturn and, most severely, the 2023 Domestic Debt Exchange Programme (DDEP). That programme, designed to ease Ghana’s sovereign debt crisis, forced banks to swap high-yielding government bonds for new, lower-interest instruments, inflicting large valuation losses on their balance sheets. State-owned banks were hit especially hard because of their large exposure to government debt and weaker capital buffers going in.

By 2024–2025, the IMF programme supporting Ghana’s economic recovery specifically flagged NIB as a key problem area. IMF staff repeatedly urged the government to take decisive action, up to and including liquidation, because the bank was a persistent drain on public finances. Instead, the Ghanaian government committed to recapitalising and restructuring NIB to preserve its development role while strengthening governance and financial sustainability.

Against this backdrop, the Ghanaian government’s injection of over GH¢1.4 billion into NIB in July 2025 marks a dramatic new chapter in that decades-long struggle to keep state-owned banks solvent, relevant, and free from the cycles of political interference that have repeatedly undermined them. While the government describes this capital injection and recent board reshuffles as a turning point, the larger question remains whether such interventions will finally bring these banks under the kind of corporate governance and market discipline needed to end their chronic dependence on the state.

Structural Challenges and Governance Reform

For NIB, the scale and timing of the rescue underscore the urgency of its condition. Long undercapitalized and burdened with non-performing loans, the bank has survived for years on regulatory forbearance and quiet assurances of government support. This July’s GH¢1.4 billion capital injection represents one of the most direct and transparent recapitalizations in its history. Yet money alone cannot address the structural weaknesses that have made NIB a perennial drain on the public purse.

At the heart of those weaknesses is governance. For years, NIB’s board was criticized for being an arena of political patronage, with government-appointed directors often lacking banking experience, and management changes tracking political cycles rather than commercial needs. As a result, the bank’s lending frequently served political goals rather than sound credit principles, helping to swell a portfolio of risky and often unrecoverable loans. Attempts at cleaning up its books, such as the creation of an Asset Recovery Company in 2010 to offload bad debts, provided only partial relief, failing to break the underlying pattern of politically driven, high-risk lending.

Now, the newly appointed nine-member board, chaired by veteran banker Frank Adu Jnr., is under pressure to prove that this time can be different. Official statements have emphasized ending “political interference,” but observers point out that such promises have been made before. Real independence will require the board to establish robust risk management systems, hire and retain professional management free from partisan pressures, and enforce genuinely commercial lending criteria even in politically sensitive sectors.

Chronology of Key Recapitalization Events (2005–2025)

• 2007–2008: BoG raises minimum capital requirement to GH¢60m (to be met by 2012). State banks begin seeking ways to increase capital; NIB faces rising NPLs.
  
• 2010: NIB creates Asset Recovery Company and transfers GH¢208m in bad loans to ARC (net GH¢143m after provisions) to cleanse its balance sheet. No significant new equity, but an indirect recap via NPL offloading.
  
• 2012: BoG doubles capital requirement to GH¢120m. Government refrains from direct cash recap; ADB and NIB remain undercapitalized but operating under BoG forbearance.
  
• 2015: ADB attempts IPO to raise ~GH¢380m; initial offering halted by union’s injunction and government suspension. Capital shortfall persists through 2015.
  
• 2016: ADB successfully completes IPO after legal clearance, raising about GH¢325–326 million in new capital. ADB lists on Ghana Stock Exchange, boosting capital toward regulatory requirements.
  
• Sept 2017: BoG issues directive for GH¢400m minimum capital by end-2018. Triggers industry consolidation.
  
• Aug 2018: Consolidated Bank Ghana (CBG) is formed by the government. It takes over 5 failed banks and is capitalized with GH¢450 million state funds; the government also issues ~GH¢5.76 billion in bonds to support CBG’s assumed liabilities. CBG is 100% state-owned, created to safeguard depositors and stability.
  
• July 2018: BoG annuls ~50% of ADB’s shares acquired by four investors using illegitimate funds. Those shares revert to state (BoG’s trust), effectively recapitalizing ADB through share annulment and re-nationalizing the bank.
  
• Dec 2018: Government incorporates Ghana Amalgamated Trust (GAT) as an SPV to recapitalize selected local banks that missed the GH¢400m. Parliament approves a GH¢2.0bn sovereign guarantee for GAT bond issuance. NIB and ADB are slated to benefit.
  
• Mar 2019: GAT’s GH¢2bn program is underway. Government emphasizes saving indigenous banks to maintain local ownership.
  
• Mid-2019: GAT invests equity in ADB – ~GH¢127 million for 11.3% stake – allowing ADB to meet capital requirements. NIB’s recap via GAT is delayed; NIB continues undercapitalized with promise of later support.
  
• 2020: COVID-19 shock. BoG provides industry relief; no new recapitalization yet. NIB and ADB stay afloat; CBG stable with state backing.
  
• 2021: Development Bank Ghana launched (separate DFI); talks of NIB/ADB restructuring persist informally.
  
• 2022: Ghana’s fiscal crisis; Domestic Debt Exchange (2023) announced, impairing bank assets. State banks incur capital losses from government bond haircuts.
  
• Sept 2023: Merger of NIB and ADB is proposed behind the scenes; Minority in Parliament blows whistle, accusing gov’t of a clandestine sale plan. Public controversy ensues. The minority suggests recapitalizing NIB by swapping government debt to equity instead. Merger/collapse plan put on hold amid backlash.
  
• May 2024: Cabinet approves NIB recapitalization plan. First GH¢400m tranche disbursed in May. Finance Ministry ties this to post-COVID recovery and IMF program goals.
  
• July 2024: IMF Second Review highlights NIB plan – first injection done May 2024 – and calls for a comprehensive reform of state-owned banks by Apr 2025. An independent diagnostic of NIB’s finances is commissioned.
  
• March 2025: New NIB MD engages government; 2025 Budget earmarks GHS2.2bn to fully capitalize NIB and ADB. NIB appeals for expedited release of remaining funds to meet turnaround targets.
  
• July 9, 2025: Government inaugurates new NIB Board. Finance Minister Ato Forson announces “a bold decision to recapitalize NIB,” promising professionalism and independence. He also inaugurates a new CBG Board, affirming plans to recapitalize CBG in 2026 after NIB’s rescue.
  
• July 10, 2025: Mid-Year Budget confirms government has injected GH¢1.4 billion into NIB so far, via cash and bonds. Finance Minister indicates ADB and CBG are next in line for recapitalization in 2026.

A Path to the Market?

Beyond internal reforms, many industry watchers argue that the logical next step for NIB would be to consider listing on the Ghana Stock Exchange. Unlike its peer, the Agricultural Development Bank (ADB), which listed nearly a decade ago to raise new capital and increase transparency (though the government remains the dominant shareholder), NIB remains wholly state-owned. That has allowed opaque governance and insulated it from market scrutiny. A listing could compel NIB to adopt higher disclosure standards, bring in private investors, and subject its strategy and management to shareholder accountability.

For advocates of reform, listing is not merely a financial maneuver but a governance test: it would show whether Ghana is truly willing to open up these legacy state banks to market discipline and reduce direct political control. It would also create a path for raising private capital in future, lessening the constant call on the public purse.

ADB’s own experience with listing offers both inspiration and caution. Its 2016 IPO was lauded as a milestone in banking-sector development, promising to diversify its shareholder base and impose market discipline. Yet subsequent years revealed the limits of that achievement. In 2018, the Bank of Ghana cancelled shares held by private investors whose funding sources failed scrutiny, effectively re-nationalizing a large part of the bank. While ADB met its regulatory capital requirements partly through support from the Ghana Amalgamated Trust (GAT), government remained the decisive shareholder, able to steer board appointments and strategy.

More recently, ADB faced fresh capital challenges due to the 2023 domestic debt restructuring, which sharply reduced the value of government bond holdings that underpinned its balance sheet. Though the bank is better capitalized than NIB at present, it is not immune to the same structural issues. In July 2025, when a new board was sworn in, the Finance Minister pledged the government would support full recapitalization in 2026, a reminder that the state remains both its primary backer and controlling influence.

Critics argue that unless ADB can deepen its governance reforms, even listing will not insulate it from being used as an instrument of policy lending divorced from commercial risk analysis. The lesson for NIB is clear: without credible governance, capital injections alone merely postpone the next crisis.

What unites the challenges facing both NIB and ADB is the fundamental tension between their development mandates and their need to operate as sound commercial banks. Governments have long justified their ownership on the basis that these institutions support sectors underserved by private banks, industry in NIB’s case, agriculture for ADB. But undercapitalization, political appointments, and policy-driven lending have too often turned them into unreliable partners even for those sectors, while undermining confidence in the broader banking system.

This latest round of recapitalizations has at least brought these problems into the open. By publicly quantifying the scale of support required and appointing new, experienced boards, the government is making a visible effort to address long-festering issues. But the true measure of success will not be in new capital alone. It will depend on whether these banks can demonstrate improved asset quality, reduced political interference, and real accountability.

For NIB in particular, the current recapitalization may be its best chance in a generation to reset its model, clean up its balance sheet, and prepare for a possible listing that would force it to operate with the same transparency and rigor as its private-sector peers. Whether Ghana’s leaders will have the political will to see such reforms remains an open question, one whose answer will shape the future of state-owned banking in the country.

Read More