Ghana's VAT Revenue Increases by 33.6% as Banking NPLs Climb to GH¢20.7bn

Ghana's economic landscape presents a tale of two fronts: robust consumer spending is fueling a massive jump in tax revenues, while the banking sector grapples with a rising tide of bad loans. Meanwhile, a major state bank's stock is hitting record highs. We break down the conflicting signals in the latest economic data.

Market Snapshot: Forex, Fuel, and a Surging Stock

• USD/GHS: ¢12.56 (BOG Interbank Selling Rate, Oct 06)

• Diesel Prices: Gail (¢14.20), MISA Energy (¢13.79)

• Investor's Insight: GCB Bank shares have skyrocketed to an all-time high, boasting an astounding 137.83% Year-to-Date (YTD) return, underscoring strong investor confidence in the financial institution.

Domestic VAT Collections Jump 33.6%, Signaling Robust Consumer Demand

In a powerful indicator of economic recovery, Domestic VAT collections for the first five months of 2025 rose by 33.6% to GH¢8.31 billion, up from GH¢6.22 billion in the same period last year.

This surge, reported in the Bank of Ghana's July Monetary Policy Report, is supported by a parallel boom in retail sales, which grew by 35.7% cumulatively from January to May 2025.

Key Drivers:

• Stronger Consumer Demand: The data points to a significant rebound in household spending and private consumption.

• Improved Tax Compliance: The robust growth suggests enhancements in tax administration and compliance.

• Stable Economy: The uptick is fueled by stable prices and moderate growth in disposable incomes, reflecting a gradual recovery in domestic demand.

This positive momentum highlights growing economic confidence, though sustaining it will require continued fiscal discipline and policies that support household purchasing power.

Banking Sector NPLs Rise to GH¢20.7 Billion Despite Improving Ratio

The stock of Non-Performing Loans (NPLs) in the banking industry increased by 1.3% to reach GH¢20.7 billion in June 2025, up from GH¢20.4 billion a year earlier.

This presents a complex picture for the sector. While the total value of bad loans grew, the NPL ratio, a key measure of asset quality, actually improved, falling to 23.1% from 24.2% a year ago. This decline is because the growth in total loans outpaced the growth in NPLs.

Sectoral Breakdown and Concerns:

• High-Risk Sectors: The commerce and finance sector recorded the highest NPL ratio at 27.0%, up significantly from 19.7% a year ago.

• Private Sector Dominance: The private sector accounts for 96.4% of all NPLs, as it is the largest recipient of bank credit.

The rising stock of NPLs raises concerns about its potential impact on lending rates, as banks may price the risk of defaults into their interest charges. In response, the Bank of Ghana has directed commercial banks to blacklist willful defaulters and restrict further credit to them, with a cap of a 10% NPL ratio by December 2026.

Oil Marketing Companies Under Investigation for Inflated Fuel Data

The Chamber of Oil Marketing Companies (COMAC) has launched an investigation into two of its members, Moari Oil and Yass Petroleum, over allegedly manipulated petroleum consumption data.

This follows a recent report showing unprecedented fuel consumption growth in regions like the Upper East (80.23%) and Upper West (21.7%). The Chamber finds these figures "alarming" and suspects they may have been inflated to unfairly claim more from the Unified Petroleum Pricing Fund (UPPF).

The UPPF, a levy on every litre of fuel, is designed to subsidize transportation costs to ensure uniform fuel prices across the country. The Board Chairman of COMAC, Gabriel Kumi, has called for the fund to be scrapped, citing ongoing abuse.

Ghana's economy is sending mixed signals. The soaring VAT and retail sales figures paint a picture of a confident consumer and a recovering private sector. However, the underlying stress in the banking system, evidenced by the growing NPL stock, serves as a cautionary note. For sustained growth, managing financial sector risks while fostering a transparent and competitive market, whether in banking or fuel distribution, will be crucial.

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