The sharp fall in Treasury bill rates to 6.45 per cent for the benchmark 90-day bill signifies a turning point in the country’s financial services sector.
For years, the government securities have provided banks, pension funds and individual investors with a reliable source of income, which often pushes them to lock in most of their investible funds there, while denying the productive sectors of the economy, especially the private sector, access to these funds to run and expand their businesses.
Today, that model is under strain, forcing a rethink of how capital is deployed and how returns are generated.
The drop in yields has been steep. From levels above 28 per cent at the end of 2024 to just over six per cent now, the shift reflects broader efforts to stabilise the economy, reduce borrowing costs and restore fiscal balance.
In many ways, this is a positive development. Lower yields reduce the government’s debt servicing burden and create space for public investment.
However, the impact on investors and financial institutions is significant. Pension funds and retirees who depend on fixed-income securities for stable returns are seeing their earnings decline.
For banks, the challenge is even more structural. A large share of deposits has traditionally been invested in treasury bills, providing predictable interest income with minimal risk. As yields fall, that income stream is shrinking.
This shift exposes a long-standing weakness in the country’s financial system: the overreliance on government instruments. When returns on treasury bills are high, there is little incentive for banks to expand lending to the private sector. Now, the environment is changing and the financial institutions must adapt.
The most immediate response is likely to be a search for alternative revenue streams. Some banks may try to increase fees and charges, but this approach carries risks. Excessive charges could place additional pressure on customers and draw regulatory scrutiny. It is not a sustainable solution. Already, bank customers are calling for their borrowing costs to decrease in response to the favourable environment and the significant cut in the policy rate to its lowest since October 2021.
A more fruitful approach involves expanding access to credit for businesses and households. Increased lending to sectors such as manufacturing, agriculture and services can support economic growth, leading to repeat business and becoming a new source of income for banks.
However, this approach requires discipline. Poor credit assessment could lead to a rise in non-performing loans, undermining financial stability. It is the conviction of the Graphic Business, however, that banks must look in this direction because this is what banking is primarily about.
The declines in treasury bill rates also have broader market implications. As fixed-income returns weaken, investors may begin to shift funds into equities, gold or foreign-currency assets.
This could boost activity on the Ghana Stock Exchange, but it also introduces new risks, particularly if short-term sentiments drive investment decisions.
For policymakers, the current trend presents both an opportunity and a challenge. Lower interest rates can stimulate economic activity by reducing the cost of borrowing.
The Graphic Business, however, urges the managers of the economy to ensure that inflation remains under control so that real returns do not turn negative.
The paper also believes that the expected easing of the Monetary Policy Rate could reinforce the downward trend in yields, further encouraging lending and investment. At the same time, our observations point to the government’s likely return to the bonds market for longer-term financing, testing investor appetite in a lower-rate environment following a painful Domestic Debt Exchange Programme (DDEP).
Ultimately, the Graphic Business believes that the decline in treasury bill rates signals a transition. The era of enjoying easy returns from government securities is fading. In its place must come a more dynamic financial system that supports private-sector growth and investment in the productive sector.
Banks and investors who adapt quickly to the change will find new opportunities; those who do not risk being left behind in a changing market landscape.
Source:
www.graphic.com.gh
