Deloitte West Africa: Bank of Ghana’s 27% Policy Rate Decision to Anchor Inflation and Support Economic Stability

Deloitte West Africa has endorsed the Bank of Ghana’s decision to maintain the policy rate at 27%, stating that the move will help anchor inflation expectations despite ongoing short-term economic pressures.

The professional services firm believes that holding the policy rate steady will not only bolster inflation control but also support the recovery of the cedi and ensure external sector stability.

In its economic brief, which compared the monetary policy rate (MPR) decisions in Ghana and Nigeria, Deloitte emphasized that the unchanged rate would boost business and consumer confidence in the medium term. The Bank of Ghana’s Monetary Policy Committee (MPC) justified its decision, citing elevated inflation despite improvements in the stability of the Ghanaian cedi and a generally stable domestic economy.

Deloitte expressed optimism that the current policy rate would continue to foster economic growth and prevent inflationary pressures from worsening. It further noted that the Ghanaian economy is expected to see growth driven by rising business confidence and increased economic activities. The firm also highlighted that the strengthening of the local currency would help stabilize prices, providing additional support to economic stability.

Nigeria’s Economic Challenges: Higher Fuel Prices and Tightened Monetary Policy

In contrast, Deloitte reported that Nigeria’s MPC raised the policy rate to 27.50%, marking the sixth increase since January 2024, amid rising inflationary pressures. The firm pointed to higher fuel prices as a significant factor driving up production and distribution costs, alongside persistent exchange rate pressures and elevated core inflation.

Deloitte warned that these factors could further squeeze disposable incomes, reduce money supply, and lead to tighter credit access. This, in turn, could increase borrowing costs, loan defaults, and further strain the Nigerian economy.

Despite these challenges, Deloitte expressed confidence in the resilience of Nigeria’s banking system, citing its ability to withstand both external and internal macroeconomic pressures.

As both countries navigate complex economic landscapes, Deloitte’s analysis underscores the importance of maintaining a steady policy rate to support economic stability and long-term growth.