The Chief Operations Officer of Dalex Finance, Joe Jackson, has said the country must not lose sight of the impact the GHc 5.7 billion bond for the purchase and assumption of all deposits and assets of collapsed banks on Ghana’s liquidity challenges.
Customers with fixed deposits with rates as high as 25 percent at the defunct Beige Bank, UniBank, Construction Bank, Sovereign Bank, and Royal Bank are having to wait for at least three years until they can reap some benefits from their investments.
“Consolidated Bank takes over and says to everybody that whether you like it or not, I am converting those instruments, those short-term instruments into a five-year bond at a rate of 7.5 percent,” Mr. Jackson noted on The Big Issue.
Because of this, given Ghana’s 9.3 percent inflation rate, he said “everyone has been forced to take a haircut.”
This is compounded by the absence of a secondary market for this bond, where investors would have been able to cash out by selling securities they already own.
“So if I say I can’t take this, I will rather lose some money and cash out, there is no secondary market. So what has happened is that GHc1.1 billion of short-term supply of cash has been taken out the market by this action. So when you see the liquidity crisis, it is on one hand, fear and panic which is causing the demand to rise and we should be asking that there should even be an injection of funds. Coupled with that is that the supply has been cut by GHc 1.1 billion.”In effect, investors are in default rolling over their principals and interests for the first three years of the bond, and Mr. Jackson remarked that “what has happened is that GHc 1.1 billion of short-term supply of cash has been taken out of the market by this action.”
Though he acknowledged that the liquidity crisis has been worsened with fear and panic, he added that “coupled with that is that, the supply has been cut by GHc 1.1 billion.”
This has also translated into a “horrendous liquidity crunch” in the microfinance sector because a number of them have their monies locked up in the banks for at least the next three years.
Mr. Jackson said these developments were an “unwritten crisis” and the “equivalent of financial Ebola.”
“If you see any institution that has been paying any depositors regularly, take your heart to them because most of the institutions are unable to do that.”