Is the new Bank of Ghana office building the catalyst to attaining the BoG's mandate?

The Bank of Ghana commissioned a new office building recently. The new building was financed and constructed by the Bank at a time when its performance was continuously short of its core mandate.

All-in-all, the construction of the new office building, which is not expected to advance the attainment of the Bank’s mandate in anyway by itself, seems to have been undertaken at a time that all policy energies should have been garnered towards reducing inflation and depreciation of the cedi, and bolstering the banking system to support growth and reduce unemployment.

Thus, the management of the Bank of Ghana seems to have taken decisions that are incongruent with their mandate and, thus, puts them out of touch with a significant majority of Ghanaians. 

Background

On 20 November 2024, the Bank of Ghana (BOG) commissioned its new office building (The Bank Square) situated opposite the Accra Regional Hospital. The BOG indicates that the need for a new office building was conceived in the 1990s because its now retired location (1 Thorpe Road in the central business district) was congested. In pursuit of this, efforts were made between 2012 and 2016 at securing a suitable plot of land with no commitments made in that regard.

However, when a structural integrity test conducted by the firm ESPCo on its 1 Thorpe Road office building after 2016 found the building unfit for purpose, the BOG acquired a plot of land situated opposite the Accra Regional Hospital in 2020 for the construction of a new office building.

The project site was handed over to the contractor in March 2021. The building comprises four sub-buildings that will accommodate over 2,500 staff, has public banking facilities, a currency museum, conference and press amenities, a 1,500-seater auditorium, and a rooftop terrace. It was constructed at an estimated cost of US$250 million. 

During the commissioning of the office building, the Governor of the BOG outlined some attributes of the new building. They include bringing under one roof all of the Bank’s multiple offices in Accra to allow better harmonization and streamlining of operations, reduce costs, and improve efficiency.

Architecturally and structurally, the attributes include the use of sustainable design concepts such as energy and water conservation, recycling, and needing minimal maintenance; being the tallest building in Ghana; having the most sustainable EDGE advanced structure of its size in the sub-region - symbolling the BOG’s enduring presence and authority in the financial landscape that helps position Ghana as a leading force in Africa’s financial ecosystem and an economic powerhouse on the world stage.

The Governor indicated that the new building would help push the BOG to new frontiers of central banking and demonstrate what we, as a nation, can achieve. The Governor also stated that the central bank remained committed to delivering on its mandate, and that the new building should enable it to do so effectively. 

BOG’s performance shortfalls

Let us remind ourselves of the mandate of the BOG. The mandate is to formulate and implement monetary policy to achieve price stability, ensure a sound banking and payment system, contribute to the promotion and maintenance of financial stability, and support government policy to promote economic growth.

Now, what is the likelihood of the new office building in enhancing the achievement of this mandate? For analysis, we use variables that encapsulate this mandate. We examine these variables at end-December 2016 and then at end-December 2023. The choice of this period is supported by the reasoning that if the current BOG management is found to have made progress on these variables over the seven-year period, then there is some chance that the new office building could help facilitate further progress in achieving its mandate. Please note that we are unable to evaluate the longer-term robustness of the new office building to earth movements, as this falls outside the realm of economics.

We measure price stability by consumer price inflation and movements in the external value of the cedi. Year-on-year headline inflation, food inflation, and nonfood inflation at end-December 2016 were 15.4%, 9.7%, and 18.2% respectively; these worsened to 23.2%, 28.7% and 18.7% respectively at end-December 2023. At the same time, the cedi, which depreciated by 9.7% relative to the US dollar at end-December 2016, depreciated by 27.8 % relative to the US dollar at end-December 2023 - worsening the domestic currency’s external value over the period. Turning to a sound banking system and financial stability, the non-performing loans (NPL) ratio which stood at 17.3% at end-December 2016 (before the financial sector clean up) worsened to 20.6% at end-December 2023 (at a time when the financial sector cleanup had been done). Now, a good indicator of the BOG’s support to government policy to promote economic growth is growth in private sector credit. Growth in private sector credit, which stood at 17.8% at end-December 2016 worsened to 8.4% at end-December 2023.

Concluding Remarks

Given the all-round worse performance by the BOG over these seven years – particularly when one considers that the performance in 2023 was helped by haircuts and moratorium on external debt repayments, one wonders how a building with all the normative attributes enumerated by the Governor during the commissioning will facilitate the achievement of the Bank’s mandate if the Bank does not enhance its technical competence?

No doubt the Bank has some good caliber staff, but the question is whether they are optimally placed to enhance productivity. Secondly, does the current recruitment practice of the Bank (with staff increasing from 1,911 to 2,234 within this seven-year span) allow for the hiring of the best caliber staff (as was done under the previous management) or party and other affiliations drive the recruitment process? Thirdly, will the monetary expansion associated with the US$250 million used in the construction of this new office building make the inflation fight easier or harder going forward?

These are some of the considerations that the BOG will need to take account of in its bid to better achieve its mandate, while bearing in mind that so far as the ordinary man continues to reel from the vagaries of high inflation, high depreciation of the cedi, unstable financial sector, high cost of credit amongst others —that are all detrimental to growth—constructing a world-class building and celebrating same amounts to tickling their own fancy, and makes them out of touch with the reality of a significant majority of Ghanaians.

The writer is an economist

Email:  aapaduwa@outlook.com