You lack understanding of monetary policy issues - Financial analyst to Togbe Afede

Financial analyst Dr. Kwaku Dawson has criticized the former board chairman of the National Investment Bank, Togbe Afede XIV, for his lack of understanding of monetary policy issues.

He argues that the recent publication by Togbe Afede XIV seeking to blame the Central Bank for its monetary policy decisions is unfounded and lacks merit.

"I think Togbe got it all wrong. He doesn’t understand the operations of the central bank even though he once served as a board member. His opinion on BoG benefiting from high-interest rates is baseless.

“...High-interest rates raise the cost of open market operations and lead to large losses. But that’s the price central banks pay to achieve stable prices. Central banks are not commercial banks and do not seek profits,” he explained.

The financial analyst continued, “Has Togbe seen the downward trend in the inflation rates? This is due to the effective open market operations of the Bank. Open market operations are part of the monetary policy tools to control inflation, but executing them comes at a cost. Bank of Ghana is focused on reducing inflation because low and stable inflation helps businesses and entrepreneurs, including him, to plan for future activities. Central Banks, by their operations, are supposed to provide a public good, and that public good is low and stable inflation which comes at a cost.”

“As a financial analyst, I have observed that hikes in policy rates help to control inflation, but I also know that increasing the rate leads to monetary losses. The important thing is that it is helping to bring inflation down. The losses do not impact the operation of central banks. This is basic in central banking operations,” Dawson added.

On the former Board Chair’s tenure at the NIB, Dr. Dawson alleged that Togbe Afede XIV resigned based on the current predicament of the bank and therefore has no moral right to criticize the managers of the Bank of Ghana.

“NIB became a struggling bank with future financial viability questionable, posing a serious threat to its solvency. The combination of the bank’s overall net risk, capital, and earnings made it highly vulnerable to financial viability and solvency. Additionally, 50% of loans were non-performing, while earnings and key performance indicators were weak,” he stressed.

Dawson further alleged that “Investments were placed in non-bank financial institutions, savings and loans, and Securities and Exchange Commission (SEC) regulated institutions, totaling GH¢370 million. This led to a total of GH¢162.9 million in non-performing investments of the principal amount.”

The financial analyst also claimed that Togbe Afede XIV's Board lacked oversight, failing to submit or publish audited financial statements for 2016 and 2017.

This, he claimed, was a breach as the Board also made over-the-counter limits and violated payment regulations.

In conclusion, Dr. Dawson alleged that the Board approved management payments for business promotion expenses without following the bank's policy.