Suspension of dividend payment by banks and SDIs …Implications and effects 


The Bank of Ghana has recently instructed banks in Ghana not to pay dividends to shareholders for the 2019 and 2020 financial years because of the coronavirus (COVID-19) pandemic and its effects.

Banks in Ghana would have normally declared and paid dividends as approved by their shareholders at the Annual General Meetings (AGMs) around this time of the year in Ghana, but that is not to be because of such instructions from the central bank – the Bank of Ghana giving as a reason for such a decision how banks would be negatively impacted if they (the banks) should dole out such monies. But has the central bank (BoG) thought of the implications and effects this decision will have on beneficiaries of the dividends?


Implications and Effects

Individual and corporate shareholders will not have any income through their investments in these banks. But it must be noted that the majority of individual shareholders are pensioners who have invested their hard-earned monies in such companies (banks) through the Ghana Stock Exchange.

Corporate entities, including Mutual Funds and Unit Trusts, SSNIT and other asset management companies, including Pension Funds, are also to lose their investment incomes, which will negatively impact their returns to investors and thereby make them unpopular – a situation which began even before the emergence of COVID-19.

SSNIT, in particular, will be negatively impacted heavily, since a major part of its investment income or returns of its investment portfolio come from these banks (both listed and unlisted); thereby affecting future incomes or payments to prospective and existing pensioners.

It must be noted that SSNIT, in particular, already has problem with its investment portfolio because of its investment holdings in some non-performing companies (e.g. the abattoirs, Aluworks Ltd., PBC Ltd., Cocoa Processing Co., some Hotels, etc.); likewise, the investment incomes of other fund management companies running the Second (2nd) and Third (3rd) tiers of pension funds – all these affecting pensioners’ incomes in the near-future.

The Ghana Stock Exchange (GSE) will also see its trading activities going down, since the most vibrant and active listed companies on the exchange are the banks. This situation can even lead to most players on the exchange pulling out.

Again, this decision of the Bank of Ghana will see the Ghana Stock Exchange (GSE) performing poorly for two years running, because of the uncertainty of how trading activities in these listed banks will be vis-a-vis the Financial Stock Index and the overall GSE Index. And, could this possibly lead to the GSE having problems joining the proposed broader West Africa Stock Exchange (WASE) platform?

We wait to see!!!


It may seem that the banks themselves collaborated with the BoG in this decision-making, as they would also want to avoid, for any reason, paying these monies to shareholders as they normally would wish but most times cannot avoid. Meanwhile, in denying the shareholders their due, members of the Board of Directors and management (of these companies) have already taken their ‘piece of the cake’ in terms of fees and allowances for members of BoDs, and salaries and allowances for the management.

Also, it is worth noting that the BoG’s directive would, impliedly, be telling the major external shareholders – normally the parent companies – to “think twice” before pushing more money into their subsidiaries in Ghana (as their expected investment returns cannot be guaranteed).

This directive from the BoG has come at the wrong time, and definitely will have various negative effects on the investing public.

In light of the above stated reasons, it would be better for the BoG to reconsider its directive to the banks in order for shareholders of these companies (banks) to have their due and be cushioned financially in a time like this.

The BoG’s directive will definitely create a vicious circle within the economy and make investments in the country a no-go area, taking into account how so many citizens have lost their investments to the collapsed financial institutions post the financial sector clean-up.

Hopefully, the BoG will listen this time round and take a more humane approach in this matter. Shareholders/investors have already suffered too much through losing their investments in the collapsed financial institutions- vis the Microfinance institutions, Savings & Loans Companies, other Asset Management companies, and the delisted former UT Bank.


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