The Bank of Ghana (BoG) will by the end of this week issue a new upward Annual Percentage Rates (APR) and Average Interest (AI) of commercial and universal banks. With both banks and non-bank financial institutions releasing new base rates due to the upward adjustment in the prime rate to 16 percent, the Central Bank as part of its move to make the APR known to the public, will release its second publication soon. The prime rate, which is the rate at which the Central Bank does its overnight lending to banks, was increased last week from the previous14.25 percent- a move that the Governor, Dr. Paul Acquah said was to curtail the shocks of external pressures on inflation. The Central Bank on February 29, 2008 released the first APR and AI which tracks the average interest rate on deposits, base rate, lending rate to retail customers and lending rate to businesses of 23 universal banks and three non-bank finance houses. Both corporate and retail customers are now to pay higher interest rates on loans taken from banks and non-bank financial institutions. Presently, the average base rate of the banks hovers around 18.5 percent but is expected to go up to 21 percent. Ecobank Ghana and Stanchart are among the latest banks that have adjusted their base rates upward to 23.25 and 23.24 percent respectively, meaning their average interest rates on lending to retail and corporate customers will go up. Other banks such as Barclays and Stanbic have done so as well. According to the BoG earlier research published in February, HFC and Agricultural Development Bank offered the best competitive lending rates of 23.39 and 23.58 percent respectively to individuals. National Investment Bank (NIB) and United Bank for Africa (UBA) however charged the highest of 41 and 38 percent respectively. On the highest average lending rates to businesses, BPI, Merchant and Cal Banks charged 39.05, 36.57 and 36.44 percent respectively. Conversely the cheapest loans to businesses on average were charged by ADB (22 percent), HFC (23.39 percent) and Unibank (24.83 percent). However, the concern by the Central Bank was the excessive interest spreads by banks in Ghana. The interest spread between lending and deposit rates was too wide as banks charge between four and six times as much on loans, as they offer for deposits. For instance, NIB offers the best deposit rate at 8.99 percent followed by Stanchart and First Atlantic Merchant Bank at 8.72 and 8.24 percent respectively. Interestingly, a survey carried out a couple of years ago by CITI FM, an Accra based radio station and supported by the BUSAC fund, a Danish advocacy initiative revealed that interest spreads demanded by Ghanaian banks are significantly wider than those in most emerging African economies. Source: Daily Guide