Bank of Ghana’s new head office: A misguided investment

The Bank of Ghana (BoG) is set to commission its new $250 million headquarters on Wednesday, November 20, 2024, with pomp and pageantry, a development that has sparked widespread discontent. While the building may signify progress (albeit phoney) to some, it is wrong timing, bad location and escalated costs raise serious questions about the priorities of Ghana’s central bank. We argue that the decision to invest heavily in this new head office after spending over $50 million on renovating its existing headquarters and only to abandon it for a new building, reflects a misalignment with the bank’s core mandate, especially given Ghana’s current severe economic challenges.

At a time when high inflation, rising unemployment, and public debt with haircuts are affecting the daily lives of Ghanaians, the Bank of Ghana’s choice to allocate substantial funds to a new headquarters with opulence is concerning. In our current situation that demands prudent spending and focused support for economic stability, this ambitious construction project amid the controversy it has generated, is not only extravagant but disconnected from the urgent priorities of Ghana’s people and economy at this time. The optics of this investment are troubling, as they suggest that the BoG is more interested in prioritizing institutional grandeur and splendour over monetary prudence, forethought and social responsibility.

Background to the New Head Office

The new corporate head office, scheduled for commissioning, has been a focal point of public scrutiny due to its dramatic and seemingly unchecked cost escalation. Originally budgeted at US$81.8 million, the project’s cost has ballooned to an estimated US$250 million, raising significant concerns about transparency, governance, and accountability. Despite widespread public concern, the BoG’s responses to queries about the project’s expenses have been unsatisfactory, fuelling suspicions of fiscal mismanagement and lack of accountability.

The project’s rapid escalation—from US$81.8 million to US$121 million within eight months, now projected to exceed US$250 million—has prompted serious questions. Key among them are: How did the budget triple in such a short period? What internal controls were in place to monitor these costs? Compounding these concerns, the BoG has declined to provide the current total cost, full procurement details, leaving the public with limited information.

Documents show that the procurement process began in January 2020, with the BoG obtaining approval to use a restricted tendering method. This approach, usually reserved for situations with limited supplier availability, restricts open competition, raising questions about compliance with Ghana’s Public Procurement Act of 2003, which mandates open tendering for major projects to ensure fairness and value for taxpayer money. The BoG’s choice of five shortlisted companies for the project—including Ronesans Holdings, an entity not registered with Ghana’s Registrar of Companies—further clouds the process, with questions around how these firms were selected and why reputable Ghanaian companies were excluded from consideration.

Concerns over procurement extend to the project’s management as well. The BoG awarded a single-sourced, US$3.45 million contract to MULTICAD for project management. Public Procurement Authority records indicate that approval for MULTICAD’s contract was granted in September 2021, despite the company only being officially registered in December 2021—three months after approval. This discrepancy prompts further questions: Why was this no-bid contract awarded, and how did an unregistered company qualify for such a crucial project?

As the new head office nears completion and occupation, these unresolved issues surrounding cost and procurement cast a shadow over its impending commissioning. The Bank of Ghana’s allocation of substantial funds to a project that has tripled in budget without full transparency reflects a deviation from the principles of financial prudence and public accountability. At a time when the BoG is charged with safeguarding Ghana’s financial stability, the opaque handling of this project’s budget and procurement processes underscores a governance crisis that warrants careful examination. The public is left wondering: How did a project initially budgeted at US$81.8 million evolve into one of the costliest developments in the bank’s history? And what, if any, measures will be taken to ensure accountability?

Bankruptcy of the Bank of Ghana and the Pursuit of Recapitalisation

The financial state of the Bank of Ghana (BoG) has deteriorated alarmingly in the past seven years, raising critical questions about its priorities, particularly in the context of its decision to invest over $250 million in a new corporate head office. Following successive losses of GHS 1.64 billion and GHS 793 million in 2017 and 2018, the BoG’s financial situation worsened significantly, with unprecedented losses of GHS 60.8 billion in 2022 and GHS 10.5 billion in 2023. These cumulative losses have left the BoG technically insolvent, struggling to meet its capital adequacy requirements and unable to sustain its financial obligations without external support.

To address this crisis, the BoG has signed a Memorandum of Understanding (MoU) with government as part of the International Monetary Fund (IMF) program that is currently underway, committing to early recapitalisation as part of Ghana’s broader economic stabilisation program. However, the central bank’s reliance on the Government of Ghana for recapitalisation creates a major challenge. The government, already heavily debt-burdened, lacks the fiscal capacity to inject the substantial capital needed to stabilize the BoG. This financial interdependency underscores a paradox: the institution tasked with ensuring monetary stability and supporting the financial sector now depends on a financially distressed government to shore up its operations.

Compounding these concerns is the BoG’s decision to allocate over $250 million to a new head office project, even as it grapples with insolvency. This extravagant expenditure raises serious questions about the bank’s priorities and its commitment to prudent financial management. How can a central bank facing a capital crisis justify such a significant investment in infrastructure when those resources could have been directed toward recapitalization or strengthening Ghana’s fragile financial sector? The decision suggests a troubling misalignment between the bank’s financial realities and its spending priorities, further eroding public confidence in its leadership.

The consequences of the BoG’s insolvency extend beyond its balance sheet. A financially weakened central bank undermines trust in its ability to implement effective monetary policy, maintain financial sector stability, and support economic recovery efforts. The investment in a costly new head office amid this financial crisis magnifies public concerns about governance failures and misplaced priorities within the BoG.

While recapitalization may temporarily address the BoG’s financial deficiencies, it is clear that structural reforms are needed to restore credibility and ensure sustainable financial management. Transparency, accountability, and a re-evaluation of spending priorities must be central to these reforms. The decision to prioritize a lavish infrastructure project during a period of insolvency must serve as a cautionary tale, prompting a shift toward more prudent and responsible management of Ghana’s central bank. The cumulative GHS 66 billion loss made since 2017 has not only weakened the bank’s balance sheet but also reflects a missed opportunity to address the critical needs of the struggling financial sector.

Economic Misalignment with National Priorities

Ghana faces pressing economic challenges, with high inflation, rising unemployment, and mounting public debt impacting citizens nationwide. Inflation surged to over 54% in 2022, driving up living costs and pushing many Ghanaians into financial hardship. Meanwhile, public debt levels have placed significant pressure on the government’s ability to fund critical social services, and unemployment remains a major concern, affecting economic stability and public morale. Within this context, institutions like the Bank of Ghana are expected to exercise fiscal prudence and demonstrate solidarity with the people.

Investing over $250 million in a new head office during such an economic crisis appears to be at odds with this expectation of fiscal responsibility. Central banks, especially those in developing economies, must align their resources and actions with national economic priorities. Given Ghana’s current economic conditions, the new BoG headquarters project could be seen as an unjustifiable expense that neglects the urgent needs of the nation. Resources directed toward an opulent office could have supported initiatives to stabilize the financial sector through equity support for local banks, enhance financial literacy, or fund economic programs with more immediate and tangible benefits for the population.

The perception of this project as an act of public extravagance threatens to erode the BoG’s credibility and public trust. As citizens struggle with daily costs and limited economic opportunities, the sight of a lavish new bank headquarters may appear out of touch with the challenges faced by ordinary Ghanaians. At a time when public confidence in the bank is crucial, this project sends a message of disconnection from the financial hardships experienced by the public the BoG serves.

Operational Inefficiencies

In addition to these financial losses, the BoG’s decision to spend over $50 million on renovating its existing headquarters, only to abandon it for a new building, further exemplifies governance inconsistencies. Renovations in 2019 and 2023 improved areas like the banking hall and visitor facilities, implying that the bank intended to continue using the site. However, it later justified the new project by citing seismic safety concerns, raising questions about foresight in planning and resource allocation. If structural integrity was a known issue, why proceed with expensive renovations only to abandon them? This pattern of spending and then discarding points to operational inefficiencies and raises legitimate concerns about the bank’s governance practices.

If the Bank of Ghana were privately owned, shareholders would likely demand a clear, strategic use of funds with a focus on long-term value. The decision-making process demonstrated by the BoG’s governors and board suggests a disconnection from the accountability and fiscal discipline that private ownership would impose. This lack of prudent governance has not only led to financial inefficiency but also undermined the bank’s role as a model of effective financial stewardship for the entire nation.

Environmental and Social Responsibility Concerns

The environmental impact of the new headquarters also warrants consideration. The building is located in a high-density area surrounded by other office buildings, which may lead to significant increases in daily traffic and, consequently, carbon emissions. Hundreds of BoG employees will commute to the new site each day, adding to urban congestion and negatively impacting the local environment.

In light of global efforts toward sustainable development, the BoG’s lack of emphasis on environmental considerations in its new headquarters project reflects a missed opportunity to demonstrate environmental leadership. A central bank has a responsibility not only to uphold fiscal and monetary stability but also to model socially responsible behaviour, including environmental stewardship. Opting for a more sustainable, environmentally friendly design or location could have aligned the bank’s actions with broader sustainability goals, reinforcing its commitment to both economic and social responsibilities.

Financial Resources Misallocation

The $250 million allocated to the Bank of Ghana’s new headquarters could have been directed to far more pressing needs that would directly benefit Ghana’s struggling financial sector and economy. Following Ghana’s Domestic Debt Exchange Program (DDEP), the financial landscape has been severely disrupted, leaving local banks, fund management companies, and savings and loans institutions grappling with unprecedented challenges. Many of these institutions are now facing insolvency, and the financial sector as a whole is struggling to recover stability. In response, the Bank of Ghana, with government support, recently borrowed $250 million from the World Bank to establish a Financial Stability Fund aimed at providing critical support to this beleaguered sector.

This newly borrowed $250 million could have been augmented with the funds earmarked for the BoG’s new headquarters, creating a more substantial stability fund that could ease liquidity pressures and restore confidence in Ghana’s financial institutions. Such a fund would directly support the operational viability of banks and financial services companies, safeguarding jobs, stabilizing savings, and restoring public trust in the financial system.

Alternative uses for these funds could also include much-needed financial literacy programs, which are essential to empower citizens to make sound economic decisions, save responsibly, and reduce reliance on costly financial products. Additionally, with ongoing financial inclusion challenges, particularly in rural areas, reallocating resources to these efforts would help ensure broader access to banking and financial services across the nation.

Another priority could have been the BoG’s own digital currency initiative, the e-cedi, which remains incomplete. If successfully launched, a digital currency could bolster financial inclusion, lower transaction costs, and create an accessible platform for underserved populations. By channelling funds toward the completion of the e-cedi or similar modernization projects, the BoG would strengthen the nation’s financial infrastructure, enhancing resilience and adaptability in a rapidly digitalizing world.

In choosing to prioritize a costly building project over initiatives that directly impact public welfare, the Bank of Ghana demonstrates a troubling detachment from the immediate needs of the financial sector and the broader economy. During a time of economic crisis, Ghanaians expect their central bank to exercise fiscal prudence and align its investments with the pressing needs of the public and national priorities, not to pursue projects that reflect institutional grandeur over genuine fiscal and social responsibility.

 A Legacy of Misguided Investment

In summary, the decision by the Bank of Ghana to construct a new $250 million headquarters during a period of economic difficulty illustrates a concerning departure from sound financial prioritisation. This project reflects a misalignment with the principles of monetary prudence, responsible governance, and environmental stewardship that the BOG should exemplify.

A new government must thoroughly investigate this irresponsible conduct and hold to account anyone who is implicated in any form of abuse of public trust in undertaking such a wasteful project using public funds.

To restore its reputation and uphold public trust, the BoG must reassess its approach to resource allocation and refocus on initiatives that support economic stability and social welfare.

Going forward, the BoG’s Board and leadership should prioritize transparency, monetary discipline, and sustainability in all its undertakings. By realigning with these principles, the Bank of Ghana can work to rebuild public confidence and demonstrate a true commitment to serving Ghana’s long-term financial needs instead of sumptuousness and wasteful behaviour.