Why Can Ghanaian Savings Rates Be Higher Than Canadian Savings Rates?

It is one of the first things Ghanaians abroad notice, and one of the most frequent questions we receive. A savings product in Accra advertises a rate several times what a Canadian bank offers. Something looks wrong with that picture.

Nothing is wrong with it. The two numbers are compensating for entirely different things.

Nominal rates compensate for inflation first#

The most important part of any interest rate is not reward — it is compensation for the money losing value while it is lent out.

If prices in a country are rising quickly, anyone lending money for a year needs a high rate simply to end up no worse off. If prices are barely moving, a low rate does the same job.

Country A: 15% rate, 12% inflation

Real return ≈ 3%

Country B: 4% rate, 2% inflation

Real return ≈ 2%

The gap between 15% and 4% looks enormous. The gap between 3% and 2% — which is the gap that actually affects the saver — is small. Most of the difference in headline rates is inflation compensation, not extra reward.

The second component is risk#

The remainder reflects what a lender is being asked to accept.

Ghana's government borrows at higher rates than Canada's because investors demand compensation for a higher probability of disruption to repayment — a judgement supported by the 2022–23 domestic debt exchange, in which domestic bondholders did in fact take losses.

Currency risk is layered on top. A foreign investor lending in cedis must be compensated for the possibility that the cedi weakens against their home currency before they are repaid. If the currency weakens by more than the rate premium, their return in their own currency is negative regardless of the nominal rate.

So which is better?#

It depends on a question about you, not about the countries.

If you live in Ghana, earn cedis and spend cedis, the relevant comparison is the Ghanaian real return: your nominal rate minus Ghanaian inflation. The Canadian rate is irrelevant to you, because you were never going to spend Canadian dollars.

If you are a Ghanaian abroad, or saving toward foreign-currency expenses, then currency movement is part of your return and must be included. A high cedi rate followed by a large depreciation can produce a worse outcome than a modest foreign rate.

What this explains about Ghana#

It explains why falling inflation is genuinely good news for savers even though it comes with falling nominal rates. If inflation falls faster than rates, real returns improve — even as the advertised number gets smaller.

It also explains why the very high nominal rates of Ghana's crisis years were not the opportunity they appeared to be. Inflation at the time was running high enough that, for many savers, the real return was negative. The number on the poster was large. Purchasing power was falling anyway.

That is the whole lesson, and it applies well beyond this particular comparison.