Gold for Oil: Ghana’s Plan To Buy Petroleum Products With Gold And Concerns Among CSOs Explained

Gold for Oil: Ghana’s Plan To Buy Petroleum Products With Gold And Concerns Among CSOs Explained

At the height of the fuel price volatility in November 2022, vice president Dr Mahamudu Bawumia announced an uncommon move by the government to purchase imported oil using gold. Already some civil society organisations have thumbed down the idea. But what does the bold move entail and is it feasible?

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One of the many triggers of the current economic crisis that has hit Ghana is the cedi’s depreciation against the dollar and other major trading currencies. A scarcity of dollars in Ghana shot up its price, with $1 dollar selling as high as GHS15 at forex bureaus at one time. The cedi has lost about 50% of its value to the dollar this year.

The depreciating cedi pushed up the price of refined petroleum products imported into Ghana because local oil marketing companies (OMCs) purchase them with dollars. Between January to October 2022 the price of diesel, petrol and LPG has more than quadrupled, further increasing headline inflation.

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Bawumia announced the gold for oil barter plan by the government.
Vice president Dr Mahamudu Bawumia speaks at a programme in Ghana. Source: Facebook/@mbawumia
Source: Facebook

Getting to the end of November 2022, vice president Mahamudu Bawumia announced an unusual plan by the government to ditch the dollar in getting imported oil for Ghana. He disclosed in a post on his Facebook page that, rather than our US dollar reserves, gold mined in Ghana would be used to buy the oil products.

“The barter of sustainably mined gold for oil is one of the most important economic policy changes in Ghana since independence. If we implement it as envisioned, it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with its associated increases in fuel, electricity, water, transport, and food prices,” the vice president stated.

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The plan has failed to make sense to civil society organisations and experts. After many criticisms and questions, the vice president tried to clarify.

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This Is What We Know So Far About The Gold-for Oil Barter Agenda

Gold bars and refined oil.
Stock photos of gold bars and an unrecognisable engineer turning on off vent of gas pump.
Source: Getty Images

The deal has not started yet. It is not expected to start until the latter part of 2023 but Ghana officials have disclosed some great responses have already been received from some oil exporting countries. Head of financial markets at the Bank of Ghana, Steve Opata, said Ghana is already partnering state-owned oil refining powerhouse, Emirates National Oil Co. (ENOC), towards implementing the barter arrangement.

Kabiru Mahama, one of the economic advisers to the vce president Dr Bawumia has said all mining companies in Ghana have been ordered to sell one-fifth of the precious metal they refine to the country’s central bank starting from 2023.

This directive is aimed at building up bullion reserves, which in turn will be paid in exchange as price for imported fuel. Ghana has also been vigorously putting the word out to attract more interested countries. According to Mahama, by October 2023, all of Ghana’s oil product needs would be swapped for gold.

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Gold-For-Oil Barter Faces Resistance From Civil Society In Ghana

Duncan Amoah, Bright Simons and Benjamin Boakye
L-R: Duncan Amoah, Bright Simons and Benjamin Boakye. Source: UGC, Facebook/@copecghanaofficial
Source: UGC

Government’s grand agenda to move away from the use of dollars to purchase petroleum products has not been received well by the civiil society organisations and some experts. It has largely been described as untenable and a poor approach to holding the cedi depreciation.

The Africa Centre for Energy Policy (ACEP) fears the barter deal could easily breed corruption. ACEP’s Benjamin Boakye told the Business & Financial Times (B&FT) that the move by the government sounds mysterious at best.

“We can always stress-test policy before announcements. Gold for oil is weird,” he said.
To him, the gold-for-oil barter does not sound feasible because “the common denominator is the dollar. Total gold export was $4.8billion, just about how much we needed to import refined products.”

The ACEP executive director also questioned how the government can raise enough dollars to buy all the gold produced in Ghana. He also wondered whether the government can really buy all the gold produced in cedis.

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The Chamber for Petroleum Consumers Ghana (COPEC-GH) also described the move by the government as a big joke. COPEC-GH’s executive secretary, Duncan Amoah said it would make more sense for government to pump money into revamping the Tema Oil Refinery (TOR).

“We have more than enough crude oil for our market if our focus is on stabilising the market from external shocks that put pressure on the cedi,” he told

Nana Amoasi VII of the Institute for Energy Security (IES) shares a similar view.

“Our monthly import bill for finished petroleum products is roughly $380million. Can government get gold to the tune of $380million every month for exchange of finished products?” he quizzed.

Bright Simons of IMANI Centre for Policy and Education thinks just like other countries, Ghana’s plan will fail.

"Oil and gold prices do not move in tandem. Gold and dollars are however increasingly more correlated than used to be the case. So much so that gold is increasingly a poor hedge against the dollar. The intriguing joint effect of both facts is the result that Ghana’s plan may in fact be quite risky," he wrote in a article posted on his blog.

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The saying that desperate times call for desperate measures is true about Dr Bawumia’s “weird” announcement. The vice president announced the plan at a time the cedi was taking a major beating hit from the dollar. But now the cedi has been appreciating gradually, and with so many questions raised, it is likely that by October 2023 the vice president and government would have abandoned the move altogether. In any case, time will tell.

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