When Ghana’s cedi plummeted in 2022, the government introduced an unconventional solution: the gold-for-oil programme. As the currency spiraled downward against the dollar and fuel prices soared past 20 cedis per liter, officials aimed to address the underlying issue—Ghana’s reliance on imported petroleum products that deplete its foreign reserves.
The strategy appeared simple: exchange gold for dollars to purchase oil, thereby reducing the demand for foreign currency and slowing the cedi’s fall.
However, economic theories and historical attempts suggest this may be more of a hopeful experiment than a definitive answer. While oil imports can impact exchange rates in the short term, research indicates their long-term effect on currency value is often minimal. This raises doubts about whether the gold-for-oil programme can truly stabilize the cedi as the government intends.
The challenge is considerable. Ghana spends around 400 million cedis monthly on oil imports, a significant drain on its reserves. The gold-for-oil programme, featured in the 2024 budget, seeks to alleviate this pressure. Yet, since its launch in January 2023, it only covers 30% of Ghana’s oil requirements, raising questions about its overall effectiveness amid broader economic struggles.
A deeper examination of the programme uncovers structural weaknesses that cast doubt on its sustainability. Most notably, there is no formal agreement between the Bank of Ghana and the Precious Minerals Marketing Company (PMMC)—a critical oversight highlighted by the Auditor-General in a 2023 report.
The Bank of Ghana has since assured that a framework is being finalized, and a separate account for Gold-for-Oil transactions will be established.
Additionally, the programme requires small-scale miners to sell their gold to the state-run PMMC. While this could ensure a steady gold supply for oil transactions, it also unintentionally promotes smuggling.
Many miners are bound by forward contracts to deliver gold to foreign buyers at a premium. Forced to breach these contracts due to the government’s directive, some resort to the black market to meet their obligations.
Regarding fuel prices, the evidence so far is mixed. Although prices at Goil stations have shown some stability, the Africa Centre for Energy Policy (ACEP) and energy analysts attribute this more to favorable global oil market conditions than to the gold-for-oil scheme. This suggests that any perceived benefits may be more coincidental than directly related to the programme.
Meanwhile, the programme’s lack of transparency has sparked political controversy. The Auditor-General’s concerns have been echoed by the opposition National Democratic Congress (NDC), which claims the deal is shrouded in secrecy and has vowed to audit it if they gain power. The parliamentary minority has called for further investigation, but the government maintains that the programme falls under the Bank of Ghana’s jurisdiction, not a typical government initiative.
Despite the controversy, the Gold-for-Oil programme remains a key issue in political campaigns. The current Vice President, who is a leading candidate in the upcoming elections, has promised to expand the programme if elected. This suggests a future where Ghana may increasingly rely on such barter-style arrangements to manage its foreign exchange needs, though whether an expanded programme would overcome the current challenges or exacerbate them remains to be seen.
Ghana’s gold-for-oil policy, presented as a bold measure to stabilize the cedi, now faces execution flaws, questionable effectiveness, and growing political discord. As its true impact remains uncertain, the policy may soon join the list of ambitious yet unsuccessful efforts to stabilize Ghana’s volatile currency.
