Ghana: Gold-for-oil project to alleviate hardships, says PMMC boss

The decline in the price of fuel – from ¢13.6 per litre to ¢12.3 per litre – in the last two months, will have a ripple effect on people’s personal economies, he says.

“We are focused on efficiency in the implementation so that people will see and feel the impact in their pockets.”

Under the G4O programme, Ghana aims to secure competitively priced oil by selling gold to ease pressure on the local currency, reverse rocketing fuel prices, and fixing the balance of payment problems.

By March, more than 60,000 ounces of gold valued at over $97m had been purchased from local mines, but the PMMC is targeting at least 160,000 ounces of gold, valued around $300m per month, which could help purchase about 50% of the country’s monthly oil demand.

Kick-starting the G4O programme was the shipment of 41,000MT of oil from the United Arab Emirates in January for $40m. Another 155,000MT arrived at the end of February, with expectations that the number will continue to rise to meet the expected threshold.

Official figures put Ghana’s annual gold output in 2020, 2021 and 2022 at four million, 2.8 million and three million ounces respectively.

According to vice president Mahamudu Bawumia, Ghana will make annual savings of $4.8bn from the programme.

Skeptics

But the executive director of Africa Centre for Energy Policy, Ben Boakye, has challenged the claim about the programme being responsible for Ghana’s recent fuel price drop.

He previously told The Africa Report that: “If you know how the pricing mechanism works, you will note that it has nothing to do with the gold-for-oil programme. It’s because prices on the international market have dropped and this affects petroleum products in the market.”

Oil price data posted by Bloomberg confirms that between March and April, the price of crude on the international market dropped from about $86 per barrel to $73 per barrel. After peaking again on 10 April, the price appears to be steadily trending downwards.

Moreover, questions about the risks of corruption in the barter arrangement, the uncertainty of getting the required gold volume, and skepticism around whether or not gold is a good store of value abound.

Incidents around smuggling may also jeopardise the programme, but the PMMC hopes to establish gold-buying offices to circumvent these types of issues.

Gold mining regions

“We are opening up buying centres across the major gold mining regions. We have a centre in Kumasi, Tarkwa which happens to be the gold capital of Ghana,” says Awuah.

“We are also opening a buying centre up north because we see that there is a lot of gold being mined up north and the lack of our presence there is giving room for our neighbours from Burkina Faso to enter into that market, purchase that gold and simply walk across the border… Another centre is also coming up in Takoradi. We are hurriedly working at having a presence there.”

As for the IMF: “Regarding our involvement in the government’s gold-for-oil programme, we will conduct a thorough analysis of the risks that the BoG is facing under the programme and report the findings to the board,” the IMF staff report read.

“There are still challenges but we will continue to find ways of running an efficient programme,” says Awuah.

The government has since made commitments to ensure full transparency in implementing the programme.