Ghana and Emirates National Oil Company are negotiating a barter agreement that would allow the West African country to pay for fuel with gold.
According to Kabiru Mahama, a vice president’s economic adviser, the administration secured a “tentative” arrangement with the oil company based in Dubai.
As it builds up its bullion reserves to be used to import fuel and lessen demand for dollars after its currency fell 57% this year, Ghana, Africa’s second-largest producer of gold, ordered large mining companies last week to sell 20% of the metal they refine to the central bank starting on January 1.
In a phone interview on Friday, Mr. Mahama stated, “We’re open to any foreign oil trading company that is interested.”
“All of our oil product demands would be converted to gold beginning in October.”
The barter system is seen as a solution for Ghana, whose economy is struggling to stabilize, to stop the decline of the cedi, the worst-performing currency among those monitored by Bloomberg.
The nation’s foreign exchange reserves are being depleted and inflation is being fueled by the sinking cedi.
In the meantime, President Nana Akufo-administration Addo’s plans to ask foreign bondholders to accept losses on their investments in order to open the door for an International Monetary Fund bailout after losing access to global capital markets this year due to skyrocketing debt and loan-service costs.
An email and a phone message seeking comment received no immediate response from ENOC. A request for comment sent through email was also not quickly answered by Dubai’s government, which owns ENOC.
The gold trade has a long history with Dubai. Critics assert that regulatory gaps allow bullion that has been smuggled out of conflict zones and used for money laundering to be exchanged in the city, but Dubai’s commodities exchange has refuted those assertions.
The United Arab Emirates’ nationally run anti-money laundering reporting system was expanded to include gold dealing last year.
According to Steve Opata, director of financial markets at the Bank of Ghana, “ENOC is interested in giving us refined oil for gold.”
“We will give them the equivalent in gold, based on the amounts they have agreed to provide us. This program is between governments.
Ghana imports goods worth $10 billion a year, 48%
The government anticipates that exchanging gold for refined crude will aid in the recovery of its gross international reserves, which fell to $6.7 billion at the end of October from $10.8 billion a year earlier, or barely 2.9 months’ worth of imports.
As a result of the falling currency, inflation increased to 40.4% in October. The central bank responded by increasing borrowing costs by 250 basis points to 27%, the highest level in more than 19 years.
The gold will be purchased in cedis by the Bank of Ghana from the mining firms. For the first time in 60 years, Ghana started purchasing gold last year to increase its foreign exchange reserves. The most recent action increases the buying.
In a Facebook post, Bawumia stated that “if we implement it as envisioned, it will radically impact our balance of payments.”
Dollar demand from oil importers The depreciation of the cedi and rises in the cost of living, including higher prices for petrol, transportation, and utilities, he claimed, are caused by depleting foreign exchange reserves.