Commercial banks may assume responsibility for Gold for Oil policy - BoG

The Bank of Ghana (BoG) is proposing that commercial banks assume responsibility for the Gold for Oil initiative.

This move comes two years after the policy's launch and is being proposed by the BoG to enable it to concentrate on its primary objectives, including monetary policy and price stability.

The Central Bank Governor, Dr. Ernest Addison, addressing the Public Accounts Committee in Parliament, said that the policy is a key measure to enhance the nation's reserves, offering long-term benefits and contributing to Ghana's economic fortitude and growth.

He also advocated for the policy's continuation, crediting it with aiding the country during challenging times.

He cited the initiative as part of the Central Bank's commitment to purchasing gold to bolster national reserves, rather than overextending its operations with the Gold for Oil scheme.

“It is a programme that we recommend continuing because it helped us in the period of crisis. We only want to make sure that this is done by a commercial bank so that we can have time to focus on our operations as a central bank. So this is the discussion that we are holding going forward but the ability to be able to exchange our natural resources directly for oil when oil prices get out of hand, we think that it is a very innovative programme.”

“So it is really about the central bank spreading itself too thin by trying to add gold for oil to our business but we are fully focused on buying gold to build our reserves," he said.

Reiterating the policy's significance, Dr. Addison pointed out its role in reducing oil prices since its inception in 2022 and advised against its discontinuation, even as the foreign exchange market improves and oil prices decline.

He stated that the government should retain the policy as a contingency plan, given the unpredictable nature of market sentiments and potential future oil price hikes.

“This is an intervention that was very critical in the heat of the crisis. Yes, the foreign exchange market is functioning better than it was in 2022. Oil prices have come down much better than they did in 2022. The situation is much better now than it was in 2022, when the Gold4Oil policy was introduced.

“However, we think that it’s still an important programme for the government to have that option and to be able to empower commercial banks to undertake their activities. Should market sentiments change, which they do every day, we don’t know what will happen tomorrow. And if we wake up and find ourselves in a situation where the prices are driving the pumps to where they were again, the government has an option to fall on. It’s a very innovative instrument,” he said.

The Gold for Oil (G4O) policy is a strategic program launched by the government that aims to utilise the Bank of Ghana's Domestic Gold Purchase (DGP) program to support the importation of petroleum products into the country.

The initiative aims to free up foreign exchange resources and reduce pressures on the Bank of Ghana’s foreign reserves and the banking sector.

It also seeks to procure petroleum products at competitive prices through Government-to-Government arrangements.

The BoG purchases all gold produced and exported by companies with licensed small-scale concessions, including community mines.

This gold is then used to pay for oil supplies to Ghana, either through barter trade or via a broker channel.

ID/MA

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