Cedi Appreciation: “Gold For Oil” NOT The Same As “Gold For Reserves”

The recent appreciation of the Cedi against the US dollar and other trading currencies has led to many arguments and credit-taking competitions.

For political expediency and partisan interest, some have credited the Cedi recovery to:

1. Gold for Oil Policy spearheaded by Dr. Mahamudu Bawumia.
2. GoldBod Initiative spearheaded by Mahama’s government.
3. External Influences such as US-China Tariffs war and trade tensions.

However, it is important to state certain facts without any form of political interest as follows:

1. The “Gold for Oil” is not the same as “Gold for Reserves”.

“Gold for Oil” was implemented by Akufo-Addo’s government as a specific programme where gold was used to pay for oil imports with the sole objective of reducing foreign exchange dependency as well as ensure the stabilization of fuel prices on the Ghanaian market. That is, domestically produced gold in Ghana was used to pay for oil imports instead of using foreign currency especially US Dollars.

The net effect of “Gold for Oil” policy reduce dependence on foreign trading currencies for oil imports, reduce the impact of exchange rate fluctuations on fuel costs, and potentially ensure the stability of fuel prices on the domestic market.

In nutshell, Bawumia’s “Gold for Oil” was a specific policy aimed at providing solution to a specific economic challenge of Fuel Pricing Stability. That is, the policy was an innovative barter arrangement aimed at exchanging domestically procured gold for imported petroleum products thereby reducing the need for US Dollars to buy fuel from the world market. The Gold for Oil was a specific need for the Bulk Distribution Companies(BDCs), and the deal involved the Bank of Ghana purchasing gold from small-scale gold operators in Cedis, which the Central Bank then sells on the world market for US Dollars. The dollars realised from the sales was used by Bank of Ghana to purchase the oil or in some instances, swapped the gold for the oil.

On the other hand, “Gold for Reserves” is a continuous policy and comprehensive financial strategy implemented by Bank of Ghana and other Central Banks, aims at managing a country’s overall foreign exchange portfolio.

The rationale behind “Gold for Reserves” Policy is to provide a stable exchange rate regime (that is building foreign exchange reserves), stable store of value, buffer against inflation, investments-diversification, and act as a hedge against financial instability.

The “Gold for Reserves” policy has been in existence long before the introduction of “Gold for Oil Policy”, and both were running concurrently until the current Bank of Ghana Governor, Dr. Johnson Asiama announced the outright suspension of the “Gold for Oil” policy, citing:
(a). Policy implementation challenges
(c). Operational challenges
(d). Financial losses to the State.

It is important to state that, the “Gold for Reserves” Policy is still in place and has always been in operations, and that, the recent GoldBod initiatives seems to only enhance the effectiveness and efficiency of the operationalization of “Gold for Reserves” Policy of Bank of Ghana. With or without the GoldBod, the Bank of Ghana would still continue to operate its traditional “Gold for Reserves” Policy.

Was “Gold for Oil” Policy able to addressed the depreciation of the Cedi against the US Dollar and other trading currencies since its implementation from 2022 to March 2025? The answer to this question is BIG NO.

Was the “Gold for Oil” Policy able to ensures the stability of domestic fuel prices in Ghana between 2022-March 2025? The answer to this question is Partially Yes.

Unbiased Verdict
The recent appreciation of the Cedi against the US Dollar and other trading currencies are largely due to the following reasons:

1. Policy Reforms, Fiscal Policy Objectives, and Monetary Policy objectives of Mahama’s government.
2. Favorable global economic conditions especially the recent US-China trade tensions(Tariffs War between US and other countries especially in relation to China).
   Both US and China are significant trading partners of Ghana.
3. Ongoing Fiscal Reforms(Fiscal discipline programme) under Ghana-IMF programme, and the credit has to be given to former President Akufo-Addo, Ken Ofori-Atta, former Minister of Finance, and Hon. Dr. Mohammed Amin Adam, former Minister of Finance.

It is without doubt that, the $ 3 billion IMF Extended Credit Facility has restored some considerable level of economic confidence, with an anticipated $370 million tranche hitting the account of Bank of Ghana soon.

For the records, Mahama ended his first term with IMF cushion from 2015-2016, and his second term too is being cushioned with IMF from 2025-2026.

4. Ongoing Ghana’s Debt Restructuring Programme, and the credit has to be given to former President Akufo-Addo, Ken Ofori-Atta, former Minister of Finance, and Hon. Dr. Mohammed Amin Adam, former Minister of Finance.

During the 2025 Budget Speech delivered on 11th March 2025, Hon. Dr. Ato Forson stated that, “Mr. Speaker, you may recall that the government(Akufo-Addo’s government) commenced the debt restructuring programme in 2022 to restore debt sustainability and economic stability. Mr. Speaker, as of now, the restructuring process is approximately 93 percent completed completed. The remaining 7 percent relates to debt of US$2.7 billion owed to commercial creditors. We(Mahama’s government) are committed to completing the remaining debt restructuring as soon as possible”(Sections 101, 102 & 103 and Pages 23-24 of the 2025 Budget Speech).

It is very worthy to state that, the Ghana’s debt restructuring has provided a necessary vital breathing room for Mahama’s government, with the next major payment due in July 2025.

5. The recent S&P Global Ratings Upgrade of Ghana’s credit status from selective default to CCC+, and the credit has to be given to President John Mahama, and Hon. Dr. Ato Forson, Minister of Finance.
6. The recent direct market interventions by the Bank of Ghana, in the forex injection of $490 million in April 2025, and the credit has to be given to Dr. Johnson Asiama, Governor of Bank of Ghana.
7. World market pricing of Ghana’s gold at $ 3, 400 per ounce, and cocoa at $ 10, 000 per ton.
8. Establishment and operationalization of the Ghana Gold Board(GoldBod) even though UP Tradition Institute still has some strong reservations about the monopolistic creation of the GoldBod.
9. The decline of the US Dollar Index(DXY) leading to the weakening of the dollar against other trading currencies.
10. The increased gold reserves of Bank of Ghana, valuing at approximately $3.6 billion by 30th April 2025 kind courtesy the combined positive effects of “Gold for Reserves” Policy(with credit to Bank of Ghana), suspended “Gold for Oil” Policy(with credit to Dr. Mahamudu Bawumia), and the operations of the GoldBod(with credit to President John Mahama, especially the requirements that, 20% of gold export proceeds should be converted to Ghana Cedis before dollar exchange as well as the decision of Mahama’s government through GoldBod to purchase 20% of gold from large-scale mining companies).

The recent recovery of the Cedi is a combination of several factors, and therefore, it is very pedestrian for anyone to single out one initiative as the causality of the Cedi appreciation.

Based on the available facts and data, it fair to state that:

1. Mahama’s government(President John Mahama, Hon. Ato Forson, Minister of Finance, and Dr. Johnson Asiama, Governor of Bank of Ghana) contributed 50% to the recent appreciation of the Cedi.
2. Akufo-Addo’s government(President Akufo-Addo, Hon. Ken Ofori-Atta, Hon. Mohammed Amin Adam, and Governor Ernest Addison) contributed 25% to the recent appreciation of the Cedi.
3. IMF-Ghana Programme, and CCC+ credit status of Ghana by S&P Global Ratings contributed 15% to the recent appreciation of the Cedi.
4. Favorable Global Economic conditions such as US-China Tariffs war contributed about 9% to the recent appreciation of the Cedi.
5. “Gold for Oil” Policy and other domestic factors contributed about 0.5-1% to the recent appreciation of the Cedi.

Therefore, the role of the suspended “Gold for Oil” Policy to the recent Cedi appreciation is highly insignificant on a scale of 100%.

In conclusion, to safeguard the sustainable appreciation of the Cedi against the US Dollar and other trading currencies, the UP Tradition Institute would like to respectfully recommend to the Mahama’s government or future government of the New Patriotic Party(NPP) to consider the:

1. Enactment of “Ghana Gold Reserve Act” under the direct control and supervision of the Bank of Ghana.

The “Ghana Gold Reserve Act” would protect the currency system of Ghana, provides guidelines/regulations for the better use of the monetary gold stock at the Bank of Ghana.

The operations/functionality of the “Ghana Gold Reserve Act” would NOT be the same as the Ghana Gold Board(GoldBod). The GoldBod would contribute to the “Gold for Reserves” Policy whereas the “Ghana Gold Reserve Act” would ensure the proper international best practices as far as the monetary use of gold stock at Bank of Ghana is concerned.

2. Establish the “Exchange Stabilization Fund(ESF)” under the “Ghana Gold Reserve Act”, to control the value of foreign currencies in relation to the performance of the Cedi.
3. Amend the Foreign Exchange Act, 2006(Act 723) to include the authority of the President of the Republic of Ghana to establish the gold value of the dollar or any foreign currency by proclamation through the Ministry of Finance without unnecessary approval from the Bank of Ghana.

……Signed….
Razak Kojo Opoku(PhD)
Founding President, UP Tradition Institute.