According to directives issued by Ghana’s Minister of Lands and Natural Resources, Samuel A. Jinapor, large-scale gold mining companies will be required to “sell 20% of all refined gold in their refineries to the Bank of Ghana.” The gold-for-oil scheme is part of the Ghanaian government’s plan to prevent further depletion of the country’s foreign exchange reserves.
The Bank of Ghana will use cedis to pay for gold
After it was revealed that Ghana plans to use gold to buy petroleum products, the country’s Minister of Lands and Natural Resources, Samuel A. Jinapor, announced on November 25 that beginning in 2023, large-scale mining companies will sell “twenty percent (20). % of all refined gold in its refineries to the Bank of Ghana.” Payments for gold will be made in cedi, the local currency, and will be at an “undiscounted spot price”.
According to a Facebook post shared by Ghana’s Vice President Mahamudu Bawumia, the Bank of Ghana (BOG) and the Precious Minerals Marketing Company (PMMC) will work to ensure that mining companies comply with the directive. As for Ghana’s so-called community mining schemes (CMS), the government said they would be required to “sell their gold products to the government through the PMMC”.
To ensure compliance, Jinapor stipulated that “mining licenses for CMS must contain a clause requiring licensees to sell their gold production to the government.” According to the directives issued by Jinapor, all licensed small-scale gold miners will be subject to conditions similar to those applicable in community mining schemes.
Ghana’s dwindling foreign exchange reserves
Meanwhile, in an earlier post announcing Ghana’s oil-for-gold plan, Vice President Bawumia insisted that such a move would help preserve the country’s dwindling foreign exchange reserves. He added:
The exchange of sustainably mined gold for oil is one of the most important economic policy changes implemented in Ghana since independence. If we implement it as intended, it will fundamentally change our balance of payments and significantly reduce the continued devaluation of our currency by increases in the prices of fuel, electricity, water, transport and food.
Bawumia will effectively address one of the main factors behind the rapid depreciation of the Ghana cedi by reducing or eliminating the use of the US dollar when importing petroleum products. According to a report by Bitcoin.com News, the rapid depreciation of the Ghanaian currency since the beginning of 2022 has made it the world’s worst performing currency.
While Jinapor’s instructions to gold mining companies were framed as a channel to help “local gold refiners acquire gold reserves from PMMC to support their operations”, some followers on Bawumia’s social media platform criticized the proposed gold-for-oil policy.
Facebook user Naji Alhassan, who reacted to the post of the vice president of Ghana, said: “These are not good measures. These are showcases to please the bourgeois class. The best way to go is to have at least 50% of our gold and also a gold refinery to refine our gold. Soon the bourgeoisie will exhaust all the gold the Bank of Ghana will buy. We want pragmatic measures.”
However, some of Bawumia’s followers like Mohammed Hashiru welcomed the move which they claimed would stop “imperialists from using their worthless documents to control, manipulate and destroy our economies”.
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