The Rise and Fall of Ghana’s Gold for Oil Initiative

In recent developments, the Bank of Ghana (BoG) reported staggering financial losses, amounting to GH¢317 million in 2023 and escalating to GH¢1.82 billion in 2024. These figures are a sobering reminder of the challenges faced by regulatory institutions in navigating economic turbulence. Have you ever wondered how decisions like these ripple through a nation’s economy?

The central bank committed roughly GH¢4.69 billion to the Gold for Oil (G4O) initiative. In a bid to stabilize fuel prices and bolster the strength of the cedi, this decision led to a heart-wrenching 45% loss on investment. When the stakes are this high, every decision counts, and hindsight often brings clarity. Yet, was this approach the best course of action given the circumstances?

A Grim Termination

The BoG officially put an end to the Gold for Oil programme on March 13, 2025, citing excessive financial losses as its primary justification. “The scale of the losses made continuation of the programme financially untenable,” remarked a central bank official in the wake of the announcement. Have we learned from past mistakes, or are we destined to repeat them?

Background: The Fuel Crisis and Dollar Shortage

The inception of G4O can be traced back to December 2022, during a period marked by skyrocketing fuel prices and a critical shortage of foreign exchange. At that point, diesel hit GH¢23 per litre, while petrol hovered around GH¢17 at GOIL filling stations. It was a difficult time for many Ghanaians. Just imagine driving to fill your tank, only to see prices soar dramatically.

The depreciation of the cedi and dwindling foreign reserves led the government and the BoG to explore innovative solutions. They opted to purchase petroleum products in the international market using gold instead of U.S. dollars. A bold strategy, indeed—one that raised eyebrows but offered a semblance of hope for a country grappling with economic challenges.

An Innovative Approach to Save Foreign Reserves

The fundamental idea behind the programme was strikingly straightforward: reduce the monthly demand for dollars—particularly driven by oil imports, which cost the nation around $400 million monthly. By using gold as an alternative currency, the central bank aimed to alleviate pressure on the cedi. The initiative seemed like a lifeline, but was it too good to be true? This innovative approach begged questions about long-term viability.

Gold Accumulation: Foundation Laid in 2021

Before G4O took shape, the BoG had embarked on a domestic gold purchasing programme as early as June 2021. Collaborating with the Precious Minerals Marketing Company (PMMC) — now branded as GoldBOD — the Bank aimed to acquire gold dore from local miners in exchange for cedis, refining it abroad to bolster Ghana’s official reserves. Can a nation’s strength truly rest on the gold it possesses?

The original target was ambitious: to double Ghana’s gold reserves within five years. Back then, reserves stood at 8.74 tonnes. Fast forward to 2025, and the stockpile had exceeded 32 tonnes. In less than four years, the reserves nearly quadrupled, driven largely by meticulous planning and execution. Yet, amidst success, could there be a hidden cost?

A Costly Experiment: The Merged Strategy

Ultimately, G4O became entwined with the broader strategy for domestic gold accumulation. While the gold reserves surged, the oil component proved to be unsustainable. The phrase “all that glitters is not gold” rings especially true when the source of supposed prosperity becomes burdensome.

With the programme ultimately shelved, it leaves behind a tale of contradictions—a tremendous growth in gold reserves clashing with staggering financial losses. The pursuit of energy price stability and cedi protection presented an ambitious agenda but led to a reality check that many had feared.

In conclusion, the Gold for Oil initiative may have fallen short, yet it serves as a poignant reminder of the complexities involved in economic policymaking. Isn’t it fascinating how a bold idea can transform into a cautionary tale? As Ghana moves forward, the lessons learned will be invaluable, shaping future endeavours and perhaps preventing similar pitfalls. The quest for stability and growth is fraught with challenges, but perhaps it is through those challenges that innovation truly arises.

Edited By Ali Musa
Axadle Times International – Monitoring