Adnan Adams Mohammed
All things being equal, Ghana is expected to take delivery of first consignment of ‘Gold for Oil’ a new oil trade payment agreement within the second week of January 2023.
Precisely, between 10th and 12th of January, the first consignment of the finished product is going to arrive in this country coming from the United Arab Emirates. All the necessary agreements needed have been executed.
The good news is that, a lot more interest had been shown by other oil traders.This will help in stabiliszing the local currency against the international trading currencies, especially the U.S dollar, as it will reduce the pressure on the cedi. Oil import is one of the largest commodity the country uses excess foreign currencies to import and mostly create scarcity of the U.S dollar anytime Bulk Oil Distributors (BDCs) are paying for their consignment.
“This move by the government will take some pressure off the dollar and make it available to other people to avoid increasing pressure on the cedi” , Deputy Energy Minister, Andrew Egyapa Mercer reiterated in an interview last week after a hint by the Vice President on his facebook wall.
Dr Mahamudu Bawumia announced on Facebook on Thursday, December 22, 2022, that the country will take its first consignment of oil under the gold-for-oil policy in January 2023.
“I am happy to announce that the Government of Ghana has concluded the arrangements for the operationalisation of the ‘Gold for Oil’ policy.”
“Consequently, the first oil products under the policy will be delivered next month (January 2023)”.
“My thanks to the Minister for Energy, Minister for Lands and Natural Resources, Governor of the Bank of Ghana, the Chamber of Mines, PMMC and BOST for their leadership in the operationalisation of the Government’s Gold for Oil Policy. God bless our homeland Ghana”, he said.
The government had been working on the new policy to buy oil products with gold rather than US dollar reserves for the past few weeks.
The move, announced earlier by Dr Bawumia, is meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.
Ghana’s Gross International Reserves stood at around $6.6bn at the end of September 2022, equating to less than three months of imports cover.
That is down from around $9.7bn at the end of last year, according to the government.
If implemented as planned for the first quarter of 2023, the new policy “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency”, Dr Bawumia said a few weeks ago.
Using gold would prevent the exchange rate from directly impacting fuel or utility prices as domestic sellers would no longer need foreign exchange to import oil products, he explained.
“The barter of gold for oil represents a major structural change,” he added.
While countries sometimes trade oil for other goods or commodities, such deals typically involve an oil-producing nation receiving non-oil goods rather than the opposite.
Ghana produces crude oil, but it has relied on imports for refined oil products since its only refinery shut down after an explosion in 2017.
In the 2023 budget presentation to parliament, last week, Mr Ofori-Atta warned that the West African nation was at high risk of debt distress and that the cedi’s depreciation was seriously affecting Ghana’s ability to manage its public debt.
Consequently, according to the Legislator. Hon Egyapa Mercer, significant progress had been made as part of efforts to import cheap fuel to Ghana.
The Gold for Oil barter deal will see the country getting cheaper fuel in exchange for Gold.
Prices of fuel are expected to go down further after the cheap fuel is introduced into the market.
Mr. Egyapa Mercer explained that the deal is intended to “compliment what it is that the private sector who are operators within the space are providing.”
According to him, this move by the government will take some pressure off the dollar and make it available to other people to avoid increasing pressure on the cedi.
It will be recalled that in November, Vice President Dr. Mahamudu Bawumia announced the deal to ostensibly tackle the country’s “dwindling foreign exchange reserves” and also to address rising prices of petroleum products.
He said the government expects “this new framework to be fully operational by the end of the first quarter of 2023.”
Fuel prices at the time of the announcement were high at most fuel pumps across the country, with consumers appealing to the government for an intervention.
Subsequently, a government delegation was dispatched to Abu Dhabi to negotiate a deal to bring petroleum products onto the Ghanaian market.
The delegation was scheduled to meet the Chief Executive of the Abu Dhabi National Oil Company (ADNOC), Sultan Al Jaber for a possible deal.
