The successes so far chalked by the government’s innovative Gold for Oil policy have vindicated the positions of the Vice President, Dr Mahamudu Bawumia and the Energy Minister, Dr Matthew Opoku Prempeh.
Dr Bawumia who has been driving the policy from the presidential level, and Dr Opoku Prempeh who is the implementation anchor at the ministerial level, have persistently drummed home the inherent benefits of the programme and promised that the government will do everything possible to ensure that Ghana reaps maximum benefits from it.
According to Dr Bawumia, since its operationalisation, the Gold for Oil policy has stabilised the exchange rate and is expected to save the country approximately $4.8 billion annually.
Also speaking at the 2023 energy sector retreat, Dr Opoku Prempeh stated that his ministry will religiously monitor every step in the Gold for Oil value chain to ensure that the purposes for which the programme was birthed, are not defeated.
The Gold for Oil policy has been credited as one of the measures that have led to stable fuel prices. The Head of Financial Markets at the Bank of Ghana, Steven Opata, said the government’s policy had resulted in increased competition among traders of refined petroleum products, leading to reductions in prices at the pumps.
As a result of the implementation of the policy, petroleum prices, which hovered averagely at GH¢15 in January 2023, now sells at about GH¢12 on the average and are expected to further go down in the coming months.
As of May 29, 2023, the price of gasoline in Ghana was GH¢13.2 per litre, roughly $1.19, indicating a decrease from the prices in December 2022 .
This has brought relief to motorists as they are able to work within their budgets. Also, the increases in transport fares that characterised the year 2022 have died down, bringing relief to passengers.
Furthermore, the drop in fuel prices has impacted on the drop in inflation, since fuel prices are a major driver in economic activities. From a high of 54.1 per cent in December, 2022, inflation has consistently dropped, reaching 41.2 per cent in April. This signifies a positive outlook for the economy.
At a time West Africa’s biggest economy, Nigeria is struggling to deal with surging oil prices , which has led to two states in Africa’s most populous nation of 221 million people cutting down working days to three in a week, many see Ghana’s Gold for Oil policy as a significant step in bringing relief to Ghanaians and driving economic growth.
Achieving policy objective
The implementation of the Gold for Oil programme commenced with the arrival of the first consignment of about 40,000 metric tonnes of diesel on January 15, 2023, valued at about $40 million.
The National Petroleum Authority (NPA) in a statement said the prime objective of the programme is to use additional foreign exchange resources from the Bank of Ghana’s Domestic Gold Purchase programme to provide foreign currency for the importation of petroleum products for the country which currently stands at about $350 million per month.
Payment for oil supply is to be done in two channels: by way of barter trade where gold is exchanged for oil or via broker channel where the gold is converted into cash and paid to the supplier.
The first consignment of 40,000 metric tonnes of diesel constitutes about 10 percent of the country’s combined monthly demand for petrol and diesel.
According to the NPA, the plan is to gradually increase imports under the programme to constitute about 50 per cent of the country’s total demand for petrol and diesel. The implementation of the programme will ease pressure on the dollar (the currency used for the importation of petroleum products) and avoid the occasional increases in petroleum prices resulting from the depreciation of the cedi against the dollar.
In addition, the programme will ensure that the cost of importing the products from international oil traders will be comparatively cheaper. The consequent reduction in foreign exchange pressures and premiums charged by international oil traders as well as efficiency gains from the value chain will lead to lower ex-pump prices in the country.
The Group Chief Executive Officer and Managing Director of GOIL Plc, Kwame Osei-Prempeh, described the policy as outstanding. He said his outfit is benefiting from the deal because the policy is good.
He, therefore, dismissed allegations in certain quarters that the programme has negatively affected some Oil Marketing and Bulk Distributing Companies.
In an interview with Joy Business at the 54th Annual General Meeting of the company, Mr Osei-Prempeh explained that measures have been put in place by the shareholders of the company to take advantage of the deal to protect the interest of consumers and partners.
“We are not kicking against it. It has really taken some of our stress because at a point we needed to push for dollars and all but now it is fine,” he said.
A former Group Chief Executive Officer of GOIL, Patrick Akorli has also described the programme as innovative.
Speaking with Citi News, Mr Akorli said the success of the policy depends on the honesty of the government.
He stated:” It is a very innovative one. What the government is saying is that we need about $400 million almost every year [to get oil], so if we have gold and the gold can be exchanged at a given price to get dollars dedicated to the oil downstream market, then at least we are assured that prices will be stable.”
Top Gold Producer boost
Meanwhile, the Gold for Oil policy is set for a major boost after Ghana recaptured the position of Africa’s biggest gold producer from South Africa.
Industry watchers believe that increased gold production gives the indication that the nation is well-positioned to pursue the policy, which is seen as a game-changer for Ghana’s economy.
The Russia war in Ukraine has upended the fragile economic recovery from the COVID-19 pandemic, setting in motion a crisis that is devastating global energy markets, the United Nations has stated.
Consequently, the government of Ghana has been looking for avenues to overcome the challenges. Experts who spoke to The Thunder over the weekend said Ghana will see a rebuilding of its gold reserves, which will enhance the trading of oil products.
Reuters reported on June 9, 2022 that Ghana recorded a 32 per cent increase in gold production in 2022, enabling the country to win back the top spot from South Africa as the largest gold producer in Africa.
Ghana lost the position to South Africa in 2021 after a drastic fall in output. Quoting Joshua Mortoti, the President of the Ghana Chamber of Mines, the report said gold output rose to 3.7 million ounces in 2022 from 2.8 million ounces the previous year, driven by growth in the output of both large and small-scale sectors.
“The large-scale gold sub-sector recorded its highest output in the country’s history in 2022,” Mortoti said.