The government’s unique ‘Gold for Oil strategy’ appears to have justified the viewpoints of Vice President Dr Mahamudu Bawumia and 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 repeatedly emphasised the program’s inherent benefits and promised that the government would do everything possible to ensure that Ghana reaps the most significant benefits from it.

According to Dr Bawumia, the Gold for Oil programme has stabilised the currency rate and is estimated to save the economy $4.8 billion each year since its implementation.

Speaking at the 2023 energy sector retreat, Dr Opoku Prempeh emphasised that his ministry will closely monitor every Gold for Oil value chain stage to ensure that the program’s goals are not undermined.

Positive effects

The Gold for Oil scheme has been praised for helping to keep gasoline costs constant.
According to Steven Opata, Head of Financial Markets at the Bank of Ghana, the government’s approach has encouraged competition among dealers of refined petroleum products, resulting in lower pricing at the pumps.

As a consequence of the policy’s implementation, petroleum prices, which averaged GH15 in January 2023, currently sell for around GH12 on average and are likely to fall further in the following months.

As of May 29, 2023, the price of petrol in Ghana was GH13.2 per litre, or approximately $1.19, reflecting a reduction from December 2022 pricing.

Relief

Motorists are relieved because they can now stick to their budgets.

Furthermore, the hikes in transit fares that defined 2022 have subsided, providing respite to passengers.

Furthermore, because fuel costs are a significant generator of economic activity, the decline in inflation has been influenced by the drop in gasoline prices.

Inflation has steadily declined from a peak of 54.1 per cent in December 2022 to 41.2 per cent in April. This indicates that the economy is on the mend.

Significant step

Many see Ghana’s Gold for Oil policy as a significant step in bringing relief to Ghanaians and driving economic growth at a time when West Africa’s largest 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 working days to three in a week.

Achieving policy objective

The first cargo of around 40,000 metric tonnes of fuel, worth at approximately $40 million, arrived on January 15, 2023, kicking off the Gold for Oil project.

According to the National Petroleum Authority (NPA), the primary goal 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 country’s importation of petroleum products, which currently stands at around $350 million per month.

Payment for oil supply is to be made in two ways: through barter trading, in which gold is traded for oil, or through a broker channel, in which gold is transformed into currency and paid to the provider.

The initial cargo of 40,000 metric tonnes of fuel represents around 10% of the country’s total monthly consumption for petrol and diesel.

According to the NPA, the program’s goal is to steadily boost imports to meet roughly half of the country’s overall demand for petrol and diesel.

The program’s adoption will relieve pressure on the dollar (the currency used to import petroleum goods) and avoid the periodic rises in petroleum prices caused by the Cedi’s devaluation against the dollar.

Furthermore, the project would ensure that the cost of purchasing items from foreign oil traders is relatively lower.

Lower ex-pump prices in the country will result from a reduction in foreign exchange pressures and premiums imposed by international oil merchants, as well as efficiency benefits from the value chain.

Outstanding move

Kwame Osei-Prempeh, Group Chief Executive Officer and Managing Director of GOIL Plc praised the policy.

He claims that his company benefits from the arrangement since the policy is sound.

As a result, he denied complaints in some quarters that the scheme had harmed some Oil Marketing and Bulk Distributing Companies.

In an interview with Joy Business during the company’s 54th Annual General Meeting, Mr Osei-Prempeh highlighted that mechanisms have been put in place by the company’s shareholders to take advantage of the arrangement in order to defend the interests of customers and partners.
“We’re not going to fight it. It has definitely relieved some of our tension since there was a time when we needed to push for dollars and all, but now everything is perfect,” he remarked.

Patrick Akorli, a former Group Chief Executive Officer of GOIL, has also characterised the scheme as creative.

Mr Akorli told Citi News that the success of the initiative is dependent on the government’s honesty.

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, Ghana has reclaimed the rank of Africa’s largest gold producer from South Africa, giving the Gold for Oil strategy a significant boost.

According to industry observers, the rising gold output indicates that the country is well-positioned to follow the strategy, which is viewed as a game-changer for Ghana’s economy.

According to the United Nations, Russia’s conflict in Ukraine has upended the fragile economic recovery from the COVID-19 epidemic, triggering a crisis that is wreaking havoc on global energy markets.

As a result, the Ghanaian government has been exploring for ways to solve the obstacles.

According to experts who talked to The Thunder over the weekend, Ghana’s gold reserves will be rebuilt, which would boost oil trading.

According to Reuters, Ghana increased gold output by 32% in 2022, allowing the country to reclaim the top rank as Africa’s largest gold producer from South Africa.

After a sharp drop in productivity, Ghana lost its rank to South Africa in 2021.

According to Joshua Mortoti, President of the Ghana Chamber of Mines, gold output would increase to 3.7 million ounces in 2022 from 2.8 million ounces the previous year, driven by expansion in both big and small-scale industries.

“The large-scale gold sub-sector recorded its highest output in the country’s history in 2022,” Mortoti explained.

Source: Adomonline.com