The Deputy Energy Minister, Andrew Egyapa Mercer has explained what the Gold for Oil (G4O) programme entails.
The programme was an initiative implemented by the Akufo-Addo-led administration to use Bank of Ghana’s (BoG) existing Domestic Gold Purchase (DGP) programme to support the importation of petroleum products into Ghana.
So far, Ghana has received two consignments of petroleum products since the implementation of the policy, which sum up to 80,000 metric tonnes of oil. The first shipment arrived on January 15, 2023, and the second on February 19, 2023.
Ghanaians have been made to understand by government appointees such as Vice President Dr Mahamudu Bawumia, that the overall objective of the initiative is to lower the prices of fuel and also relieve the pressure on the nation’s forex reserves.
Speaking on JoyNews’ Newsfile on Saturday, Mr. Mercer also reiterated that the major objectives of the G4O were to ensure that Ghana does not run short of oil as well as to stabilise the cedi.
The legislator, therefore, gave the genesis of the programme. He attributed it to factors such as the depreciation of the cedi, the increase in petroleum prices, and Bulk Distribution Companies (BDCs) forwarding prices.
He explained to the host, Samson Lardy Anyenini, “We as a government realized that owing to, especially the Russian-Ukraine invasion, supply chain challenges had evolved that then had led to some countries experiencing shortages in petroleum products. Of course, our own peculiar economic situation where Forex availability was becoming a challenge for the Bank of Ghana.
“Import cover was dwindling and so then, the demand for dollar to import petroleum products then led to a spiraling in the depreciation of the cedi, especially because the BDCs forward price. By forward price, what it only means is that if they import the commodity today at say GH₵10 to a dollar, because there is a window within which they sell and we import, they want to assure themselves that by the time they sell the commodity, they would be able to generate sufficient enough to buy the same dollar to replace their stocks.
“And so rather than selling it for GH₵10, they will sell it for GH₵15, and BoG was not meeting that demand. And so at a point, they were forward pricing the petroleum product at GH₵19 to a dollar, just so that they can go buy the commodity when it runs out. That GH₵19 to a dollar is what you and I pay which then led to petroleum products rising as high as GH₵23/ GH₵24 per litre.”
Mr. Mercer added that the government then thought it important to find means to intervene, claiming that data indicated that out of the two components that determined the petroleum pricing—the Free On Board (FOB) price and forex impact— the forex impact had a greater percentage in terms of impact on the price as compared to the FOB increases at the global market.
“And so if you had a policy that then ensured that the forex was stable, or reduced to levels that are accommodating, then you have an impact on the price,” he added.
The Deputy Energy Minister further added that the Gold for Oil initiative was eventually born following deliberations by the government and stakeholders on how to ensure that the country did not encounter challenges that were associated with the global shortage of petroleum products.
He then explained that the programme entailed the Bank of Ghana buying gold from small-scale miners instead of they exporting it, and using the money to support funds for Ghana’s import bill.
“The policy of Gold 4 Oil, which purely is that Bank of Ghana (BoG) aggregates gold here in the country by buying from small medium scale operators who ordinarily would have exported, and if all things were working well, would have repatriated the funds into Ghana to support our import bill.”
He added that “But that fund in itself was not coming. And so, aggregating the gold here, paying for it in cedi, and externalising it to then either swap or sell the gold to fund the petroleum imports would help in reducing the demand that ordinarily, BDCs will be having for dollar. At least, to the extent that the Gold4Oil programme was providing.”
Thus, Mr Mercer concluded that the government is working to ensure that the objective of importing 100% petroleum products through the implementation of the G4O is achieved.
“The objective is to do a 100% of our petroleum products importation through the programme, and that we are going to work with the BDCs to ensure that we achieve that. If we achieve the 100% importation through the Gold 4 Oil programme, what it then means is that the demand for dollar of 400 per month by 12, which takes us to 4.8 billion will not be available anymore,” he said.