- COPEC CEO Warns Against Repeating Gold-for-Oil Mistakes as State Expands Gold Trading
Ghana must ensure that its expanding role in the domestic gold market does not recreate the financial and governance weaknesses associated with the former Gold-for-Oil programme, the Chamber of Petroleum Consumers has warned, as scrutiny intensifies over the costs of commodity-backed foreign-exchange interventions.
Duncan Amoah, Chief Executive Officer of COPEC, said lessons from the previous Gold-for-Oil arrangement should shape the government’s approach to current gold transactions, particularly where the Bank of Ghana’s balance sheet is exposed to commodity-trading and foreign-exchange risks.
“If we learn from the mistakes of Gold-for-Oil, we should be able to structure this properly,” Mr Amoah said.
His intervention comes amid a widening debate over losses associated with Ghana’s domestic gold purchase arrangements and how the economic benefits of the policy should be measured against the financial costs carried by public institutions.
Ghana has increasingly sought to use domestically produced gold to strengthen foreign reserves, improve access to foreign exchange and reduce pressure on the cedi. But such interventions can generate significant costs when gold is acquired locally under one pricing structure and subsequently sold, transferred or converted into foreign exchange under different market conditions.
Mr Amoah argued that policymakers should avoid an arrangement in which losses generated by a government intervention ultimately migrate onto the central bank’s balance sheet.
The warning carries particular weight because Gold-for-Oil was originally introduced during Ghana’s severe foreign-exchange crisis as an unconventional mechanism for reducing the amount of dollars required for petroleum imports.
By using gold as part of the financing architecture for fuel imports, policymakers sought to ease pressure on international reserves and stabilise domestic petroleum prices.
The arrangement, however, also exposed the state to commodity-price, foreign-exchange and execution risks.
The present debate over gold trading has therefore revived a broader question: whether the architecture supporting Ghana’s current gold strategy sufficiently separates commercial activity from monetary-policy objectives and clearly identifies who ultimately bears losses when transactions do not generate expected returns.
GoldBod has emerged as a central institution in the government’s effort to formalise the artisanal and small-scale gold market, reduce smuggling and channel a greater proportion of export proceeds through official systems.
That strategy can generate significant macroeconomic gains if competitive domestic purchasing captures gold that would otherwise leave the country through informal channels.
Higher formal exports can improve foreign-exchange availability, support reserve accumulation and potentially strengthen the Bank of Ghana’s ability to manage periods of currency volatility.
But Mr Amoah’s intervention highlights an important distinction between those broader economic benefits and the profitability of individual institutions.
“If GoldBod is making profit, then we should also be interested in where the funding is coming from and whether the institution providing the funding is also making losses,” he said.
That distinction has become increasingly important as competing claims have emerged around losses associated with Ghana’s gold programmes.
GoldBod Chief Executive Sammy Gyamfi has challenged suggestions that the institution itself incurred some of the losses being discussed publicly, arguing that figures cited in the debate relate in part to the Bank of Ghana’s Gold-for-Reserves operations rather than GoldBod’s own trading performance.
The disagreement demonstrates why consolidated accounting across the state’s gold architecture matters.
A public institution can report a surplus while another institution involved in financing, purchasing, settlement or foreign-exchange conversion absorbs the economic cost of the same transaction chain.
That means institutional profitability alone may not provide a complete picture of whether the overall intervention generated or destroyed public value.
The issue becomes even more significant where the state deliberately pays highly competitive prices for domestic gold in order to discourage smuggling and attract production into official channels.
If the acquisition price exceeds what can ultimately be recovered through international sales after commissions, foreign-exchange conversion and associated costs, the difference effectively becomes an economic subsidy.
Such a subsidy may still be defensible if its benefits including stronger reserves, increased formal exports and exchange-rate stability exceed the cost.
But the subsidy should be visible. Otherwise, losses can emerge outside the conventional budget through the accounts of the central bank or another state institution, creating what economists describe as quasi-fiscal costs.
For Ghana, that concern is especially sensitive as the country attempts to rebuild fiscal and monetary credibility following several years of severe macroeconomic instability.
The policy challenge is therefore not necessarily whether the state should stop purchasing domestic gold.
It is whether the transactions can be structured in a way that makes the complete economics visible.
That would require greater disclosure around purchase prices, international selling prices, commissions, agent fees, foreign-exchange conversion rates and the allocation of gains and losses between GoldBod, the Bank of Ghana and central government.
It would also require clearer separation between GoldBod’s commercial mandate and the broader monetary-policy objectives that may motivate the central bank to acquire gold even where the immediate transaction economics are less favourable.
Recent policy adjustments have sought to address some of these vulnerabilities through changes to settlement arrangements, pricing structures, agent fees and the ring-fencing of proceeds.
For COPEC, however, the experience of Gold-for-Oil remains a warning against judging unconventional interventions solely by their short-term macroeconomic effects.
The ultimate test of Ghana’s evolving gold architecture will not simply be how much gold the state is able to purchase.
It will be whether the country can capture additional foreign exchange, strengthen reserves and support currency stability without building another layer of losses that eventually has to be absorbed by taxpayers or the central bank.
That requires an architecture in which benefits are measurable, costs are transparent and risks cannot quietly move from one public institution to another.
The lesson from Gold-for-Oil is therefore broader than the commodity involved.
State interventions can provide valuable support during periods of economic stress, but without transparent pricing, consolidated accounting, rigorous risk management and clear institutional accountability, the cost of short-term stability can eventually reappear on the public balance sheet.
