List of African Countries Turning to Gold to Shield Against Currency Depreciation
Over the past few years, African economies have been navigating a perfect storm of global disruptions. Amidst these challenges, African nations are increasingly turning to gold as a safeguard for their economies.
Over the past few years, African economies have been navigating a perfect storm of global disruptions. The economic scars left by the COVID-19 pandemic are still healing, with many countries facing slowed growth, rising debt, and weakened fiscal positions.
Adding to this volatility are mounting geopolitical tensions which have sent energy prices swinging and further complicated economic planning across the continent.
Amidst these challenges, African nations are increasingly turning to gold as a safeguard for their economies.
Countries like South Sudan, Zimbabwe, and Nigeria are either boosting their gold reserves or exploring the possibility of doing so.
This shift mirrors the strategy of central banks in major economies like China and India, which have actively accumulated gold to diversify their reserves and reduce reliance on the US dollar.
According to a World Gold Council survey, around 20 central banks globally are expected to follow suit in the coming year, marking a significant trend in global economic strategy.
Below are the list of African countries turning to Gold to shield against currency depreciation:
The Reserve Bank of Zimbabwe launched a new gold-backed currency last April to help stabilise the economy and protect citizens from currency fluctuations and sky-high inflations.
The new currency, called Zimbabwe Gold (ZiG), is Zimbabwe’s sixth attempt in 15 years to establish a stable local currency, and it is backed by 2.5 tons of gold and $100 million in foreign currency reserves held by the central bank.
Uganda plans domestic gold purchases to build foreign exchange reserves and limit risks on reserve investments.
The Bank of Uganda announced plans to buy bullion directly from artisanal miners, aiming to counter falling reserves and hedge against growing risks in international financial markets.
The country’s foreign exchange stockpile has come under pressure, partly due to capital flight triggered by the enactment of anti-LGBTQ laws. The situation worsened in August when the World Bank suspended new financing to Uganda, deepening the strain on its financial stability.
South Sudan is exploring gold as a means to build up its national reserves, recognizing its potential as a valuable commodity and a source of foreign exchange.
Last year, Central Bank Governor James Alic Garang announced plans to diversify the country’s reserve base by incorporating gold and other valuable resources.
The country has significant gold deposits, particularly in the central and eastern Equatoria region, and the sector shows promise for growth despite challenges like infrastructure and security issues.
Madagascar’s new central bank governor plans to leverage gold to bolster the country’s official reserves and stabilize its currency, amid falling international sales of a key export, vanilla.
Governor Andrianarivelo, who assumed office Last January after serving as an executive director at the IMF, said the next consignment of gold will be refined and stored abroad.
The Bank of Tanzania began purchasing gold locally in 2023 as part of its strategy to boost foreign exchange reserves.
In support of this move, Tanzania’s mining regulator has mandated that all mining firms and gold traders exporting the commodity allocate at least 20% of their gold for sale to the central bank. This initiative is aimed at diversifying the country’s foreign reserves.
In July 2024, Nigerian senators proposed expanding the powers of the Central Bank of Nigeria (CBN) to allow it to leverage gold in strengthening the country’s foreign reserves.
The draft bill suggested designating the CBN as the automatic off-taker of all gold produced within the country, with an ambitious target of having gold account for at least 30% of Nigeria’s external reserves.
