All you need to know about the government’s Gold for Oil programme | Check it out

Last year, the Vice President, Dr. Mahamudu Bawumia announced a new government policy dubbed Gold for Oil (G4O).

The policy, as explained by the government, is to allow the government to pay for imported oil products with gold, in a direct barter with gold purchased by the Central Bank.

The move, announced by the Vice President in the midst of the depreciation of the cedi against the US dollar and the rising cost of fuel prices, was explained as an intervention to help stabilise prices of fuel products, as well as reduce pressure on Ghana’s foreign exchange, as the direct gold barter would be the mode of paying for imported oil instead of depleting the foreign exchange reserve.

The Gold for Oil programme has since been implemented with the first oil consignment arriving last month.

According to the government’s G40 Programme Framework dated February 3, 2023, which explains the policy, payment for the oil supply is done in two channels; barter trade or via forex obtained from selling gold to a broker.

Under the Barter Channel, suppliers willing to take gold in direct exchange for petroleum products will be provided with the equivalent volume of gold by the Bank of Ghana (BoG).

“Both the Bank and the International Oil Trading Companies (IOTCs) are required to open Gold Metal Accounts in a mutually agreed gold refinery for the purpose of gold transfer,” the framework reads.

“BoG accumulates refined gold in its metal account at a refinery nominated by a supplier to fund petroleum product shipments. BoG transfers equivalent amount of gold based on petroleum products supply invoice from its metal account to a supplier’s metal account on receipt of Quality Certificate (QC) of the product supplied and final invoice from Bulk Oil Storage and Transport Company (BOST).

Under the Broker Channel, the BoG executes a gold supply agreement under which it sells gold to a gold broker, which provides forex cover to pay for petroleum products.

“Gold Broker buys dore gold from BoG and deposits the proceeds in BoG gold holding account. BoG transfers funds from gold holding account to an Escrow Account to pay for petroleum product shipment on receipt of QC and final invoice from BOST”.