Vice President Dr. Mahamudu Bawumia, has announced that the Gold-for-Oil policy introduced by government early this year, has stabilized the exchange rate thus, reducing the price of petroleum in Ghana.
In his speech at the commissioning of the new Bulk Oil Storage and Transportation (BOST) office in Accra, he noted that the Gold-for-oil policy will save the country some $4.8 billion annually.
He assured consumers of the petroleum product that the price will decline further from the next pricing window of March 16.
The Vice President defended government’s decision to roll out the oil-for-gold policy. He said this is the most important macroeconomic policy intervention to deal with the exchange rate depreciation, fuel price, food price and inflation messes that have existed in the country.
He revealed that “Tomorrow we will see the decline in price that we are expecting. This is remarkable because two and half months ago, we were at GHC23.00 per liter but today we are at GHC12.00 per liter.”
Dr. Bawumia added that “The most important aspect of the gold-for-oil policy is not just the reduction in fuel prices but the savings in foreign exchange that the Bank of Ghana will make as a result of the lower demand for forex to import oil. The prices of fuel will go up and come down but what we are expected to see is more stability in the pricing and also savings in foreign exchange”.
The Vice President assured that government will import more fuel under the policy and lauded the role that BOST played significantly in ensuring that Ghana chalked this feat.
Meanwhile, the Executive Director of the Africa Center for Energy Policy (ACEP) Benjamin Boakye, has dismissed the statement made by Vice President.
Mr. Boakye revealed that there is a general reduction and stabilization in oil and fuel prices on the global markets and therefore attributing Ghana’s to the Gold-for-Oil policy is not accurate.
He said “If you’re analyzing the industry and how the pricing mechanics work, you will know that this has nothing to do with gold-for-oil. We are seeing prices on the international markets drop. Today about US$73 per barrel and even USD$66 for WTI. Implications are that it is going to drop further. These have implications for petroleum products on the market and that is what is forcing the price down against the fact that the cedi has been stable.”
Mr. Boakye noted that these are the fundamental drivers of the price stability. He added that government’s claim that the stabilization is due to the gold-for-oil policy is not accurate.
According to him, his job is to analyze policy based on the drivers and factors that underpin the occurrence on the market.
“If you understand the mechanics and what influences price, you’d have to analyze them based on those. It is not gold-for-oil that has caused the stability. This is the general attitude of government because when they see price go up, they will blame it on international pricing but when they see the prices drop, they want to attribute it to the gold-for-oil”, said Benjamin Boakye.
Gold-for-Oil policy
The Gold-for-Oil policy, as explained by the government, is to allow government to pay for imported oil products with gold, in a direct barter with gold purchased by the Central Bank.
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).
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.
