Ghana and Emirates National Oil Company are negotiating a barter agreement that would allow the West African country to pay for fuel with gold.
According to Kabiru Mahama, a vice president Mahamudu Bawumia’s economic adviser, the government and the oil company with headquarters in Dubai have reached a “tentative” deal.
As it builds up its bullion reserves to be used to import fuel and lessen demand for dollars after its currency fell 57% this year, Ghana, Africa’s second-largest producer of gold, ordered large mining companies last week to sell 20% of the metal they refine to the central bank starting on January 1.
The barter system is seen as a solution for Ghana, whose economy is struggling to stabilize, to stop the decline of the cedi, the worst-performing currency among those monitored by Bloomberg. The nation’s foreign exchange reserves are being depleted and inflation is being fueled by the sinking cedi.
The gold trade has a long history with Dubai. Critics assert that regulatory gaps allow bullion that has been smuggled out of conflict zones and used for money laundering to be exchanged in the city, but Dubai’s commodities exchange has refuted those assertions. The United Arab Emirates’ nationally run anti-money laundering reporting system was expanded to include gold dealing last year.
According to Steve Opata, director of financial markets at the Bank of Ghana, “ENOC is interested in giving us refined oil for gold.”
In the meantime, President Nana Akufo-administration Addo’s plans to ask foreign bondholders to accept losses on their investments in order to open the door for an International Monetary Fund bailout after losing access to global capital markets this year due to skyrocketing debt and loan-service costs.
An email and a phone message seeking comment received no immediate response from ENOC. A request for comment sent via email was also not immediately answered by Dubai’s government, which owns ENOC.