BoG buys first gold in 60 years: Plans to purchase 540kg with GH¢200m in 2021

BY: Maxwell Akalaare Adombila
Dr Ernest Addison,Governor of the Bank of Ghana
Dr Ernest Addison,Governor of the Bank of Ghana

For the first time in about 60 years, the Bank of Ghana (BoG) has purchased gold to augment its gold reserves and shore up the country’s foreign assets.

The bank bought 280 kilogrammes of the precious metal this year under a historic gold purchase programme meant to double its gold reserves and supplement the traditional ways that the country has built reserves over the years.

It has since set aside GH¢200 million to be used to purchase 540kg of gold produced domestically this year.

Although gold purchase is a critical component of central banking across the world, the         

BoG only returned to the business this year after exiting it around 1961.

It now aims to buy more than 17,500kg — about 17.54 tonnes — of the precious metal in the next five years.

Giving an update on the programme which took off in June this year, the Director of the Financial Markets Department at the BoG, Dr Steve Opata, told the Daily Graphic in Accra last Monday that the initiative had been successful and the bank was on track to hitting its target for the year and the next five years.

BoG only returned to the business this year after exiting it around 1961.

It now aims to buy more than 17,500kg — about 17.54 tonnes — of the precious metal in the next five years.

2022 Target

Giving an update on the programme which took off in June this year, the Director of the Financial Markets Department at the BoG, Dr Steve Opata, told the Daily Graphic in Accra last Monday that the initiative had been successful and the bank was on track to hitting its target for the year and the next five years.

“As you know, we started the programme around June this year and so this year we are going quite moderately. The plan is to buy 540kg, but next year the target will be 2,050kg,” he said.

He said the gold purchased would be added to the BoG’s reserves after it had been processed to the standard of the London Bullion Market Association (LBMA).

The BoG currently has 8.77 tonnes of gold in reserve, equivalent to about six per cent of the bank’s reserves, although Ghana is the second largest producer of the metal in Africa.

Dr Opata said the bank was funding the programme from its profits.

Impact on locals

Although a repeat of a programme that was halted in the 1960s, the current gold purchase is the first time that the central bank is buying the resource from local producers.

At the launch of the programme in June this year, the Governor of the BoG, Dr Ernest Addison, said it had the potential to improve the small-scale gold mining sector by guaranteeing a fair purchasing price for gold, while providing an incentive to formalise the sector and move away from damaging environmental and social practices.

He added that it would also lead to a route to formalise and improve the ability of small-scale gold miners to sell on formal gold markets and thereby reduce their vulnerability to illegal actors in the domestic and international gold supply chain.

Mining companies

In his interview with the Daily Graphic last Tuesday, Dr Opata added to what Dr Addison had said at the launch, emphasising that the objective was well on course, with mining companies also expressing interest in selling to the central bank.

“I must say that we have seen a lot of interest from mining firms, and when that happens, we can even exceed our target. For instance, we have commitments from one mining firm that it will supply 100kg this year and we are going through documentation.

“If that works out, then you can see us easily achieving our target this year,” he said.

Aggregator

Dr Opata said the bank was currently buying from one aggregator, while due diligence continued on another company to help increase the supply base.

 “We are using one aggregator right now. We want to be sure that the programme is credible and we will be able to refine the gold that we buy at a refinery that will accept it as monetary gold,” he stated.

He added: “We are doing due diligence on another aggregator. If that is successful, we will add another aggregator this year.”

Traceability

The director said in spite of the wide acceptance, challenges with standards and traceability existed.

“The whole thing boils down to doing due diligence to make sure that every once of gold we buy is traceable and can meet the refinery status. We have to refine it at the LBMA-certified refinery for it to be counted as monetary gold. So we have to make sure that the gold is traceable and meets all the sustainability issues. That we are doing,” he said.