‘Gold4oil’ key in stabilising fuel prices — BoG
THE Bank of Ghana (BoG) has lauded the Gold for Oil (G4Oil) programme for helping to stabilise fuel prices since its introduction.
The Head of Financial Markets at the central bank, Steven Opata, said the government’s policy had resulted in increased competition among traders of refined petroleum products, leading to reductions in prices at the pumps between December last year and March, this year.
He attributed the drop in diesel prices from about GH¢24 per litre in December 2022 to a little above GH¢13 per litre as at the end of March to the programme under which about four cargoes have so far been delivered.
Launched in January, the G4Oil programme uses locally procured gold to purchase fuel in a bid to prevent the foreign exchange pressure that the use of cash brings on the cedi.
It relies heavily on the central bank’s domestic gold purchase programme that was launched in July last year to help shore up the BoG’s reserves.
The BoG’s Head of Financial Markets said in an interaction with the media in Accra that the G4Oil programme played a significant role in getting ex-pump prices of petrol, diesel and Liquefied Petroleum Gas (LPG), among others things to reduce by 50 per cent this year.
He said the halving of the prices came at a time when crude oil prices had fallen by an average of 30 per cent.
As of March 17, about four cargos have since come in under the programme that took off this year, he said.
Speaking to selected journalists on issues arising from the bank’s Monetary Policy Committee (MPC) meeting in the first quarter, Mr Opata said the lower prices had benefited consumers and businesses, including helping to put inflation on a downward trend.
Consequently, the BoG’s head of financial markets appealed to the public to support the programme which hinges on using locally produced gold to buy refined petroleum products abroad for the local market.
He said by purchasing the petroleum products with gold, the country was also avoiding the pressure that the use of foreign currencies always brought on the cedi.
This, he said, also provided some respite for the local currency.
The cedi lost about 22.1 per cent of its value to the US dollar as of March 20, according to the BoG data.
Announced late last year by the Vice-President, Dr Mohamudu Bawumia, the G4O programme allows the country to pay for petroleum products using either locally sourced gold or proceeds of that gold sold to a broker.
It took off in January with Dr Bawumia describing it as revolutionary and a potential big saver for the economy.
In February when consignments under the policy were put into the market, the Vice-President said the programme had led to price drops at the pumps, while estimates showed that the country could save about $4.8 billion from its implementation annually.
Giving an update, Mr Opata explained that BoG’s gold purchase as a reserves programme was key to the success of the government’s G4Oil programme.
He said since it was launched, the central bank had successfully purchased about 166,000 ounces of gold valued at about US$314 million.
“Now, as you know, we are using the domestic purchase programme to secure fuel. As of the March 17 this year, about four cargoes had come in and like I told you, these have created a lot of competition such that the international oil trading companies who, before, had a captive market and taking advantage of their monopolistic power, are now competing,” the BoG’s head of financial markets said.
“If you look at the data, ex–pump prices have dropped from about almost GH¢24 per litre in December 2022 to around GH¢13 per litre right now.
“So, we are looking at almost a 50 per cent drop in fuel prices,” he said.
Mr Opata expressed the optimism that the drop in fuel prices would impact on other prices for inflation to drop further.
Inflation, which measures the general price levels of goods and services, has resumed a downward trend after peaking at 54.1 per cent in December last year.
It dropped to 53.6 per cent in February before easing to 52.8 per cent.
The central bank said it expected further falls in the coming months after hiking its policy rate to 28.5 per cent in March.