The Chamber of Oil Marketing Companies (COMAC) is strongly recommending that the government halts the direct Gold-for-Oil (G4O) policy and replace it with a Gold-for-Forex policy that will directly tackle the stabilization of the cedi through gold reserves.
COMAC says the direct barter trade of gold for petroleum dubbed Gold-for-Oil has failed to deliver the promised economic relief of reducing fuel prices at the pumps hence a need for a more strategic policy like Gold-for-Forex.
In a report titled “Gold for Oil or Gold for Forex?” cited by The High Street Journal, COMAC says the G4O policy only covers just 30% of the country’s demand for oil hence having a very limited impact on the intended purpose.
The policy, COMAC has also observed, has been bedeviled with transparency concerns and financial mismanagement.
Given the very minimal impact and the issues of transparency and accountability, the chamber believes the direct swapping of gold for oil should be immediately halted for a more effective strategy.
The Chamber therefore recommends that a Gold-for-Forex (G4F) strategy, where gold reserves are leveraged to strengthen Ghana’s foreign exchange (FX) reserves should rather be implemented. In their view, the G4F will yield better economic results.
“Even if G4O may have contributed some benefits, it cannot be the silver bullet to address the fundamental issues affecting fuel supply in Ghana’s downstream petroleum sector,” the COMAC report states adding that “Instead of direct commodity swaps, Ghana should leverage its gold reserves to stabilize foreign exchange markets, ensuring that oil importers have access to adequate FX liquidity.”
This recommendation of COMAC is rooted in their data-driven analysis which they say has proven that Ghana’s exchange rate remains the dominant factor influencing fuel prices and inflation.
The G4O policy, introduced in December 2022, was meant to reduce pressure on FX reserves and stabilize fuel prices. However, the Chamber maintains a closer look at fuel price trends indicate that global market forces, not G4O, were the real drivers of price fluctuations.
COMAC, as part of measures to enhance the effectiveness of the proposed G4F policy, the chamber is advocating for major structural transformation in the country’s petroleum sector. Among a number of proposals is the call for the strengthening of the refining capacity of the country. COMAC believes investing in domestic refining infrastructure will reduce reliance on imported refined petroleum, insulating Ghana from global supply chain disruptions and forex volatility.
They are also calling for an enhanced storage and redistribution regime that focuses on best practices prioritizing building reserves and eliminating logistical bottlenecks that will ensure a stable and reliable fuel supply.
COMAC further contends that ensuring transparency and accountability are key to building confidence in government-led initiatives and preventing mismanagement.
This proposal from the Chamber follows a hint given by the Minister for Energy, John Jinapor that there are plans to gradually phase out the G4O policy as they are in the process of exploring alternative policies.
