Ghana plans to ditch U.S. dollars in favour of gold to buy oil

A petrol station in Accra, the capital of Ghana. Ghana is itself a producer of crude oil, but relies on imports for refined oil products. Photo: In Pictures Ltd./Corbis via Getty Images.

Prior to independence, Ghana was known as the Gold Coast. Perhaps it is only fitting that it should pay with gold for oil. Although this is more out of necessity than an attempt at a display of wealth. Vice-President Mahamudu Bawumia announced that the government is working on a policy meant to save the country’s economy on Thursday.

The country's U.S. dollar reserves are dwindling (From USD 9.7 bn at the end of 2021, to USD 6.6 bn in Sept. 2022) and are enough to last for less than three months to cover the cost of importing oil. The proposed policy is uncommon. While countries sometimes trade oil for other goods or commodities, such deals typically involve an oil-producing nation receiving non-oil goods rather than the opposite.

While Ghana produces crude oil, an explosion that destroyed its only oil refinery in 2017 means that it has to rely on imports for refined oil products.

The dwindling foreign currency reserves coupled with the demand for dollars by oil importers are leading to the weakening of the local currency and an increase in living costs.

If implemented as planned for the first quarter of 2023, the new policy “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency,” Vice-President Bawumia said, adding that “The barter of gold for oil represents a major structural change.”