Fuel prices to drop due to gold for oil deal — NPA to Ghanaians

It said it would work with the Bulk Oil Storage and Transportation Company (BOST) to negotiate prices with international traders adding that it will regulate the prices of petroleum products.

The statement said all Bulk Import, Distribution, and Export Companies (BIDECs) and Oil Marketing Companies who wish to purchase products under the G4O programme would be required to sign off an undertaking confirming their willingness to comply with the terms and conditions for partaking in the purchase and sale of G4O products.

It said the implementation of the government's G4O programme commenced with the arrival of the first consignment of about 40,000 metric tonnes of diesel on January 15, 2023, valued at about US$40 million.

The first consignment of 40,000 metric tonnes of diesel, the statement explained constituted about 10 percent of the country’s combined monthly demand for petrol and diesel and is expected to gradually increase imports under G4O to constitute about 50 percent of the country’s total demand of petrol and diesel by March 2023.

It said the prime objective of the programme was to use additional foreign exchange resources from the Bank of Ghana’s Domestic Gold Purchase (DGP) programme to provide foreign currency for the importation of petroleum products for the country which currently stands at about US$350 million per month.

The statement stated that the implementation of the G4O would ease pressure on the dollar (the currency used for the importation of petroleum products) and avoid the occasional increases in petroleum prices resulting from the depreciation of the cedi against the dollar.

It said the programme would ensure that the cost of importing the products from international oil traders would be comparatively cheaper, adding that the "payment for oil supply is to be done in two channels by way of barter trade where gold is exchanged for oil or via broker channel where the gold is converted into cash and paid to the supplier."

The statement said the consequent reduction in foreign exchange pressures and premiums charged by international oil traders as well as efficiency gains from the value chain would lead to lower ex-pump prices in the country.

It added: "The implementation of the G4O will ease pressure on the dollar (the currency used for the importation of petroleum products) and avoid the occasional increases in petroleum prices resulting from the depreciation of the cedi against the dollar.

"The programme will ensure that the cost of importing the products from international oil traders will be comparatively cheaper.

"The consequent reduction in foreign exchange pressures and premiums charged by international oil traders, as well as efficiency gains from the value chain, will lead to lower ex-pump prices in the country," it noted.

Gold-for-oil policy

The policy to buy oil products with gold rather than U.S. dollar reserves is meant to tackle dwindling foreign currency reserves coupled with the demand for dollars by oil importers, which weakens the Ghana cedi and increases living costs.

Vice President Dr. Mahamudu Bawumia said the government is projecting to save about US$3 billion in foreign exchange yearly from the proposed policy which seeks to acquire oil products in exchange for gold.

He explained that the policy which would be implemented in the first quarter of next year could also relieve some inflationary pressure on the cedi.

Speaking at the 11th Association of Ghana Industries (AGI) Ghana Industry and Quality Awards in Accra, Bawumia said "So we will be saving US$3 billion from the lack of demand from the Bank of Ghana (BoG) for foreign exchange. This reduces the pressure on the cedi immediately and, therefore, you will see much, much lower depreciation of the currency."

He indicated that the import-reliant nature of the economy, particularly for finished petroleum products, accelerated the depreciation of the cedi and increased the cost of doing business and cost of living.