A growing number of African countries are turning to gold as a hedge against geopolitical risks, currency losses, and economic instability. Last week, the governor of the Central Bank of South Sudan announced plans to expand the country’s gold reserves. Other countries that have already implemented similar measures include Nigeria, Uganda, Ghana, and Zimbabwe.
African nations are exchanging US dollars for gold or purchasing gold using their own currencies to support domestic development and ensure stability in their foreign exchange reserves. Some countries, such as Zimbabwe, have even introduced new currencies pegged to gold and other precious metals.
Nigeria, Uganda, Zimbabwe, Madagascar, and South Sudan have all launched programs to increase their gold reserves. For example, the Central Bank of South Sudan has outlined a plan to expand its gold holdings. In June, the Central Bank of Uganda announced a program to purchase gold directly from local artisanal miners. Tanzania has also set a plan to spend $400 million on six tons of gold.
In June, Nigeria launched a campaign to purchase domestic gold to strengthen its gold reserves and use its own currency. The program, called the Presidential Artisanal Gold Mining Initiative, has already delivered its first ingots to the Central Bank of Nigeria.
The Bank of Ghana has also announced a plan to double its gold reserves over the next five years.
Zimbabwe went further by creating a gold-backed currency, the ZiG, which replaced the Zimbabwean dollar in April. The use of the ZiG has grown since its launch, accounting for 15% to 30% of total transactions.
African leaders and central bankers are motivated by concerns about the US dollar being used as a weapon, the impact of excessive dollar-denominated debt, and the potential for sanctions or currency manipulation.
[di Michele Manfrin]