Central banks in Nigeria and several sub-Saharan African countries could face liquidity challenges if the price of gold declines, a Fitch Group unit, BMI, has warned. BMI said nations including Ghana, Tanzania and Nigeria have increased their gold holdings in recent years, with Ghana’s aggressive accumulation now accounting for a third of its total reserves.
BMI’s Orson Gard, speaking during an investor presentation, said the growing use of gold as a store of value could expose central banks to significant risk. He added that a sharp fall in prices may undermine the credibility of monetary policy and impact reserve adequacy, especially for countries like Ghana and Tanzania that also rely on gold exports.
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Ghana’s central bank governor, Johnson Asiama, acknowledged the potential impact on reserves, revealing that the country has launched a hedging programme to cushion against price volatility. BMI noted that the global gold price, which peaked earlier this year, may be nearing a decline due to anticipated cuts in U.S. interest rates.
Other African countries taking steps towards gold-backed reserves include Kenya, Uganda, Rwanda, Namibia, Burkina Faso and Zimbabwe. However, Fitch warned that governments may struggle to convert these holdings into hard currency during economic shocks, citing past examples in India and Argentina.
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