SUB-SAHARAN African central banks that have significantly ramped up gold purchases in recent years may now be courting serious financial risk, according to a report by BMI, a unit of Fitch Group. A sharp slide in gold prices or liquidity shortfalls could jeopardise both reserve adequacy and monetary credibility.
Gold accumulation surging amid geopolitical turbulence
Ghana, Tanzania and Nigeria stand at the forefront of this gold‑buying spree, sourcing bullion locally in a bid to buffer foreign reserve portfolios from intensifying global market volatility. These moves have been accelerated by escalating US trade tariffs and broader geopolitical tensions this year.
Meanwhile, other sub‑Saharan nations—including Kenya, Uganda, Rwanda and Namibia—are either exploring or implementing gold‑acquisition strategies. Burkina Faso plans to increase its reserves, and Zimbabwe recently announced that its new ZIG currency is backed by gold.
Risks mounting with price and liquidity exposure
‘Gold is increasingly being used by sub‑Saharan African markets as a strategic store of value,’ said Orson Gard, Senior Sub‑Saharan Africa analyst at BMI, during an investor presentation.
However, BMI cautions that this strategy carries heavy risks. In Ghana, for example, gold now accounts for roughly one third of foreign reserves, causing a pronounced appreciation in the cedi. This currency strength risks undermining export competitiveness.
BMI has maintained its gold price baseline for 2025 at around $3,100 per ounce, but expects a gradual medium‑term decline. A drop in US interest rates could exert downward pressure on bullion prices, potentially triggering sharp erosion of reserve values in these rapidly gold‑laden economies.
Double burden for gold-exporting economies
Countries such as Ghana and Tanzania face a ‘double whammy’ as gold‑export earnings fall in tandem with the depreciating value of their gold hoards. This could strain external balances and reserve buffers at once.
Furthermore, the liquidity of gold reserves remains a major concern. In crisis scenarios, central banks may find it difficult to convert physical gold into hard currency quickly or efficiently—an issue witnessed in past episodes involving India and Argentina facing balance‑of‑payments turmoil.
Central banks respond with hedging and caution
Ghana’s central bank Governor, Johnson Asiama, acknowledged the country’s exposure to commodity price swings and outlined plans for a hedging programme designed to shield reserves from sudden gold price vulnerabilities.
But BMI warns that even a gradual decline in prices over the medium term could undermine reserve adequacy and public confidence in central bank policies, especially in nations that began accumulating gold at recent peaks.
Outlook: Gold’s value may be past its apex
While gold’s rally earlier in 2025 helped support reserve strength during turbulent times, BMI now suggests that the metal’s price may have reached its summit. With growth in global markets moderating and the prospect of US rate cuts on the horizon, bullion may be poised for a correction. Sub‑Saharan central banks’ growing gold allocations leave them particularly exposed.
Credit: Africabrieifing
