ABUJA: Several African countries including Nigeria, Uganda, Zimbabwe, Tanzania, South Sudan, and Madagascar are boosting their gold reserves and purchasing gold domestically after growing concerns over the stability of the US financial system and the weaponization of the US dollar.
The move to increase gold reserves is driven by apprehensions about the sustainability of the dollar as a global currency, amid rising inflation, escalating debt levels, and geopolitical tensions. African nations are seeking to hedge against these risks by diversifying their reserves away from the dollar and toward gold.
South Sudan has recently joined this trend. The country’s central bank governor announced plans to expand its gold reserves, highlighting the preparation of policy documents and studying international examples as part of this strategy.
Uganda has taken proactive steps by launching a domestic gold-buying program aimed at purchasing gold directly from local artisanal miners. This initiative is part of a broader strategy to mitigate risks in international financial markets.
Tanzania has committed to a substantial investment in gold, with plans to spend $400 million on acquiring six tons of gold. Tanzanian Finance Minister Dr. Mwigulu Nchemba has also issued a directive to reduce the use of the US dollar in domestic transactions.
Nigeria has initiated a domestic gold-buying plan to strengthen its reserves. The Nigerian central bank is not only purchasing locally sourced gold but also repatriating its existing gold reserves to mitigate risks associated with a weakening US economy.
Madagascar implemented a domestic gold purchases program last year, driven by a decline in income from vanilla exports. This move aims to boost the country’s reserves in light of economic challenges.
In Ghana, a presidential candidate has proposed backing the national currency with gold if elected. This plan echoes Zimbabwe’s recent adoption of a gold-backed currency, the ZiG, which replaced the Zimbabwean dollar earlier this year. The ZiG is supported primarily by gold, along with other foreign exchange reserves including US dollars.
Economic analysts suggest that these gold-buying strategies are both a response to domestic economic issues and a precaution against potential future risks. According to a Tellimer report cited by Bloomberg, increasing gold reserves makes sense for countries anticipating a rise in gold prices or a decline in the value of the US dollar. It also serves as a safeguard against possible sanctions or disruptions in access to US dollars.
To some degree, African leaders and central bankers are trying to fix problems they created by printing too much money and running up dollar-denominated debt.
But they are also concerned about America’s weaponization of the dollar and other risks associated with the greenback including the profligate spending and growing national debt.
