As the US dollar appreciates against most local currencies in Africa, many countries are striving to boost their foreign currency reserves. Numerous African nations have initiated programs to purchase gold from local producers to bolster these reserves. Uganda is the latest and second East African state to adopt this strategy, aiming to strengthen its shilling and reduce forex pressure.
Several African countries are now relying on gold reserves to support their local currencies. Uganda’s President Yoweri Museveni recently highlighted this initiative. According to Bloomberg, this measure is part of a broader strategy to address rising debt levels, high interest rates, and other economic challenges.
Uganda is the most recent nation to announce the purchase of gold to enhance its foreign currency reserves.
Which African Countries Are Exploring Gold Reserves?
1. Uganda
The Bank of Uganda’s June 2024 State of the Economy Report states that buying gold from locals will boost foreign currency reserves and mitigate international market risks. This move is expected to support artisanal and small-scale miners, positively affecting other economic sectors. The EastAfrican reports that this could reduce gold exports, which earned Uganda $2.3 billion in 2023.
2. Ghana
Business Insider Africa reports that Ghana has invited gold miners to sell 20% of their refined output to the central bank. Ghana, Africa’s leading gold producer, increased production from 2.2 million ounces in 2012 to 3.08 million ounces in 2022, with gold reserves at 8.74 tonnes in 2024. The Ghanaian cedi continues to depreciate against the US dollar, impacting the country’s economy.
3. Nigeria
Nigeria’s central bank has invited local gold producers to sell their refined gold to boost its currency reserves. Trading Economics notes that Nigeria holds 21.37 tonnes of gold. The depreciation of the Nigerian Naira against the US dollar has increased the cost of living in the country.
4. Tanzania
In September 2023, the Bank of Tanzania (BoT) started buying gold from local producers to strengthen foreign exchange reserves and grow the mining industry. The regulator had 418 kilograms of gold and aimed to procure six tonnes by December 2023, according to The EastAfrican.
5. Zimbabwe
In April 2024, Zimbabwe introduced Africa’s first structured gold-backed currency to combat rising inflation. The Zimbabwe Gold (ZiG) currency, backed by 2.5 tons of gold, appreciated by 1.1% against the US dollar in its first week.
Other top African countries with significant gold reserves include Algeria (174 tonnes), Libya (147), Egypt (126), South Africa (125), Morocco (22.12), Mauritius (12.42), Tunisia (6.84), Mozambique (3.94), Malawi (0.4), Burundi (0.03), and Kenya (0.02).
Is Zimbabwe Gold (ZiG) Competing with Kenya Shilling?
The ZiG joined the Kenyan shilling among African currencies gaining against the US dollar. The ZiG traded at ZWL 13.41 per US dollar, while the Kenyan shilling traded at KSh 130.39 per US dollar. Despite Moody’s downgrade of Kenya’s debt rating, the Kenyan shilling remained strong, making it one of the best-performing currencies globally since it hit a low in January 2024.
The Kenyan shilling’s stability in the foreign exchange market has beaten major global currencies at the start of Q3 2024.
editorial@examiner.co.ug
