Sub-Saharan African central banks have been steadily increasing their gold holdings as a hedge against market volatility, with Ghana, Tanzania and Nigeria among the most active buyers. According to BMI, part of the Fitch Group, this shift toward gold carries two principal risks that policymakers should carefully manage.
Price risk – If global gold prices fall sharply, the market value of these reserves would decline, which could weaken central bank balance sheets. For economies that export gold, such as Ghana and Tanzania, lower prices would also reduce export earnings and could worsen the trade balance.
Liquidity risk – Large gold reserves can be hard to convert quickly into cash when a country faces an urgent financing need. Historical episodes in other countries show that during severe balance-of-payments crises it can be challenging to sell significant quantities of bullion without accepting steep discounts or encountering buyers’ hesitation.
Ghana’s recent accumulation of gold has been particularly notable: gold now accounts for roughly one-third of the country’s official reserves. To mitigate potential losses from price swings, Ghana has implemented a hedging program designed to smooth the impact of adverse market movements. Other countries in the region are also expanding their exposure to the metal. Kenya, Uganda, Rwanda, Namibia, Burkina Faso and Zimbabwe are at various stages of adding gold to their official reserve portfolios, reflecting a broader regional trend toward using bullion as a diversification tool.
While gold can offer protection against currency depreciation and inflation, central banks must balance its benefits with these risks. Effective risk management includes diversified reserve compositions, transparent reporting, and contingency plans that address how to monetize or use gold assets in times of stress without destabilizing domestic markets.