BoG Gold Acquisition Losses: INSTEPR Attributes GH¢2.4 Billion Deficit to Structural Flaws, Not Politics

Introduction

The Institute for Energy Policies and Research (INSTEPR) has released a detailed rejoinder clarifying the causes behind the significant financial losses recorded by the Bank of Ghana (BoG) under its gold acquisition programme. Contrary to widespread speculation regarding political interference or corruption, INSTEPR argues that the reported GH¢2.4 billion deficit is the direct result of structural and operational weaknesses within the trading framework. This analysis aims to dissect the mechanics of the gold buying program, specifically the interaction between the central bank and the GoldBod, to explain why these losses were predictable and, according to the institute, entirely avoidable.

Key Points

Background

The controversy surrounding the Bank of Ghana’s gold acquisition program intensified following a disclosure by the International Monetary Fund (IMF) regarding a GH¢2.4 billion loss incurred over a nine-month span. This revelation sparked public outcry and accusations of mismanagement. However, INSTEPR asserts that this outcome was not only anticipated but explicitly warned against in previous communications.

To understand the current situation, one must look at the evolution of the local gold trading structure. The program was designed to bolster Ghana’s foreign exchange reserves by purchasing gold from the domestic market. However, the operational architecture involves multiple layers—specifically the Bank of Ghana, GoldBod, and registered brokers—each operating under different financial incentives and pricing mechanisms. This complexity is the foundation of the current financial deficit.

Analysis

INSTEPR’s analysis focuses on the mechanics of the transaction rather than the intent behind it. The core of the financial loss lies in the exchange rate differentials and the margin stacking inherent in the current model.

The Mechanics of the Loss

The process begins with registered brokers who purchase gold from small-scale miners. These brokers price the gold based on international multi-national revenue rates. When converting these rates into the local currency (Cedis), the brokers utilize negotiated exchange rates. Crucially, these negotiated rates often differ significantly from the Bank of Ghana’s internal exchange rates.

When GoldBod steps in to purchase the gold from these brokers, it does so using funds provided by the BoG. The price GoldBod pays includes not only the base cost but also the broker’s margin and the costs associated with refining the raw gold into “doré bars”—the standard format required for purchase. GoldBod then charges the BoG a commission for facilitating this transaction.

The Structural Disconnect

According to INSTEPR, “Standard business practice suggests that when the Bank of Ghana sells the gold procured through GoldBod, it should generate more revenue than was paid out, or at least break even.” However, the structural reality is different. The BoG is effectively buying gold at a price determined by fluctuating negotiated rates and paying commissions on top of that.

INSTEPR highlights that the BoG failed to learn from losses recorded in 2023 and 2024. A letter dated July 7, 2025, from the BoG to INSTEPR acknowledged losses of approximately GH¢1.8 billion on gold transactions specifically due to these exchange rate differentials. This confirms that the loss is a mathematical result of the pricing model, not an anomaly.

GoldBod’s Risk-Free Position

A critical point in INSTEPR’s argument is the risk profile of GoldBod. The entity operates strictly as an intermediary. It uses the Bank of Ghana’s capital to buy gold and earns a commission regardless of the final sale price realized by the BoG. This creates a moral hazard where the facilitator profits while the financier (the BoG) absorbs the loss. GoldBod does not assume financial risk regarding market volatility or exchange rate fluctuations.

Debunking the “Gold for Oil” Narrative

There has been a concerted effort by some civil society groups and government appointees to attribute the BoG’s losses to the Gold for Oil (G4O) initiative. INSTEPR firmly rejects this characterization. They argue that only a fraction of the GH¢2.1 billion loss recorded in 2024 was related to oil transactions. By repeatedly warning that the challenges were not related to BOST (Bulk Oil Storage and Transportation Company) or oil transactions, INSTEPR suggests that the focus on G4O is a distraction from the actual structural failure in gold trading.

Furthermore, the profitability of other state entities does not negate the BoG’s loss. The 2025 State Interests and Governance Authority (SIGA) State Ownership Report showed that PMMC recorded a net financial management gain of GH¢124.65 million, and BOST recorded GH¢318 million in earnings in 2024. These gains are separate from the central bank’s balance sheet and do not offset the specific losses incurred by the BoG under the gold program.

Practical Advice

To prevent the recurrence of such structural losses, INSTEPR offers specific recommendations aimed at operational reform and professionalization of the gold trading process.

Operational Independence

The Bank of Ghana must be allowed to operate independently, free from political pressure. Decisions regarding pricing models, exchange rate application, and contract terms with intermediaries like GoldBod should be based on sound financial principles rather than political expediency.

Engagement of Professional Institutions

The central bank should engage institutions with proven experience in commodity trading. This implies moving away from a model where the BoG funds the purchase without controlling the pricing mechanism. Professional commodity traders can help establish a framework where the buying and selling rates are aligned to ensure profitability or at least cost recovery.

Revising the Broker and GoldBod Model

A review of the margins and exchange rate mechanisms used by brokers and GoldBod is essential. The current model, where negotiated rates differ from BoG rates, creates an immediate loss. A unified pricing standard or a mechanism where the BoG directly controls the rate application could mitigate this risk.

FAQ

Conclusion

The GH¢2.4 billion loss recorded by the Bank of Ghana is a sobering reminder of the complexities involved in state-sponsored commodity trading. As detailed by INSTEPR, the deficit is not a symptom of political malfeasance but rather a predictable outcome of a flawed operational structure. The reliance on intermediaries operating under different exchange rate regimes has created a scenario where the central bank consistently pays more than it recovers. Moving forward, the solution lies in structural reform, operational independence for the BoG, and the engagement of seasoned commodity trading experts to close the gap between acquisition costs and revenue.