Sub-Saharan African central banks that have boosted gold reserves risk price and liquidity crises if the metal’s value falls, BMI, a Fitch Group unit, warned on Wednesday.
Ghana, Tanzania, and Nigeria have been buying gold domestically to strengthen reserves amid volatile markets stirred by U.S. trade tariffs and geopolitical tensions.
Kenya and Uganda are considering gold purchases, Rwanda and Namibia are actively adding gold, while Burkina Faso plans to increase stockpiles. Zimbabwe backs its new ZIG currency with gold reserves.
“Gold is increasingly used by sub-Saharan African markets as a strategic store of value,” said Orson Gard, BMI’s senior analyst, during an investor presentation.
However, aggressive gold buying poses risks. In Ghana, gold now makes up a third of reserves, pushing the cedi higher and potentially hurting exports. Bank of Ghana Governor Johnson Asiama acknowledged exposure to commodity price swings but said hedging strategies aim to shield reserves from shocks.
“Any sharp price drop would impact international reserves,” Asiama said, stressing the hedging programme’s role in limiting market volatility consequences. Gold prices hit record highs earlier this year but may have peaked. Potential U.S. interest rate cuts could exert downward pressure on the metal, BMI said.
“A sudden gold price drop would significantly affect sub-Saharan markets with rising gold reserve shares,” Gard warned. A gradual decline could harm reserve adequacy and damage central bank credibility, he added.
Countries like Ghana and Tanzania face a “double whammy” of reserve devaluation and reduced export income, Gard said. Governments might also struggle to convert gold into liquid assets amid crises, recalling past challenges faced by India and Argentina.