Nigeria and Kenya have emulated Ghana and have now joined the growing trend of African central banks moving to buy gold to boost their reserves and curb the free fall of their local currencies.

Former Vice President Dr Mahamudu Bawumia proposed the policy for Ghana, and three years ago, the government announced that the Bank of Ghana would begin purchasing gold to build the nation's reserves in a move to curb over-reliance on foreign exchange and help stabilise the cedi.

Ghana's gold reserves have since been significantly boosted — from a meagre seven tonnes at the start of the programme to over 30 tonnes now — with several African countries emulating Ghana's success story.

The latest countries to announce the policy are Kenya and Nigeria, which also plan to buy gold to diversify their reserves.

Kenya

Kenya has already held talks with the Bank of England on the policy, including discussions on bullion storage.

In several reports, including one by Bloomberg, Kenya's Central Bank Governor said the plan to incorporate gold is intended to help diversify Kenya's foreign reserves, which will also help control the depreciation of the local currency, the Kenyan shilling.

The strategy, the report said, is also part of Kenya's effort to reduce reliance on the US dollar and generally boost economic stability.

“I’m hoping that we can do it as soon as is practical because we’re ready to move,” Central Bank of Kenya Governor Kamau Thugge said in an interview in Washington.

Given the rapid rise in gold prices this year, Kenya is hoping it can also benefit, despite joining the table late.

“Those who got in early have made a killing. Those who get in late can also be killed,” he said.

Nigeria

In Nigeria, the federal government has also announced a decision to strengthen the country’s foreign reserves through a strategic gold acquisition programme by its central bank to eliminate reliance on dollar sourcing.

Nigeria’s Minister of Solid Minerals Development, Dr Oladele Alake, disclosed this at the 10th edition of the Nigeria Mining Week in Abuja this week.

According to Dr Alake, the programme, which aligns with the administration’s broader economic diversification agenda, is designed to use locally mined gold to boost the country’s foreign reserves, thereby reducing pressure on the naira and demand for foreign currency.

“This initiative allows us to purchase gold from local artisanal miners using naira, instead of sourcing dollars to buy gold internationally,” the minister said.

“Once the gold is acquired, it is added directly to the Central Bank of Nigeria (CBN) foreign reserves. It’s one of the fastest ways to reflect growth in our reserves,” he added.

Other African countries that have followed Ghana’s lead include Zambia, Uganda, and Rwanda, with many others, including Nigeria, set to follow — especially after the African Development Bank recommended the policy to African countries earlier this year.