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Policy Responses across Space and Time

Potential Illicit Financial Flow Risks in Ghana’s Gold-for-Oil Transaction

Risques potentiels de flux financiers illicites dans le cadre de la transaction ‘or contre pétrole’ au Ghana
Posibles riesgos de flujos financieros ilícitos en la transacción de oro por petróleo en Ghana
Fred M. Dzanku, Adubea J. Hall, Ama A. Ahene-Codjoe, Abigail A. Tetteh and Angela A. Alu


This chapter presents multidisciplinary perspectives on a unique barter trade arrangement—the Gold-for-Oil (G4O) policy initiated by the government of Ghana in November 2022. First, it uses econometric analysis to examine the economic motivation for the policy, that oil importation is the major driver of the depreciation of the domestic currency against the US dollar. Second, it provides a political economy overview of the policy, highlighting the governance issues surrounding the policy’s formulation and implementation processes. Third, it examines existing legal and regulatory frameworks, asking if due process was followed in these processes. The econometric analysis shows that although there is a positive and statistically significant long-run relationship between Ghana’s domestic currency depreciation and oil imports, the effect size is not large (the long-run oil import elasticity of the exchange rate is about 0.20), suggesting that even under the best case scenario of policy implementation within the right legal regime, the G4O initiative will not be a panacea for the perennial exchange rate volatility problem. The political economy and legal analyses highlight issues of insufficient consultations, disregard for legal foundations that might facilitate illicit financial flows (IFFs) through smuggling and illegal gold trade, the lack of transparency in the implementation of the policy and the pricing mechanisms that could increase the risk of IFFs through mispricing, and insufficient operational clarity. To enhance the policy’s effectiveness, it would be necessary to establish a comprehensive legal framework, foster stakeholder engagement, ensure transparency, and coordinate efforts among all parties. There should also be a general focus on reducing unnecessary importations and boosting exports. All these could reduce the risk of IFFs and ensure that Ghana’s natural resources are optimally utilised for the benefit of the population.

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1. Introduction

1The Ghana cedi (GHS)—the country’s official currency—depreciated by approximately 118 per cent against its major trading currency, the United States dollar (USD), between January and November 2022. This resulted in high levels of imported inflation and led to a general deterioration of living standards in the country. According to the Vice President of the Republic of Ghana, who is also the head of the government’s Economic Management Team, the underlying reason for this unprecedented depreciation was ‘demand for foreign exchange by oil importers in the face of dwindling foreign exchange reserves’. It must be noted that despite Ghana’s status as a net exporter of crude oil, the bulk of its refined petroleum products are imported, with around USD 2.92 billion spent on such imports in 2022 (Bank of Ghana, 2023). Of course, it could be argued that the post-COVID petroleum price recovery following the price slump during the first year of the global pandemic played a role in the rising demand for US dollars for imports and thus could also have had an impact on the domestic currency.

2To counter this situation, a major policy initiative called the Gold-for-Oil (G4O) policy was launched by the Vice President of Ghana in November 2022. This strategy involves using gold, instead of dollars, for procuring refined petroleum products. The Vice President extolled this barter trade approach as ‘the most important economic policy change in Ghana since independence’. The G4O initiative is projected to alter Ghana’s balance of payments significantly and to reduce demand for, and potentially the value of, the US dollar.

3Following the announcement of the G4O initiative by the Vice President and its subsequent implementation, concerns have been raised by some civil society organisations, lawyers and academics about whether or not there is a strong enough economic basis for the policy, and whether due process was followed. So far, the debate appears convoluted and unstructured, with political leanings and affiliations sometimes driving opinions. This chapter therefore provides a systematic analysis of the economic foundations of the policy, and the broader legal and political economy implications of the initiative. Specifically, it explores the potential illicit financial flow (IFF) risks posed by the G4O policy.

4Our multidisciplinary approach is motivated by the following. The motivation for the G4O policy was economic. Yet most of the discussions that followed the announcement of the initiative were centred largely on law and politics. It is thus important to first examine the short- and the long-term economic rationale of the policy initiative. This helps answer the question: Is there a strong enough economic basis for the G4O policy? Beyond analysis of the economic motivation for the policy, the rest of the debates following the policy announcement focused on legal and political economy justifications, with a major strand being made up by the potential implications for IFFs in general and trade-related IFFs in particular. By IFFs, we mean ‘Financial flows generated by methods, practices and crimes aiming to transfer financial capital abroad in contravention of national or international laws’ (OECD, 2014) and ‘cross-border transfers of money or assets connected with some illegal activity’ (Musselli and Bürgi Bonanomi, 2020, 14). In the latter definition, ‘illegal’ includes illicit activities that create negative effects in the jurisdictions in which they occur even if not illegal. To do justice to the debates in a structured manner therefore requires a multidisciplinary approach that embeds economic, legal and political economy analyses, and this is what this chapter contributes to the literature on the legal and political economy aspects of policymaking and implementation.

5The rest of the chapter proceeds as follows: The next section provides an operational definition of IFFs and describes the broad context of the G4O policy. Section 3 provides a brief evaluation of the economic rationale for the policy using econometric analysis. Section 4 then delves into political economy and legal analyses of the potential IFF risks posed by the policy. The final section concludes and presents implications for policy and practice.

2. Context of the G4O Policy

6The Vice President of Ghana made a significant announcement via his social media handles regarding the government’s exploration of a novel policy paradigm: exchanging gold for oil instead of using foreign currency for payments. According to the ‘Gold for Oil Programme Framework’ document (Governement of Ghana, 2023), which outlines the terms of the G4O deal, the policy operates within the existing Domestic Gold Purchase Programme (DGPP) of the Bank of Ghana (BoG), a programme that aims to support petroleum imports for the country. This latter programme, initiated in June 2021, seeks to bolster the BoG’s foreign exchange reserves by increasing its gold holdings in the foreign reserve portfolio.

7The Precious Minerals Marketing Company (PMMC)—the government of Ghana’s assayer—facilitates the purchase of gold through the BoG’s Domestic Purchase Programme, through both licensed small-scale and large-scale miners (Bank of Ghana, 2021). The BoG plays a pivotal role by exchanging an equivalent volume of gold for petroleum products from designated suppliers. Additionally, the BoG has the option to sell gold through established gold brokers. These brokers are responsible for providing forex cover to facilitate payments for petroleum products. The Bulk Oil Storage and Transport Company (BOST), a state entity, acts as an off-taker for petroleum products. BOST implements agreements with international oil trading companies (IOTCs) for the importation of petroleum products into Ghana. Subsequently, these products are sold to licensed bulk distribution companies. The National Petroleum Authority (NPA) plays a crucial role in determining the prices conveyed to the final consumer, promoting transparency and fair practices in the petroleum product market.

8The DGPP, a BoG initiative aimed at strengthening foreign exchange management operations, started in June 2021 (Bank of Ghana, 2021). The programme aimed to optimise the nation’s foreign reserves. According to the BoG, the G4O programme helped to increase gold reserves from 8.77 tonnes in June 2021 to 16.47 tonnes by July 2023, an increase of approximately 88 per cent.

9It must be noted that non-monetised resource exchange is not novel within the realm of global political economy. Taskinsoy (2019) characterised bartering as a form of trade that operates without the use of currency. Adam Smith, in his 1776 seminal work The Wealth of Nations, regarded bartering as a primitive activity (Smith, 1776). The origins of this practice can be traced back to colonial times, with instances including post-socialist Russia’s petro barter approach (Greskovits, 2003). The objective of the petro barter approach was to catalyse new political paradigms by emphasising local sovereignty and challenging the established norms of the international petrodollar system. It even sought to question the configurations of state and private entities within the oil sector prevalent during the Cold War era (Greskovits, 2003; Le Billon, 2001; Prokhorova, 2014).

10Barter trade saw its appeal renewed in many nations in the wake of the 2008 global financial crisis, which had left countries grappling with high levels of indebtedness coupled with dwindling foreign reserves (Taskinsoy, 2019). In recent times, a significant form of barter trade has involved the exchange of gold for oil (Shafiee and Topal, 2010; Yomi et al., 2023). Governments across the globe have actively participated in gold-purchasing programmes, driven by diverse motives such as bolstering economic stability, diversifying reserves, and safeguarding against currency fluctuations (Arslanalp, Eichengreen and Simpson-Bell, 2023; RCS Global, 2016; Zhao et al., 2015)

11The artisanal and small-scale gold mining (ASGM) industry is important for the success of the G4O policy. In 2021, the BoG reported that 20 per cent of gold reserves come from approved ASGM aggregators. The share of artisanal gold in the entire value chain is, however, hard to verity. Despite efforts by the state to formalise the ASGM sector, the challenges of informal trading networks persist, and this has implications for the DGPP and therefore for the G4O initiative since this could perpetuate IFFs. For instance, the identity of aggregators and how the new arrangement aligns with existing policies remain unclear. A comprehensive study conducted by the World Gold Council in 2016 delved into the strategies for and the challenges and key insights of crafting policies to regulate the ASGM industry, drawing from experiences in the Philippines, Mongolia, Ecuador and Ethiopia. It scrutinised how various central banks harnessed gold-purchasing programmes to bolster their reserves, uplift local communities, and establish a structured, sustainable ASGM sector (World Gold Council, 2021).

12A range of advantages are associated with central banks’ gold-purchasing initiatives, including the ability to procure gold using local currency, thus conserving foreign currency. Additionally, these programmes have played a pivotal role in facilitating the formalisation of small-scale mining operations, reducing reliance on harmful substances like mercury, fostering the adoption of pertinent standards by stakeholders, and supporting ASGM’s integration into the international market (World Gold Council, 2021). For instance, the Central Bank of Mongolia championed the implementation of the Fairmined Standard in alignment with Organisation for Economic Co-operation and Development (OECD) Responsible Sourcing Standards. Ecuador, meanwhile, adopted a stringent approach, exclusively purchasing gold from licensed miners who held legitimate bank accounts and ensuring a fair price.

13Given that the introduction of Ghana’s G4O policy was motivated by an economic problem—the unprecedented depreciation of the domestic currency attributed to increased forex demand for petroleum product imports—the next section seeks to answer the question of whether the empirical data provides strong justification for the policy.

3. The Economics of the G4O Transaction

14The G4O policy is expected to address the surging demand for the US dollar from petroleum importers, a factor that raises its price and consequently general consumer prices. The policy thus targets the stabilisation of two pivotal macroeconomic indicators: currency depreciation and inflation. Having a domestic currency (the Ghana cedi) that is strong relative to the US dollar (the foremost international trading currency) is expected to yield benefits such as reducing the domestic price of fuel, and consequently lower domestic market prices, diminish inflation and improve the national trade balance.

15However, the expected gains need to be juxtaposed with potential long-term effects such as decreased revenues from exports including crude oil and increased costs of imported inputs with a consequent rise in production costs. Although gold prices exhibit comparatively less volatility than oil prices and exchange rates, their interplay is influenced by multifaceted factors such as seasonality, geopolitics, speculation, hedging, and global supply and demand dynamics. This complexity makes it challenging to accurately gauge the impacts of gold and oil markets on a country’s domestic economic activities, encompassing exchange rate determination, inflation, and overall economic stability.

16This section addresses the following question: Does the relationship between oil imports and exchange rates support the motives of the G4O policy? In an empirical econometric analysis we examine the interplay between fuel imports, the exchange rate, and other macroeconomic indicators. By doing so, we seek to illuminate the potential viability of the policy.

3.1 Examining the Relationships between Exchange Rates and Oil Imports

17The G4O policy assumes that the GHS/USD exchange rate ( is driven chiefly by an increasing demand for foreign exchange from oil importers in the presence of declining foreign exchange reserves. We examine this supposition by specifying the following general model:


18where is oil imports and is the vector containing other macrocosmic correlates of the exchange rate (general price levels, interest rate, money stock, trade balance and real per capita output).

  • 1 The null hypothesis is that a series is non-stationary. Depending on the nature of the series, the (...)

19Empirically, we first check the integration order of all the variables of interest using an augmented Dickey–Fuller test. All our series are either I(0) or I(1).1 The autoregressive distributed lag (ARDL) model is ideal for our data because the series are of varying orders of integration. We employ the bound testing procedure to examine the presence or otherwise of a long-run equilibrium relationships (cointegration) between , and the other covariates. In the presence of a long-run relationship, the ARDL model is applied to examine the empirical relationships of interest. The general form of the model is:


  • 2 In particular, we test for serial correlation, heteroscedasticity, and non-normality. Where initial (...)

20where and are the intercept and linear trend, and p and q are the lag orders for the dependent variable (and endogenous covariates (, respectively; represents exogenous variables. In our case, represents two period dummies: the period of commercial oil production (2011–2022) and the period of the implementation of the BoG inflation targeting policy (2007–2022). We choose optimal lag orders (p and q) based on the Akaike information criterion. We implement tests to ensure that all models satisfy the relevant distributional assumptions.2

3.2 Results of the Empirical Econometric Analysis

21Data for the analysis is obtained from two main sources: the World Development Indicators database compiled by the World Bank (World Bank, 2022) and the International Financial Statistics published by the International Monetary Fund (IMF). The data for the study spans the period 1980 to 2022. Table 9.1 presents summary statistics of key variables. Figure 9.1 (a, b and c) displays the associated time-series graphs. Some of the variables appear stationary at a glance while others are not.

22Some of the series exhibit extremely high volatility over the period as shown by the coefficient of variation (CV), thus making analysis of year-to-year variation worthwhile. The official exchange rate, for instance, is highly asymmetrical with a CV value of 152 per cent, indicating a weakening Ghana cedi against the US dollar. Per capital gross domestic product (GDP) growth shows the highest volatility rate, with a CV of 209 per cent. Inflation is also quite volatile, with a CV of about 92 per cent. The import–export ratio exhibits the lowest variability, with a CV of about 18 per cent. This suggests that the structure of external trade has remained relatively stagnant. On average, over the period the value of imports exceeds that of exports, with a foreign trade deficit of about 33 per cent.

Table 9.1 Summary statistics for variables.






CV (%)

GHS/USD exchange rate






Fuel imports (Bil USD)






Import-export ratio






Treasury bill rate (%)






Inflation rate (%)






Per capita GDP growth (%)






Source: the authors.

Table 9.2 Correlations between variables.


Correlation coefficient

GHS/USD exchange rate (log) & Import-export ratio


GHS/USD exchange rate (log) & Fuel import (log)


GHS/USD exchange rate (log) & Interest rate (log)


GHS/USD exchange rate (log) & Consumer price (log)


GHS/USD exchange rate (log) & Per capita GDP growth


Import-export ratio & Fuel import (log)


Import-export ratio & Interest rate (log)


Import-export ratio & Consumer price (log)


Import-export ratio & Per capita GDP growth


Fuel import (log) & Interest rate (log)


Fuel import (log) & Consumer price (log)


Fuel import (log) & Per capita GDP growth


Interest rate (log) & Consumer price (log)


Interest rate (log) & Per capita GDP growth


Consumer price (log) & Per capita GDP growth


Source: the authors.

Figure 9.1.a Time-series graphs for the key variables.

Figure 9.1.a Time-series graphs for the key variables.

Source: the authors.

Figure 9.1.b Time-series graphs for the key variables.

Figure 9.1.b Time-series graphs for the key variables.

Source: the authors.

Figure 9.1.c Time-series graphs for the key variables.

Figure 9.1.c Time-series graphs for the key variables.

Source: the authors.

23Table 9.2 shows pairwise correlation between the variables. All the correlations are positive (after log transforming some of the variables). The correlation between the GHS/USD exchange rate and the import–export ratio is not as large as one might expect. While the correlation between fuel imports and the exchange rate is much larger, it is still not as high as speculated. It must be noted that these indicate only associations and tell us nothing about causality. The largest correlation coefficient is between the exchange rate and consumer prices (0.988), indicating significant exchange rate pass-through. This means that a high proportion of inflation might be imported. Next we present the regression results, which could help unravel more robust associations and causal relationships among the variables of interest.

  • 3 The purpose of this stepwise approach is not for variable selection but to see how the model behave (...)

24The regression results are presented in the appendix (Tables 9A1 and 9A2). Table 9A1 shows long-run results of six stepwise ARDL regressions.3 The table displays the bounds test results for determining the presence of a long-run relationship. Model 1 admits only the import–export ratio variable. The bounds test F– and t-statistics suggest we cannot reject the null hypothesis of no long-run relationship at the 0.05 and 0.01 levels. Although the estimated long-run import–export ratio elasticity of the exchange rate is economically important (1.48), it is imprecisely estimated—95% CI [–0.203, 3.167]. This further casts doubt on the presence of a long-run relationship.

25The covariate in Model 2, fuel imports, is at the core of the G4O policy. Here, there is overwhelming support for a long-run relationship with the exchange rate. The estimated long-run oil imports elasticity of the exchange rate is about 0.63—95% CI [0.179, 1.091]. Without accounting for other covariates as we do in Models 3–6, this result supports a long-run justification for the policy. What happens when we include other covariates? First, after accounting for the import–export ratio (Model 3), the F– and t-statistics from the bounds test support a long-run relationship at the 0.05 level but are inconclusive at the 0.01 level. The long-run coefficient of oil imports remains precisely estimated while the coefficient on the overall import–export ratio remains noisy. The oil import elasticity reduces to 0.48, 95% CI [0.119, 0.851].

26When we include the other candidate variables except the import–export ratio (Model 4), the bounds test strongly supports a long-run relationship and the oil import elasticity reduces slightly to 0.43 and remains statistically significant (p-value = 0). The coefficients of the other covariates also have the expected signs and are quite precisely estimated. Next, we re-estimated Model 4 replacing the oil imports variable with the overall import–export ratio (Model 5), assuming that including both in the same model might mask their individual effects. In this model, there is no ambiguity about the presence of a long-run relationship and the long-run coefficients are significant at either the 0.05 or the 0.01 level. The long-run import–export ratio elasticity is 0.63 with a 95% CI of [0.156, 1.103], so increasing demand for imports does drive GHS/USD exchange depreciation in the long run.

27Finally, Model 6 includes all the selected covariates. Not only do most of the effect sizes of the elasticities reduce, some of the coefficients lose precision: the import–export ratio returns imprecise; the fuel import elasticity is now only about 0.20 although significant at the 0.05 level. The estimated interest rate elasticity is about unity with a zero p-value to three decimal places. Per capita GDP growth has a depreciation fuelling effect, raising long-run depreciation by about 3 per cent for a percentage point rise in growth. There could be a number of reasons for this. One is the trade deficit that is created by increasing demand for imported goods and services as per capita growth rises. This increases demand for foreign currency, thus fuelling depreciation. There are, of course, other possible channels through which growth could have a currency depreciating or appreciating effect. Here, however, the depreciation precipitating channels seem to dominate.

28The estimated speed-of-adjustment coefficients () range between –0.294 and –0.950, suggesting that, depending on the model, equilibrium deviations due to negative shocks are corrected by between 29 per cent and 95 per cent in a year. In the ‘full model’ (Model 6), an equilibrium disturbance due to a negative shock is corrected by 67 per cent within one year.

29Table 9A2 reports the short-run error correction component of the ARDL Models 1, 2, 5 and 6 presented in Table 9A1. There is evidence of short-term persistence and feedback effects of the exchange rate.

30Having established that the economic motivation for the G4O policy is justified, even though the long-run effects of oil imports on exchange rate depreciation may be overemphasised, we next provide a legal and political economy analysis of the initiative.

4. Political Economy and Legal Analysis of the G4O Policy

31Developing nations with ample natural resources are increasingly adopting a policy option whereby they trade some resources for processed goods, infrastructure, or loans. This is often observed in crude oil being swapped for refined petroleum products to meet domestic fuel demands (EITI, 2021). The Nigerian government, for instance, has engaged in swaps with traders, exchanging crude oil for refined petroleum products. (EITI, 2021). There have been issues about the losses—of more than USD 2 billion—incurred as a result of crude oil swaps and offshore processing arrangements, about retained earnings by The Nigerian National Petroleum Corporation, and about the pricing of domestic crude sales. In 2016, Nigeria discontinued the crude oil swap and offshore processing arrangements (EITI, 2019, 5). Other countries—such as Côte d’Ivoire, Angola and the Democratic Republic of Congo—have engaged in similar swap deals. In the Ghanaian context, it is important to highlight that there is no historical evidence of the government participating in oil swap arrangements similar to those involving crude for petroleum products or infrastructure seen in other African countries. Nevertheless, in the mining sector the government has established a collaboration with a Chinese state-owned company, entailing the exchange of bauxite for a two billion dollar loan, the proceeds of which are intended to support the development of certain infrastructure projects. It has been observed that these kind of swap deals are carried out without proper legal frameworks, despite evaluations of such exchanges emphasising the need for such frameworks as they are crucial to preventing conflicts with existing laws and to avoiding the exacerbation of issues arising from a lack of regulation.

32Legal frameworks play a fundamental role in facilitating the process of policymaking. Ghana’s 1992 constitution (Republic of Ghana, 1992), specifically Article 34, establishes the significance of the Directive Principles of State Policy as a guiding force for governmental policy decisions. Also, the National Public Policy Formulation Guidelines (NDPC, 2020) necessitate that each policy undergoes assessment by the Attorney General to ensure its alignment with the law. In the policy formulation process, a preliminary policy document should be submitted to the Office of the Attorney General and Ministry of Justice for evaluation of its legal implications. The Attorney General’s responsibility involves scrutinising the draft policy to ensure its harmony with both domestic and international laws as well as proposing corrective measures. In essence, the legal framework precisely delineates the boundaries and parameters within which policymaking operates.

33It appears that the G4O policy is being implemented without sufficient legal foundations. This absence of a proper legal framework raises concerns about the potential for IFFs. This section first describes the governance issues that arose following the announcement of the policy and then examines the legal and regulatory gaps that might enable IFFs in the execution of the policy.

4.1 G4O Governance Architecture and Stakeholder Views on Possible IFF Risks

34As described in Section 2 of this chapter, a number of institutions must work together seamlessly to ensure the successful implementation of the policy. The integration of multiple stakeholders and governmental bodies highlights a collaborative approach aimed at optimising national resources for the benefit of the country and its citizens. However, the gold and the oil sectors in Ghana consist of other key institutions such as the Ministry of Lands and Natural Resources, the Mineral Commission, the Ministry of Finance, the Ghana Revenue Service, the Attorney General, and parliament, all of whom must be extensively consulted to ensure that the policy does not create loopholes that could be exploited by gold traders thereby increasing incentives for IFFs. The ASGM sector could be particularly vulnerable given the already complex nature of activities in that value chain. According to Thomas et al. (2019), the participation of state and non-state actors, the international community, and policy think tanks is essential to efforts to enhance consideration of the ASGM sector in the implementation of programmes and projects.

35The introduction of the G4O policy sparked a wave of reactions from various stakeholders, including the major opposition party, media outlets, civil society organisations, academia and think tanks. Former President John Mahama, the leader of the National Democratic Congress and a prominent figure in Ghanaian politics, criticised the policy for its lack of transparency. He emphasised the necessity of parliamentary scrutiny and approval, drawing attention to past international agreements that turned out to be unfavourable due to inadequate oversight and implementation by the government.

36In contrast, the Chief Executive Officer of the PMMC contended that the G4O policy had led to a significant reduction in fuel prices, of 9.6 per cent, attributing this positive development to the policy itself (Nyabor, 2023). This assertion was, however, disputed by the Africa Centre for Energy Policy, which argued that there was no evidence of a direct correlation between the G4O programme and fuel prices. The Centre further expressed concerns that the policy might inadvertently concentrate undue influence over the gold and oil value chain in the hands of politicians, underscoring the importance of careful examination and analysis in policy evaluation (Atawoge, 2022).

37These contrasting viewpoints underscore the importance of a comprehensive and critical assessment of the G4O policy that considers both its potential benefits and risks. They also emphasise the need for transparency, robust scrutiny, and open dialogue involving various stakeholders to ensure that policies of such a magnitude align with the nation’s best interests.

38One primary concern is potential redundancy faced by licensed gold sellers due to the exclusive authority granted to the PMMC to purchase gold. These sellers may seek alternative avenues to sustain their businesses, potentially resorting to covert buying and selling practices. Such a covert trade environment creates fertile ground for illicit activities such as smuggling and tax evasion. By circumventing official channels, these activities not only undermine the government’s revenue collection efforts, they also reduce the transparency and integrity of the gold trade. Further, failure to engage with the relevant institutions and not abiding by internationally agreed regulations and standards regarding international trade may expose the initiative to rent seeking behaviours.

39The formulation and implementation of the G4O policy are rooted in a nexus of economic and political decisions. This necessitates a thorough, pre-implementation examination of stakeholders’ involvement in order to unearth potential vulnerabilities to IFFs. There is a need to actively engage both the legal and the illegal miner, both state and non-state actors, both the political and the economic sphere to ascertain how to use the BoG DGPP and the G4O policy to address existing challenges within the mining sector.

40Despite the purported success attributed to the G4O initiative, the extent to which this success effectively tackles prevailing challenges in the gold mining sector remains unknown. Notably, the policy fails to directly confront the pervasive informality that characterises the ASGM sector, thus potentially perpetuating IFFs. Addressing this would not only contribute to a nuanced understanding of the policy’s impact, it would also serve as a foundation upon which to refine and fortify its strategies to effectively curb illicit financial activities in the large- and small-scale gold mining sectors.

41We now turn to our legal analysis of the G4O policy, examining the debates about whether due process was followed, and what the likely risks and implications are for IFFs in the gold value chain in particular and the natural resource sector in general.

4.2 Legal Basis for the G4O Deal

42Ghana distinguishes between large-scale and small-scale gold mining licences. Large-scale companies usually sell gold at the spot price through international agreements, not locally. The BoG typically cannot buy gold from large-scale miners under the DGPP. Although the Ministry for Lands and Natural Resources (MLNR) initially mandated large-scale miners to sell 20 per cent of their refined gold to the BoG in local currency (GHEITI, 2022), this rule was not included in the G4O policy framework.

43Small-scale miners are, however, obligated to sell their gold to the PMMC or government-licensed gold buyers. Consequently, in the G4O policy framework all licensed small-scale gold miners and community mining schemes are required to sell their gold exclusively to the BoG via the PMMC. According to the MLNR, mining licences for these entities should incorporate a clause compelling them to sell their gold to the government (GHEITI, 2022). There is doubt, however, regarding whether existing small-scale mining licences include such a clause, given the timeline for the G4O policy’s implementation. Most small-scale miners who have been instructed to sell their gold to the BoG likely hold licences that do not include this requirement. Though section 84 of the Minerals and Mining Act, 2006 (Act 703) empowers the MLNR to attach specific conditions to small-scale licences, it also stipulates that such licences can last up to five years initially, with the renewal period determined at the Minister’s discretion (Republic of Ghana, 2006). Thus, during the policy’s rollout, many small-scale miners might not have been obligated to sell to the BoG, potentially conflicting with existing contractual agreements with gold-purchasing entities. This defies the sanctity of the miners’ contractual licence with gold buyers.

44Small-scale gold mining in Ghana is primarily conducted informally, making it susceptible to IFFs due to exploitation by criminal networks (Baku, 2021). IFF risks related to the trade in gold from the artisanal and small-scale mining (ASM) sector are mainly associated with gold smuggling and illegal mining activities (Baku, 2021). The framers of the DGPP expect to formalise the ASM sector, aiming to reduce its vulnerability to illegal actors in both domestic and international gold supply chains. The Ghana Extractive Industry Transparency Initiative (GHEITI) also affirms that the G4O policy aims to centralise gold purchases from the ASM subsector, similar to the cocoa sector, providing the country with increased control over its gold exports.

45However, the G4O policy could, as highlighted by the GHEITI (2020), potentially lead to an increase in smuggling since some small-scale miners engage in forward sales with foreign buyers. These forward sales involve commitments to deliver gold doré in exchange for foreign currency at a later date, and typically occur outside organised markets through private negotiations. However, this practice involves risks, particularly regarding defaults on the part of the sellers. Consequently, forward gold purchase agreements usually include substantial penalties for sellers that fail to meet their delivery obligations by the specified date.

46The implementation of the G4O policy introduces a challenge to the integrity of these forward gold purchase agreements within the ASM sector, because it could be interpreted as a significant change in circumstances, which in legal terms could be considered a ‘frustrating event’ that discharges the parties from their contractual obligations. In other words, the policy’s introduction might lead to the inability of small-scale miners to fulfil their prior agreements, impacting the sanctity of these contracts.

47Historically, government interference has disrupted private commercial agreements (Drachsler, 1957), and small-scale miners can legally use the G4O policy to void contracts with foreign gold buyers. They are, however, likely to avoid this option due to the customisation and higher premiums associated with forward gold sales. Instead, to personalise contracts, gain premiums and sidestep government mandates, miners might continue illegal gold trading involving smuggling. Thus, the goal of formalising the ASM sector through the DGPP and the G4O policy could become counterproductive, fostering more illegal trade unless this situation changes.

48Ghana is committed to the implementation of the Extractive Industries Transparency Initiative (EITI) standards, which seek to promote natural resources management and strengthen accountability within the extractive sector. A particularly relevant standard is Requirement 4.3, which pertains to ‘Infrastructure Provision and Barter Arrangements’. It specifies that

The multi-stakeholder group is required to consider whether there are any agreements, or sets of agreements involving the provision of goods and services (including loans, grants, and infrastructure works), in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities. To be able to do so, the multi-stakeholder group needs to gain a full understanding of the terms of the relevant agreements and contracts, the parties involved, the resources [that] have been pledged by the state, the value of the balancing benefit stream (e.g., infrastructure works), and the materiality of these agreements relative to conventional contracts (EITI, 2021, 8).

49Additionally, the guidance note related to EITI Requirement 4.3 provides an interpretation of the term ‘barter arrangements’ as encompassing ‘Agreements involving the exchange of mineral, oil, and gas commodities, whereby the state’s in-kind revenues of mineral, oil, and gas commodities are exchanged for other types of commodities. These include swaps, refined product exchange agreements, and offshore processing agreements’ (EITI, 2021, 10).

50The G4O policy involves using gold doré to pay for oil supplied through a barter trade arrangement, meeting the definition of Requirement 4.3 under the EITI standards. While such barter arrangements are legal in Ghana, the country’s commitment to the EITI necessitates the transparent disclosure of their terms for accountability purposes. The guidance note offers some direction on the type of information and data participating countries and companies can disclose to ensure transparency in barter arrangements. However, the effectiveness of these reporting guidelines raises questions, primarily due to the complexity of such arrangements in comparison to monetary transactions.

51The G4O policy is particularly complex considering the substantial variation in the character and value of the goods involved in the exchange. Given the complexities associated with barter arrangements, the necessity for tailored, legally binding contracts that explicitly outline the terms and conditions of the exchange becomes an imperative. This customisation of agreements introduces an additional stratum of intricacy, mainly because there are no universally standardised templates available as guidance for such unique arrangements. Consequently, the imperative to disclose the content and specifics of such arrangements becomes even more crucial if transparency is to be ensured. The duty to disclose the value of the commodities being exchanged, the payments executed, the revenues accrued by the government and the taxes being imposed becomes considerably more challenging if the government does not demonstrate a minimum commitment to transparency.

  • 4 The Attorney General Vrs Balkan Energy Ghana Limited & Others (J6/1/2012) [2012] GHASC 35.

52The lack of transparency of the G4O policy stems from the government’s failure to submit it to parliament for approval, as required by Article 181(5) of the 1992 constitution. This provision mandates that all international economic transactions in which the government is involved must receive parliamentary approval before their implementation. The Supreme Court’s interpretation, as demonstrated in the case of The Attorney General vs. Balkan Energy Ghana Limited & Others (2012),4 provides criteria for identifying such transactions. First, a transaction will be considered international within the meaning of Article 181(5) if it has a significant foreign element. According to the Court, a transaction will be considered a business or economic transaction within the meaning of Article 181(5) if it has a connection to the country’s wealth and resources. The Court also highlights the importance of accountability and probity as having relevance to the meaning of Article 181(5). Consequently, the G4O transaction, being an economic deal with foreign elements and implications for national wealth, can be seen as falling under the Article 181(5) requirements for parliamentary scrutiny.

  • 5 Felix Klomega vs. The Attorney-General, Ghana Ports and Harbours Authority, Meridian Port Holdings (...)

53The interpretation of ‘Government’ in Article 181(5) is crucial to the identification of international transactions that are subject to this provision. In Felix Klomega vs. The Attorney-General (2013), the Supreme Court ruled that ‘Government’ encompasses the executive, legislature, and judiciary,5 excluding statutory agencies with separate legal identities. The question is whether this definition applies to the BoG. According to section 1 of the Bank of Ghana Act, 2002 (Act 612), the BoG has a separate legal identity since it can sue and be sued in its corporate name (Bank of Ghana, 2007). Also, it has the power to enter into contracts and transactions in its own name. However, the Supreme Court has noted that the interpretation that the word ‘Government’ does not apply to autonomous agencies is not an absolute rule. Institutions can fall under Article 181(5) if they mirror a government’s actions, becoming its alter ego.

54The question arises as to whether the BoG can be considered the alter ego of the Government in the G4O transaction. The G4O programme framework sheds light on this matter. Its opening statement establishes the policy as a government initiative, and throughout the document numerous references to the government imply that the BoG lacks independence in executing the policy. The involvement of the Vice President, who champions its benefits, further reinforces the government’s role in the policy’s formulation.

55The prevailing viewpoint within the parliamentary majority is that parliamentary approval is not requisite for the programme, asserting that the programme falls under the purview of the DGPP of the BoG. Additionally, it is asserted that the BoG, by legal mandate, is not obligated to report all its transactions to parliament. However, this argument presents a challenge in light of the antecedent paragraph, which establishes that the BoG is not operating autonomously under the G4O policy but rather as the alter ego of the government.

56According to Article 181(5) and the Supreme Court’s interpretation, the G4O transaction should have been presented to parliament for approval due to its significant economic and financial impact on the nation. The failure to seek parliamentary approval undermines the legitimacy of the BoG’s agreements with IOTCs that provide petroleum products in exchange for gold. This situation engenders a tangible risk concerning the breach of contracts with IOTCs in subsequent instances where successive governments fail to adhere to the stipulations of agreements pertaining to the sale of crude oil to these IOTCs. Historical observations reveal that such instances of default commonly precipitate legal disputes, ultimately culminating in substantial debts being incurred by the nation. Based on the present analysis, there appears to be no solid legal foundation for the G4O policy.

4.3 A Legal Review of the G4O Programme Framework

57This subsection assesses key components of the G4O policy. These include the valuation of gold and the pricing methods for the purchase of gold, how the proceeds will be transferred, how financing will be obtained for the purchase of gold, the buyer selection method and process and the tax implications of the transaction.

58A notable concern in the G4O policy framework is the absence of a specified pricing method for the deal. Additionally, the GHEITI has highlighted that refining gold before sale can impact its realised value. Paragraph 8 of the policy framework elaborates on the execution of the barter trade, indicating that the BoG and the IOTC will establish a gold metal account at an agreed-upon refinery for gold transfer purposes. This implies gold will be refined before serving as payment for petroleum products. In the case of gold trade through the broker channel, meanwhile, the policy framework’s language suggests that gold might not be refined. Paragraph 8, once more, outlines a process wherein the BoG will establish a gold supply agreement with a gold broker, whereby the broker acquires doré gold (so, unrefined gold) and provides forex cover for petroleum products.

59At the launch of the BoG’s DGPP, it was explained that pricing would rely on an agreed-upon pricing source and the cedi–dollar exchange rate to determine gold’s value, followed by payment within 48 hours to the gold aggregator. A ministerial directive (GHEITI, 2020) has stated that gold purchased by the BoG and the PMMC under the G4O policy would be bought at the spot price without discounts. This pricing method is not, however, evident within the policy framework itself.

60The G4O policy framework lacks provisions concerning the pricing method for gold being sold through the broker channel. This shortcoming could potentially enable the government to use private agreements to determine gold prices within the programme, creating opportunities for price manipulation through mispricing and undervaluation, both which can serve as avenues for IFFs.

61The G4O policy framework also lacks transparency regarding the criteria for selecting suppliers/buyers for gold sales and refined petroleum product purchases. The OECD (2019) acknowledges that buyer selection processes can be susceptible to corruption, leading to the selection of buyers who purchase goods at below their market value or who are unable to fulfil their contractual obligations. The absence of regulation in this process could also allow politically exposed individuals to unduly benefit from the policy through pecuniary interests in transactions.

62The Public Procurement Act, 2003 (Act 663) outlines procedures that organisations like the BoG must follow when sourcing and awarding contracts (Republic of Ghana, 2003). Political interference has, however, hindered the effective implementation of Ghana’s public procurement laws. To address potential corruption and mitigate the risk of IFFs in the buyer selection process, the OECD (2019) suggests establishing an independent buyer selection team free from political influence. Challenges in the buyer selection process could also be addressed through beneficial ownership disclosure, which is now mandatory under Ghana’s Companies Act, 2019 (Act 992). This would enhance transparency by requiring companies to reveal their ultimate beneficial owners, thus reducing the potential for hidden interests and corruption.

63The GHEITI Report on the Oil and Gas Sector 2020 (2020) points out the lack of clarity regarding how the overall transaction costs for the G4O initiative will be covered. While the government will need funds for gold purchases, the specific means of obtaining these funds remain unspecified. It is unclear whether sources such as loan syndication, central bank financing or government budget allocation will be used. According to the NPA, Ghana’s average monthly petroleum product import expenses range from USD 350 million to USD 400 million. The absence of a clear financing plan leaves room for potential manipulation by the government and violates the Public Financial Management Act, 2016 (Act 921), which requires the responsible handling of public funds. Responsible fund management necessitates transparency with regard to the source of fund. The process by which proceeds from the sale of gold will be transferred before being used to buy petroleum products is insufficiently described within the programme framework. This issue is part of a broader challenge regarding gold revenue management.

64Finally, it is imperative to critically analyse the tax ramifications associated with the policy, given that the G4O transaction falls within the purview of taxable activities as defined by Ghana’s prevailing tax legislation. It is worth emphasising that there is no evidence to suggest that the transactions conducted under the auspices of this policy have been granted any tax exemptions, as no such proposal has been presented before the Ghanaian parliament. It is essential to note that, as per Article 174 of the 1992 constitution, the authority to grant waivers or modifications to taxation requirements is vested exclusively in the hands of the parliament.

4. Conclusion and Implications

65Using a case study of a new government policy that was introduced in an unconventional manner, this chapter has presented a multidisciplinary analysis of policymaking processes and outcomes in a developing country context. Ghana’s G4O deal represents an intricate interplay of economic, legal and political economy issues that provides fertile ground for such an analysis.

66First, our econometric analysis underscores the interconnectedness of forex demand, currency depreciation, inflation and living standards, providing a critical lens through which to evaluate the economic motivation for the G4O policy and shedding light on its potential effects on the behaviour of the country’s exchange rates. Although the econometric analysis lends some support to the policy, it does not appear that this would have a game-changing effect on Ghana’s exchange rate volatility given the long-run oil import elasticity of exchange rate of about 0.20. This means that if the rates of change between the macroeconomic determinates of exchange rates were constant, a 10 per cent decrease in oil imports (which would mean reduced demand for US dollars from oil importers) would dampen exchange rate depreciation by approximately 2 per cent, holding other factors constant.

67From a political perspective, striking a harmonious balance between the gold mining and oil sectors necessitates astute political decision-making, active stakeholder engagement, and a focus on long-term socio-economic prosperity. Ghana’s journey towards effective natural resource governance requires institutional strengthening, evidence-based policymaking, and sustained citizen participation throughout the policy life cycle. By prioritising the nation’s overall well-being over short-term political gains, the nation can harness its natural resource wealth to achieve more equitable and sustainable outcomes.

68Perhaps the most important strand of the arguments concerning the G4O policy concerns its adherence or otherwise to laws and regulations. The discourse surrounding the policy underscores the imperative for transparency and adherence to legal frameworks. The call for parliamentary oversight and public scrutiny is crucial if the policy’s credibility is to be upheld, as opacity will only breed scepticism regarding its legal basis. The disclosure of essential transaction details is paramount to efforts to counteract IFFs and maintain alignment with EITI standards. This entails revealing pricing methods, buyer selection processes, involved parties and beneficial ownership information to effectively combat IFFs.

69The absence of sufficient transparency in the implementation of the policy introduces challenges in the identification and evaluation of potential disparities in taxation under the policy, as well as the emergence of tax avoidance and evasion mechanisms, which could contribute to IFFs. Given that the policy encompasses trade in gold, it is imperative that the applicable tax obligations, including but not limited to income tax, value added tax and export duties, be adhered to by mining companies, the PMMC and the BoG, in strict accordance with the provisions outlined in the Income Tax Act of 2015 (Act 896), the Value Added Tax Act of 2013 (Act 870) and the Customs and Excise (Duties and Other Taxes) Act of 2013 (Act 864).

70One way of ensuring transparency and accountability would be for the policy to explicitly state the pricing method for the transaction, whether gold would be sold based on valuation or not. Introducing a legal requirement for the PMMC and the BoG to disclose the actual prices at which they purchase gold would enhance transparency. Similarly, the G4O policy documents should mandate the BoG to disclose the prices at which gold is sold through the broker channel. This would promote openness, minimise the risk of manipulation, and contribute to the prevention of IFFs.

71Currently there exists no established legal and regulatory framework for monitoring and managing the revenues generated from gold sales. If this gap is to be addressed, it crucial that parliament pass a mineral revenue management law. Such legislation would establish mechanisms to track and oversee the revenues generated from both the sale and the purchase of gold under the G4O policy, promoting transparency and effective revenue management.

72In summary, effectively navigating the intricacies of resource governance requires a comprehensive strategy encompassing adherence to legal frameworks, inclusive stakeholder engagement, transparency, and a dedicated commitment to the nation’s well-being through sound political and economic principles. Through these measures, Ghana can chart a course that optimises the advantages offered by its natural resources, safeguarding the enduring welfare of its populace and the resilience of its economy.


Table 9A1 Long-run relationship between GHS/USD exchange rate economic variables.


Model 1

Model 2

Model 3

Model 4

Model 5

Model 6

Speed-of-adjustment (- α)



















Ln Import-export ratio (θ1)













Ln Fuel imports (θ2)













Ln Interest rate (θ3)










Ln Inflation rate (θ4)










Per capita real GDP growth (θ5)

















Constant included







Trend term included







Adj R-squared







Serial-correlation test p-value







Heteroscedasticity test p-value







Normality test p-value







Bounds test F-stat







F-stat. CV @ 5% I(0)







F-stat. CV @ 5% I(1)







F-stat. CV @ 1% I(0)







F-stat. CV @ 1% I(1)







Bounds test t-stat







t-stat. CV @ 5% I(0)







t-stat. CV @ 5% I(1)







t-stat. CV @ 1% I(0)







t-stat. CV @ 1% I(1)







Note: The values in parentheses are standard errors while those in brackets are p-values. The lag orders for the models are: Model 1 ARDL(4, 2); Model 2 ARDL(3, 2); Model 3 ARDL(4, 2, 2); Model 4 ARDL(2, 3, 3, 0, 4); Model 5 ARDL(4, 1, 4, 0, 3); and Model 6 ARDL(3, 1, 1, 4, 0, 0).

Source: the authors.

Table 9A2 Equilibrium correction form of the ARDL exchange rate equations.


Model 1

Model 2

Model 5

Model 6

Δ Ln Exchange rate (t-1)













Δ Ln Exchange rate (t-2)













Δ Ln Exchange rate (t-3)







Δ Ln Import-export ratio










Δ Ln Import-export ratio (t-1)




Δ Ln Fuel imports







Δ Ln Fuel imports (t-1)




Δ Ln Interest rate







Δ Ln Interest rate (t-1)







Δ Ln Interest rate (t-2)







Δ Ln Interest rate (t-3)







Δ Per capita real GDP growth




Δ Per capita real GDP growth (t-1)




Δ Per capita real GDP growth (t-2)




Period of oil production













Period of inflation targeting














Note: SE are in parentheses; p-values are in brackets.

Source: the authors.

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1 The null hypothesis is that a series is non-stationary. Depending on the nature of the series, the test is applied including a trend term, a drift, or the variable’s lagged value of the difference.

2 In particular, we test for serial correlation, heteroscedasticity, and non-normality. Where initial tests show the presence of serial correlation, we adjust the lag orders to ensure model assumptions are satisfied.

3 The purpose of this stepwise approach is not for variable selection but to see how the model behaves as subsequent variables are added.

4 The Attorney General Vrs Balkan Energy Ghana Limited & Others (J6/1/2012) [2012] GHASC 35.

5 Felix Klomega vs. The Attorney-General, Ghana Ports and Harbours Authority, Meridian Port Holdings Limited and Meridian Port Services Limited [2013] DLSC2748.

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List of illustrations

File image/png, 18k
File image/png, 11k
Title Figure 9.1.a Time-series graphs for the key variables.
Credits Source: the authors.
File image/png, 53k
Title Figure 9.1.b Time-series graphs for the key variables.
Credits Source: the authors.
File image/png, 52k
Title Figure 9.1.c Time-series graphs for the key variables.
Credits Source: the authors.
File image/png, 45k
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Cite this article

Electronic reference

Fred M. Dzanku, Adubea J. Hall, Ama A. Ahene-Codjoe, Abigail A. Tetteh and Angela A. Alu, Potential Illicit Financial Flow Risks in Ghana’s Gold-for-Oil TransactionInternational Development Policy | Revue internationale de politique de développement [Online], 17 | 2024, Online since 28 May 2024, connection on 16 June 2024. URL:; DOI:

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About the authors

Fred M. Dzanku

Fred M. Dzanku is senior research fellow at the Institute of Statistical, Social and Economic Research of the University of Ghana.

By this author

  • Réduire les flux financiers illicites dans le commerce des matières premières, et au-delà
    Frenar los flujos financieros ilícitos en el comercio de productos básicos, y más allá
    Published in International Development Policy | Revue internationale de politique de développement, 17 | 2024

Adubea J. Hall

Adubea J. Hall is a lecturer at the School of Law of the University of Ghana.

Ama A. Ahene-Codjoe

Ama A. Ahene-Codjoe is a lecturer at the Department of Agricultural Economics and Agribusiness of the University of Ghana.

Abigail A. Tetteh

Abigail A. Tetteh is a PhD student at the Department of Political Science of the University of Ghana.

Angela A. Alu

Angela A. Alu is a fiscal policy adviser at Oxfam, Ghana.

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The text only may be used under licence CC BY-NC 4.0. All other elements (illustrations, imported files) are “All rights reserved”, unless otherwise stated.

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