The Nigerian Senate is evaluating a new bill aimed at increasing the proportion of gold in the country’s foreign reserve assets from 4 per cent to 30 per cent. This initiative seeks to diversify Nigeria’s reserves away from reliance on the US dollar and towards a more sustainable commodity.
According to a Bloomberg Africa report, a draft bill before the Senate proposes policies designating the Central Bank as the automatic purchaser of all gold produced in the country. Currently, Nigeria’s reserves stand at $34.8 billion, with gold accounting for only 4 per cent as of the end of November.
If the new bill is adopted, Nigeria’s largely informal gold mining industry will be integrated into the formal sector and come under the jurisdiction of the Central Bank. Additionally, the Senate is proposing the establishment of a Gold Reserve Authority to oversee the management of the country’s gold reserves, aiming to bring more structure and oversight to the gold reserve management process.
The proposal also suggests that the Central Bank governor, Yemi Cardoso, should lead a newly-formed gold reserve management committee. This committee would be responsible for making key decisions regarding the handling and allocation of gold reserves. The structure and functions of this committee are designed to closely resemble those of the Central Bank’s monetary policy committee, ensuring a high level of expertise and consistency in managing the nation’s gold reserves.
In June, the minister of solid minerals development, Dele Alake, announced that Nigerian gold bar transactions, purchased locally from miners, contributed over $5 million to the country’s foreign reserve assets. Alake made this disclosure while presenting a batch of gold bars under the National Gold Purchase Programme to President Bola Tinubu.
He also indicated that the government is seeking to purchase more gold bars from local artisanal miners to boost the value of the naira against other currencies.
“I am proud to announce that this first commercial transaction (of the gold bars) has resulted in a substantial increase of over $5 million in Nigeria’s foreign reserves assets, the refinement of over 70 kilograms of gold to the London Bullion Market Good Delivery Standard, and the successful aggregation of locally mined gold, injecting around N6 billion into the rural economy,” Alake said.
Nigeria’s foreign reserve assets are heavily dominated by the US dollar, similar to the reserves of many African countries. For about a decade, the government has attempted to diversify the reserve to include more stable commodities like gold and other precious metals. The gold purchase scheme began under the former administration of President Muhammad Buhari in 2019 to increase the country’s reserves and boost the value of the naira against other currencies.
A gold-backed foreign reserve, similar to Zimbabwe’s implementation, would reduce Nigeria’s reliance on dollar inflows to stabilise its currency.
