The Minerals Income Investment Fund (MIIF) of Ghana has been at the center of recent controversy surrounding its innovative gold trading programs, namely “Gold for Forex” and “Gold for Oil.” Despite allegations of losses and impropriety, MIIF maintains that these programs have been instrumental in boosting Ghana’s economy and stabilizing the cedi, generating over US$1 billion in revenue between October 2023 and September 2024. This success has been achieved through strategic partnerships and a revolving credit system, allowing MIIF to maximize returns on a relatively small initial investment. However, fluctuations in foreign exchange rates have presented challenges, leading to variances that required remediation.
MIIF’s primary objective with the Gold Trade Desk is to integrate the gold value chain more effectively, supporting the launch of a gold-backed Exchange Traded Fund (ETF), stabilizing the cedi, bolstering gold reserves, optimizing returns for the Fund, and formalizing the small-scale mining sector. These ambitious goals are pursued through two distinct models: Gold for Forex and Gold for Oil. In both cases, MIIF partners with licensed aggregators and operates under an insured program to mitigate risks. The programs leverage the existing network of licensed small-scale miners, providing them with access to capital and ensuring that their gold is processed through accredited London Bullion Market Association (LBMA) refineries.
The Gold for Forex program aims to generate profit margins on the US dollar while simultaneously supporting the cedi against volatility. MIIF’s initial outlay for this program was the cedi equivalent of US$30 million, disbursed in three tranches of US$10 million each to its aggregator, Goldridge. This investment yielded impressive returns, averaging approximately US$60 million per month over eleven months. The success of the program attracted the attention of commercial banks like Fidelity, which entered into pre-settlement arrangements with MIIF, providing their own capital to participate in the gold trade and offtake the resulting US dollars. This collaboration generated an additional US$156 million between June and September 2024.
Unlike the Gold for Forex program, the Gold for Oil initiative did not require any capital outlay from MIIF. Instead, oil bulk distribution companies (BDCs) provided cedis to MIIF’s Trade Desk through the Chamber of Bulk Oil Distributors (CBOD). This generated approximately US$650 million in foreign exchange, which was used to facilitate fuel imports on behalf of the BDCs. Crucially, the forex provided was priced below the Bloomberg mid-rate, which contributed to the stabilization of the cedi and helped maintain manageable fuel prices for consumers.
Despite the overall success of these programs, MIIF encountered challenges in September 2024 due to fluctuations in foreign exchange rates. The disparity between local gold prices, the Bank of Ghana’s prescribed trading rates, and prevailing commercial USD rates resulted in forex variances. Specifically, a variance of US$19.5 million arose from the US$156 million trade volume involving Fidelity Bank’s capital, and a US$42 million variance emerged from the US$650 million Gold for Oil trade volume with BDCs. MIIF has since reported that the Fidelity variance has been fully addressed, and approximately US$29 million of the BDC variance has been remedied through trade receipts.
As a consequence of these variances, MIIF temporarily suspended the US$30 million revolving capital provided to Goldridge. However, MIIF maintains that the gold trade continues with an expanded network of aggregators and projects a foreign exchange inflow of US$3 billion in the next two years. Despite the challenges posed by forex fluctuations, MIIF’s gold trading programs demonstrate significant potential for generating much-needed foreign exchange, formalizing the small-scale mining sector, and bolstering the Ghanaian economy. MIIF believes this model can serve as a blueprint for future trading programs, including the proposed Ghana Gold Board, and emphasizes the importance of robust monitoring, advanced technology, and effective hedging mechanisms to mitigate risks associated with commodity trading.
