Nigeria and Other African Nations Face Risky Fallout if Gold Prices Drop, Fitch Warns

Sub-Saharan African nations, including Nigeria, Ghana, and Tanzania, could face significant economic challenges if global gold prices decline, according to a recent warning by BMI, a research unit of the Fitch Group.

The alert comes amid a growing trend among these countries to boost their foreign reserves by purchasing gold, often sourced domestically, in a bid to hedge against global financial volatility.

BMI noted that Nigeria and several of its regional peers have ramped up gold acquisitions in recent years, a strategy accelerated by escalating geopolitical tensions, shifting U.S. trade policies, and broader market instability. While gold has historically been seen as a strategic store of value, Fitch analysts caution that this approach carries notable risks — especially in the face of potential price declines.

“Gold is increasingly being used by sub-Saharan African markets as a strategic store of value,” said Orson Gard, a senior Sub-Saharan Africa analyst at BMI, during an investor presentation. “But the move comes with considerable downside risks.”

Ghana’s central bank, for instance, has significantly increased its gold holdings to the point where the metal now accounts for nearly a third of the country’s foreign reserves, according to BMI estimates. This surge has contributed to a strengthening of Ghana’s currency, the cedi, but may also be making its exports less competitive, exposing the economy to potential imbalances.

Other countries, including Kenya and Uganda, are reportedly exploring similar strategies, while Rwanda and Namibia have already taken steps to incorporate gold into their reserve portfolios. Burkina Faso has also expressed intentions to build its gold stockpile, and Zimbabwe has controversially backed its new ZIG currency with gold reserves.

BMI’s warning comes just as Ghana’s central bank governor, Johnson Asiama, acknowledged the risks associated with commodity-driven reserve strategies.

“Any sharp price drop would have an impact on international reserves,” Asiama said at a news conference. “That is why we are starting with the hedging programme,” he added, referring to a plan aimed at mitigating potential losses from unexpected market shifts.

Gold prices reached historic highs earlier this year, but BMI analysts now suggest the market may have already peaked. With possible U.S. interest rate cuts on the horizon, the precious metal could face downward pressure, potentially triggering ripple effects across reserve-heavy economies.

“If gold prices suddenly decline, it would have significant implications for sub-Saharan African markets that have rapidly increased gold as a share of their total reserves,” Gard warned. He added that even a gradual price drop could undermine the adequacy of these reserves and dent public confidence in central bank policies.

In countries like Ghana and Tanzania, both of which depend heavily on gold exports, the consequences could be especially severe. A simultaneous decline in the value of reserve assets and export earnings could place additional strain on their fiscal and external balances — what BMI calls a “double whammy.”

Another looming concern is liquidity. Unlike hard currencies, gold is not always easy to convert into liquid assets during crises. BMI pointed to historical examples in India and Argentina, where central banks holding large quantities of gold struggled to raise cash during periods of acute balance of payments stress.

For Nigeria and other nations following a similar path, the message from Fitch is clear: while gold may offer a temporary buffer against economic turbulence, an overreliance on the metal could leave their financial systems exposed to a different kind of shock — one that may be just as destabilizing as the forces they seek to guard against.

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