Dr Frank Bannor, Development Economist and Senior Research Fellow at the Institute of Economic Research and Public Policy (IERPP), has advised African countries to diversify their reserves into gold rather than relying on US dollar-denominated assets.
Speaking in an interview with Sputnik Africa News, Dr Bannor noted that even the larger Western economies are gradually moving away from dollar-based assets toward gold.
“If the so-called bigger economies, those in the northern hemisphere, are diversifying, moving away from the dollar to gold-denominated assets, then how much more African countries, who are highly susceptible not just to sanctions, but also to visa restrictions and other financial constraints?” he asked.
Dr Bannor, who is also a lecturer at the School of Public Service and Governance (SPSG), GIMPA, emphasised that dollar-denominated investments are increasingly risky amid current global geopolitical uncertainties. “It clearly points to the picture that diversifying into a dollar-denominated investment or asset is not the right way to go,” he said.
According to him, building up gold reserves offers African nations a highly liquid and reliable financial resource.
“Once you have your gold reserves, and in times of crisis, given the fact that the demand for gold has always been there, people are ready to use it. You can even undertake barter trade. Ghana, for instance, has in the past engaged in what we call gold-for-oil transactions, whereby gold could be used to purchase oil,” Dr Bannor explained.
The development economist stressed that gold’s liquidity and universal acceptance make it the most practical option for African economies.
“In terms of liquidity, gold is highly liquid in all senses because people are ready to accept it as a form of payment. It is clearly the right option to go,” he opined.
Dr Bannor further urged African governments to rethink their foreign reserve strategies. “My position is that I would advise countries, in particular African countries, to diversify their reserves into gold rather than keeping US dollar-denominated assets,” he stated.
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