Senate considers increasing foreign reserve’s gold share by 26%

Onwubuke Melvin
Onwubuke Melvin

The Nigerian Senate is considering a new law that seeks to increase the share of gold in the country’s foreign reserve assets from 4% to 30%.

This strategy is intended to diversify the reserves away from reliance on the US dollar and toward a more sustainable commodity.

A draft law in the Senate proposes a series of policies that would designate the Central Bank as the automatic purchaser of all gold generated in the country, according to Bloomberg Africa.

Nigeria’s reserves currently total $34.8 billion, with gold accounting for only 4% as of the end of November.

With the passage of the new measure, the predominantly informal gold mining industry, which now contributes little demonstrable value to the economy, will be merged into the official sector and brought under the control of the Central Bank.

Furthermore, the Red Chamber proposes the establishment of a Gold Reserve Authority to supervise the country’s gold reserves.

This new institution intends to add structure and control to the gold reserve management process.

In addition to establishing the Gold Reserve Authority, the proposal seeks that the central bank governor, Yemi Cardoso oversee a newly constituted gold reserve management council.

The committee would be in charge of making critical decisions about the handling and allocation of gold reserves. The makeup and functions of the gold reserve management committee are intended to closely reflect those of the central bank’s monetary policy committee.

This parallel structure is intended to ensure a high level of expertise and consistency in the management of the nation’s gold reserves.

The Minister of Solid Minerals Development, Dele Alake in June said that Nigerian gold bar transactions acquired locally from miners added more than $5 million to the country’s foreign reserve assets.

Alake remarked while presenting President Bola Tinubu with a batch of gold bars purchased under the National Gold Purchase program.

He also indicated that the government plans to buy more gold bars from local artisanal miners to enhance the naira’s value versus other currencies.

“I am proud to announce that this first commercial transaction (of the gold bars) has resulted in a substantial increase of over US$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 stated.

The US dollar dominates Nigeria’s foreign reserve assets, as it does in the reserves of many other African countries.

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