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  • Kian Smith

What it will take to make West Africa a Gold market

Nigeria has a thriving underground gold economy that if regulated, could unlock her as the gold market Centre of Africa. Despite the mostly informal structure of the gold market, Nigeria has one of the largest economies, the largest population in Africa, and is a top contender for the largest emerging market for luxury goods in Africa.

The lustre and luxury items visualized at the mention of gold is part of a long value chain that Nigeria does not participate in. Maru gold (gold from Maru Zamfara) is identified on sight by gold merchants in the gold souks of Dubai. Mumbai, Valenza and Arezzo Gold districts feel the groan of the Nigerian Foreign currency crunch when their Nigerian customers spend less. Cotonou smuggling paths continue to thrive and create an undocumented supply of gold to Dubai & Asia. The emergence of the Nigerian gold purchase scheme; the Central Bank of Nigeria buying gold for its reserves and the development plans for an internationally certified gold refinery in Nigeria creates an opportunity for an intervention in a critical sector that will promote economic growth and reduce unemployment. Harnessing the gold sector will boost the GDP of Nigeria and promote non-oil exports.

To sustain this development, Nigeria will need to reconsider its view on gold - the issues and ownership of gold as a commodity mined, recycled, and imported as a financial instrument, scientific product and as a potential instrument for economic warfare make it a matter of national security and importance.

Developing the gold value chain will drive innovation, stimulate the economy, and generate income for government coffers. Nigeria can become a gold economy irrespective of whether it mines gold or not. India, UAE, Singapore, Italy, Switzerland, Turkey and London are renowned world gold markets without the classification of gold mining countries.

While world gold mine production has been declining, West African gold production has been growing. In 2011, West Africa became the hub of African gold mining when the total production of gold from West Africa overtook South Africa’s gold production. Out of the 15 ECOWAS countries, Cape Verde, Benin and Togo are the only countries without notable gold reserves. However, Benin and Togo are notable for gold trade.

All other ECOWAS countries have either significant documented gold reserves, internationally listed gold mining companies or significant footprint of artisanal gold mining. The recently released World Bank 2018 figures now have Ghana as the leading producer of gold in Africa. West Africa is becoming synonymous for gold.

At a June 2019 stakeholders’ session in Lagos between the private sector and the Governor, Central Bank of Nigeria (CBN), Godwin Emefiele, Aliko Dangote iterated that activities of smuggling from the Benin Republic route is killing manufacturing in Nigeria and that it would be difficult for a country to survive with Benin Republic as a neighbour. A recent World Bank report on smuggling showed that about N1.45 trillion worth of goods is smuggled into Nigeria annually through Benin Republic. With Benin and Togo having 0% royalty on gold, neighbouring countries will find it almost impossible to prevent major royalty revenue leakages and counteract gold smuggling.

Dangote’s warning coupled with Ghana’s new status echoes the major premise for the solution towards the development of the gold value chain in West Africa - issues of different trade and monetary policies across the ECOWAS region must consistently support the development of the gold sector.

In April 24th 2019, a Reuters investigative feature titled ‘Gold worth billions smuggled out of Africa’ revealed that most of the gold traded out was not recorded in the exports of African states. Backed with confirmation from several trade economists that large amounts of gold are leaving Africa with no taxes being paid to the states that produce them, evidence points to this being a higher concern in countries and areas with large artisanal mining. Although artisanal mining organization and formalization is part of the process needed towards regulating and developing the gold economy of the region, fiscal trade and monetary policy harmonization are vital for the development of a gold market in West Africa.

Ghana who has become Africa’s biggest gold producer, shares borders with Togo, one of the top gold exporting countries of Africa with abysmal records of production. Nigeria, one of Africa’s biggest economies still hasn’t signed the Africa Free Trade Agreement but is working on a National gold development plan. These are some of the issues that will be addressed at the Eko Hotel in Lagos on June 25th and 26th at the Gold West Africa Conference (the first policy round table discussion for ECOWAS countries). With confirmed delegates from globally reputed companies in mining and gold trading, several multi-lateral development organizations and at least 10 ECOWAS countries - including stakeholders in public and private sector- we are certain that a synergy towards sustainable gold development will be built.

It is vital that a holistic integration occurs such that there is no immediate disruption of the already existing Eco-system. How do we consider creating new aspects of the gold value chain with the co-existing gold value chain being organized and strengthened? How can policies be setup towards Nigeria becoming a destination for gold? How can gold smuggling be deterred? The intricacies of the various roles and linkages for gold in the economy of West Africa will be the focus of Gold West Africa.

It is true that Ghana wears the cap for gold production, Cote D’Ivoire is the present favourite destination for gold mining investment and Nigeria pulls the strings for trade volumes but as far as developing the gold value chain, no West African country can succeed on its own; It will take a regional effort to build a sustainable gold economy and make West Africa a gold market.

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