Category: Finance

For the third consecutive year, central banks globally have been net purchasers of gold at volumes not seen since the end of the Bretton Woods system. The trend is accelerating — and African central banks are among the most active buyers.

**The context**

Gold’s role in central bank reserves declined sharply after 1971, when the US severed the dollar’s link to gold. For decades, central banks held mostly US Treasuries, euros, and other fiat instruments. That consensus is fraying.

**Why now?**

Three forces are converging:

1. **Dollar weaponisation**: The freezing of Russia’s dollar reserves in 2022 sent a clear signal to sovereigns holding large USD positions — geopolitical risk is now a real variable in reserve management.

2. **Interest rate uncertainty**: Gold pays no yield, which made it unattractive in a low-rate world. As rate cycles become less predictable, gold’s non-correlated nature becomes a feature, not a bug.

3. **Inflation hedging**: Persistent above-target inflation in major economies has revived gold’s traditional role as a store of value over long time horizons.

**African central banks**

The Central Bank of Nigeria, the South African Reserve Bank, and the Bank of Ghana have all increased gold allocations in recent years. Nigeria, notably, holds gold mined domestically — creating an unusual alignment between reserve management and local industrial policy.

**What to watch**

Gold prices remain elevated. If central bank buying continues at current pace, analysts at several major investment banks project gold could test $3,000 per troy ounce before end-2026.

NAIROBI — In a historic development, central bank governors representing Nigeria, Kenya, South Africa, Egypt, Ghana, and Rwanda have concluded a bilateral summit pledging a coordinated monetary approach. The “Nairobi Consensus” aims to build cross-border macroeconomic resilience against persistent supply chain shocks and global currency volatility.

Under the new framework, the signatory central banks will coordinate on interest rate directives, share high-frequency transaction data to combat capital flight, and establish a joint currency stabilization swap line totaling $5 billion.

“The era of isolated inflation fighting is over,” said Amina Bello, Chief Africa Correspondent for The Central Report. “As import pressures mounting from global food and energy pricing continue to de-value local currencies, central banks are realizing that currency depreciation is a contagion. By aligning reserve ratios and swap buffers, they create a stronger regional shield.”

The move comes at a critical juncture. The South African Rand (ZAR) has faced headwind swings following mining sector declines, while the Kenyan Shilling (KES) and Nigerian Naira (NGN) have undergone major structural adjustments.

Market responses to the announcement were cautiously optimistic. Bond yields in Johannesburg and Lagos stabilized, while international investors noted that policy coordination could reduce risk premiums for sovereign debt issues in the region. However, critics point out that currency swap facilities may be insufficient if underlying structural trade deficits remain unaddressed. The joint committee is expected to release its first progress assessment and currency alignment index in September.

Ayodine the dev