The Story of Ghana – From Decolonization to Stability in a Dangerous Region and Today’s Deep Economic Crisis
Ghana is, at least by population, quite a large country located in West Africa – with over 32 million inhabitants, it is the second most populous country in West Africa (after Nigeria). It borders Ivory Coast to the west, Burkina Faso to the north, and Togo to the east. Considering its immediate and broader neighborhood, Ghana is one of the most stable countries not only in West Africa but on the entire continent, by many measures, including political stability.
Ghana is predominantly a Christian country, with about 71% of the population identifying as Christian (mostly Protestant), but it also has a significant Muslim minority, making up around 19% (the rest mostly adhere to various traditional beliefs).
The capital city, Accra, along with its surrounding area, has over 5 million residents.
This region was ruled by various African kingdoms until the arrival of European colonizers. In the 15th century, modern-day Ghana came under Portuguese control, later taken over by the British.
After gaining independence from Britain in 1960, Ghana became a prominent player in the anti-colonial movement and a member of the Non-Aligned Movement, particularly during the presidency of Kwame Nkrumah.
Socialist President Nkrumah became a key figure in the pan-African movement, and since Ghana was one of the founding countries of the Non-Aligned Movement, it had very good relations with the former Yugoslavia. Yugoslav President Josip Broz Tito made a state visit to Ghana in 1961, and Kwame Nkrumah visited Yugoslavia that same year.
Ghana soon became a symbol and model that other African nations sought to emulate in their own struggles against colonialism and neo-colonialism — the lasting influence of former colonial powers even after formal independence.
Unsurprisingly, Ghana itself faced significant challenges with various forms of neo-colonialism, as Britain was not keen to relinquish its influence in this part of Africa.
President Nkrumah did not help his cause by increasingly ruling in an authoritarian manner and being declared president for life — of both the country and the party. He failed to become an “African Tito” and, with considerable British interference, an opposition was formed under the name National Liberation Council.
He was overthrown in 1966, with the military playing a key role in the coup, which occurred while Nkrumah was abroad visiting Vietnam. He spent the rest of his life in exile in Guinea.
The new government in Ghana chose a radically different path. Instead of the socialist model Nkrumah had been building, they immediately turned to loans from the World Bank and the IMF.
Two decades of economic instability followed. Predictably, right after the coup, there was mass privatization of state assets. Civilian and military governments alternated in power, Ghana remained aligned with the West, and the 1990s brought ethnic conflicts that claimed thousands of lives.
However, once left- and right-leaning governments began alternating, many declared Ghana a “stable democracy,” and it has maintained that image to this day.
Although some of its neighbors face much worse situations — for example, Burkina Faso, which has been dealing with Islamist extremist incursions for several years — Ghana has its own issues, especially increasingly severe financial troubles in recent times.
Economic Crisis and the Plan to Buy Oil with Gold
Ghana’s national currency, the cedi, is weakening under economic pressure, and the country is running low on foreign reserves — specifically U.S. dollars. Dollars are essential everywhere, including in Ghana, as they are used to buy oil. However, it appears that at least one “currency” could be as strong as the dollar when it comes to purchasing oil — gold. Ghana’s Vice President, Mahamudu Bawumia, announced yesterday that the government is working on a new policy under which it will purchase oil using gold instead of dollars.
There are no other options since Ghana’s foreign reserves have dropped to just $6.6 billion USD — enough to cover only three months of imports.
Their plan is to implement this new scheme at the beginning of 2023, with promises that it will “fundamentally change the payment system.”
Bawumia explained that the exchange of gold for oil would directly impact the purchase process — “This is a major structural change,” he said.
Still, this is an unusual move. Occasionally, oil-producing countries might sell oil in exchange for goods instead of money, but it is rare for the buyer to offer something other than money — in this case, gold, of which Ghana has a substantial amount. Remember, when it was a British colony, Ghana was called the Gold Coast (from 1821 to 1957), and later changed its name to Ghana (meaning: “Powerful Warrior King”).
Although Ghana also produces crude oil, it depends on imports for oil derivatives because its refinery exploded in 2017.
This move appears to be more an act of desperation than a clever upgrade of financial policy. Ghana (like many other countries) is currently facing a deep economic crisis — the worst in this century.
The decision to buy oil with gold was announced on the same day that Finance Minister Ken Ofori-Atta announced government spending cuts (and it seems Ghana, in a pattern established since the 1966 coup, will once again seek IMF assistance).
Nonetheless, it will be interesting to follow this experiment and see whether oil-for-gold transactions really take hold — any shift in the world’s most important trade sector, which is still oil, is undoubtedly significant.
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