Implications of New Gold Policy by National Bank of Ethiopia

The National Bank of Ethiopia (NBE) has announced changes to its gold pricing policy. The new directive eliminates the previous practice of offering a fixed premium above the international gold price to local suppliers. Instead, the NBE will set offer prices based on its internal procedures and a cost-covering incentive.

The new gold policy applies to gold deliveries ranging from 25 grams to 25 kilograms. Moreover, the NBE will no longer provide suppliers with a guaranteed premium. The NBE will offer suppliers who source gold from artisanal miners a pricing structure that ensures cost coverage and provides incentives for profitability. These suppliers must deliver a minimum of 25 kilograms in a single transaction.

The old system offered fixed price premiums based on the quantity of gold sold. For instance, the NBE provided suppliers selling between 50 grams and three kilograms with a 60% premium. Those selling between three and 30 kilograms obtained a 67% premium. The NBE also gave aggregators supplying more than 30 kilograms a 72% premium.

The NBE has introduced new incentives for large-scale gold producers. These producers can retain up to half of the foreign currency generated from gold exports. They can hold this hard currency for up to three months. This is a two-month extension from the previous limit.

The NBE justifies these changes as necessary for reforms in the gold exchange market. The changes aim to provide long-term incentives to suppliers. This aims to encourage increased gold production and boost export earnings.