(Ecofin Agency) - Nigeria has added more than $5 million to its foreign reserves through a national gold purchase program. This initiative, which involves buying gold from local producers, has strengthened the Central Bank of Nigeria's (CBN) reserves and enhanced its monetary policy effectiveness.

Dele Alake, Nigeria's Minister of Solid Minerals Development, announced this achievement during a recent meeting with President Bola Tinubu. Alake presented the president with gold bars from the first commercial transaction under the Presidential Artisanal Gold Mining Initiative (PAGMI).

Launched in 2020, this program allows the CBN to buy gold from artisanal miners, paying in naira, Nigeria’s local currency. The program “has increased the nation’s foreign reserves assets and shown that using the Nigerian Naira to purchase a liquid asset traded in United States Dollars, such as gold, is a viable strategy. This transaction has also underscored the potential of the National Gold Purchase Program to enhance fiscal and monetary stability,” Alake said. He added that approximately 6 billion naira had been injected into the rural economy through this initiative.

The gold purchase program aligns Nigeria with several countries whose central banks have recently increased their net gold purchases. According to the World Gold Council (WGC), central banks bought a net 33 tons of gold in April 2024, up from 3 tons in March. A WGC survey indicates that 29% of central banks plan to increase their gold reserves in the next 12 months, driven by rising inflation and financial market concerns.

Nigeria has substantial gold reserves, but illegal mining has hindered its potential. Between 2012 and 2018, authorities estimate that 97 tons of gold were smuggled out of the country. The gold purchase program also aims to combat this issue.