Worrisome Adulteration Practices Prompt Overdue NBE Gold Analysis Upgrade

Industry sources allege adulteration concerns behind Tigray supply freeze

A growing trend of adulteration in the National Bank of Ethiopia’s (NBE) gold supply has prompted regulators to swap out outdated methods for measuring the purity of bullion for new, more reliable technology.

The central bank is the sole entity authorized to buy gold from miners and export the mineral. A massive increase in the volume of gold being supplied to the NBE, particularly from the Tigray Regional State, coupled with record global gold prices have filled the central bank’s coffers over the past couple of years.

However, sources in the industry say adulterated gold has become increasingly common in recent months, threatening the NBE’s supply. They claim most of the adulterated gold in the market originates in Tigray, where the NBE operates a purchasing center in the town of Shire.

To date, the central bank utilized outdated densitometric analysis to determine the purity of gold by measuring its density or by using fire assays, which can be slow, unreliable, or pose risks in the form of toxic fumes.

However, increasingly common adulteration has pushed the NBE to procure spectrometers which utilize X-ray fluorescence (XRF) technology to determine quality and molecular composition with far greater accuracy.

In addition to impurities like copper, the machinery can detect traces of substances like hazardous chemicals that may have been used during the mining process.

The NBE reports it has received nearly 19 tons of gold from its Shire outpost over the first five months of the fiscal year. The figure is the highest on record and is especially striking considering that supply from Tigray was cut off during the northern war.

Still, a portion of volume, according to inside sources, has turned out not to have been gold at all. They say the adulteration problem has impeded Shire’s booming gold trade

“Even large scale gold suppliers from Tigray have recently been implicated in [adulteration]. These large scale suppliers have for years been licensed to collect small volumes of gold from artisanal miners and supply it to NBE. Recently, the NBE accused them of supplying adulterated gold. They use special imported chemicals that make it difficult to tell [the adulterated bullion] from gold. When NBE found out, it froze payments to several suppliers over the past months. As a result, many suppliers in Tigray are awaiting payment despite already supplying gold,” a source close to the issue told The Reporterspeaking anonymously.

Regulators refrained from commenting on issues related to adulteration, large-scale gold mining, or gold smuggling when approached by The Reporter.

During the 2024/5 fiscal year, the central bank received 39 tons of gold—the vast majority from small-scale miners—and generated a record USD 3.5 billion from exports.

The NBE offers a 15 percent premium on bullion and recently opened 10 new gold purchasing centers tied to Commercial Bank of Ethiopia (CBE) branches across the country.

Gold exports accounted for more than a tenth of the country’s total forex revenues last year, which grew to USD 33 billion from 24 billion in 2023/4.

The central bank’s latest report indicates its forex reserves can cover 2.8 months of imports, more than three times the value reported in June 2024. The document also reveals a massive drop in current account deficits, which are down to USD 60 million from USD 6.2 billion the previous year.

“The near elimination of the current account deficit is a monumental shift. This was likely fueled by export incentives, improved forex retention rules, and a formalization of gold exports. Reserves at 2.8 months of import cover, while improved, still sit below the recommended 3-month benchmark,” reads the document.

The report indicates the official exchange rate depreciated by more than 136 percent since last year and says an 85 percentage point drop in the parallel market spread since the liberalization in July 2024 indicates “successful currency unification.”