Ghana Cocoa Board (COCOBOD) has raised GH¢3.39 billion through its first domestic cocoa financing transaction, falling GH¢610 million short of its initial GH¢4 billion target.
The outcome has drawn attention to investor demand for the board’s ambitious GH¢16.3 billion domestic debt programme designed to finance cocoa purchases and restructure existing financial obligations.
Cocoa Capital PLC, the special-purpose vehicle established by COCOBOD to execute the financing initiative, issued 266-day commercial paper at an interest yield of 11 percent. The transaction marks an important step in the government-backed cocoa sector’s efforts to reduce reliance on international syndicated loans and mobilise funds from Ghana’s domestic capital market.
However, the shortfall in the first fundraising exercise raises questions about the pricing of subsequent issuances and the ability of the local financial market to absorb the full financing requirement for the 2026/27 cocoa season.
COCOBOD’s GH¢16.3 Billion Domestic Financing Programme
The Domestic Cocoa Notes Programme is expected to raise up to GH¢16.3 billion through commercial paper and medium-term bonds. The initiative is intended to provide sustainable cocoa financing, support cocoa bean purchases from farmers and improve the board’s debt management strategy.
Under the programme, approximately GH¢14 billion will be raised through commercial paper to finance cocoa purchases for the 2026/27 season. Another GH¢2.3 billion is expected to come from five-year bonds to refinance eligible legacy debt.
Constant Capital, in its Ghana Treasury Market Daily report, described the first fundraising transaction as an early indication of investor demand for COCOBOD’s domestic debt instruments. The financial institution noted that the performance of subsequent tranches will be crucial in determining the programme’s overall success.
The commercial paper issuance is expected to take place in phases, beginning with an indicative GH¢4 billion tranche, followed by another GH¢4 billion and a final tranche of approximately GH¢6 billion.
The actual amounts and timing of subsequent issuances will depend on COCOBOD’s seasonal funding requirements and prevailing market conditions.
This phased approach is designed to enable the cocoa regulator to raise funds when needed rather than borrowing the entire seasonal financing requirement upfront.
Financial Expert Questions COCOBOD’s 11% Interest Rate
Financial market expert Norman Adu Bamfo has raised concerns about the pricing of COCOBOD’s 266-day commercial paper, suggesting that the 11 percent yield could be unattractive compared with returns available on other short-term investments.
According to Mr. Adu Bamfo, some shorter-dated securities are trading at yields of approximately 11.5 percent on the secondary market, making the return offered by Cocoa Capital potentially less competitive.
He argued that investors would generally expect a higher return from a corporate issuer to compensate for the additional credit risk compared with government securities.
Mr. Adu Bamfo also suggested that investors might prefer to hold the commercial paper until maturity instead of actively trading it on the secondary market.
He explained that changes in market interest rates could affect the market value of the instrument, potentially exposing investors to price fluctuations if they decide to sell before maturity.
The pricing of future commercial paper issuances is therefore expected to be an important factor in attracting investors and ensuring that COCOBOD secures the funding required for the upcoming cocoa season.
New Cocoa Financing Model to Reduce Collateral Requirements
COCOBOD’s new domestic financing strategy is also intended to reduce the proportion of cocoa production committed as collateral for loans.
Chief Executive Officer Dr. Ransford Abbey has indicated that the board intends to limit crop collateralisation to a maximum of 60 percent under the new financing arrangement.
According to Dr. Abbey, the proportion of cocoa pledged as collateral could be lower if COCOBOD raises funds in phases and recycles the proceeds through multiple rounds of cocoa purchases.
He explained that borrowing only part of the required funds and reusing the proceeds during the nine-month purchasing period could reduce the amount of cocoa needed to secure financing.
The strategy links borrowing to the pace of cocoa purchases and the recycling of available funds. This could give COCOBOD greater flexibility in managing seasonal cash flow while reducing the need to commit a large share of the crop as collateral.
The approach is expected to help the board manage cocoa purchasing costs, improve working capital efficiency and strengthen its domestic debt management framework.
Domestic Borrowing Will Retain Export-Backed Financing Support
Although COCOBOD is shifting towards domestic capital markets, the new financing structure will continue to rely on export receivables as an important repayment mechanism.
Selected executed cocoa forward-sale contracts will be assigned to Cocoa Capital PLC. The associated receivables will be channelled into controlled accounts and distributed according to a predetermined payment structure.
The programme requires assigned receivables to provide minimum coverage of 1.2 times the applicable debt-service obligation.
Under the previous offshore syndicated borrowing arrangement, COCOBOD used forward cocoa sales covering a significant proportion of projected production to support financing facilities typically ranging from US$1 billion to US$1.5 billion annually.
The new model changes where funds are raised and how borrowing is structured throughout the season, while maintaining export-backed receivables as a key source of repayment security.
This transition could reduce COCOBOD’s exposure to foreign-currency borrowing and give the board greater control over the timing and size of its financing activities.
COCOBOD Settles GH¢5.36 Billion in Legacy Debt
The introduction of the domestic cocoa financing programme comes as COCOBOD continues efforts to reduce its outstanding debt obligations.
Since 2025, the board has settled approximately GH¢5.36 billion in debt, including GH¢2.68 billion paid during 2026.
COCOBOD has also completed GH¢2.31 billion in mandatory payments under the 2026 Domestic Debt Exchange Programme. Additionally, GH¢162 million has been paid to Cocoa bill holders who opted not to participate in the debt exchange.
These payments form part of broader efforts to improve the board’s financial position, address legacy liabilities and strengthen its capacity to finance cocoa purchases.
The success of the new domestic funding programme could play an important role in supporting these objectives while providing resources for the purchase of cocoa beans from farmers across Ghana.
Ghana Cocoa Producer Price Set at GH¢42,400 Per Tonne
For the 2026/27 cocoa season, COCOBOD has set the producer price at GH¢42,400 per tonne, equivalent to GH¢2,650 for a 64-kilogramme bag of cocoa.
The producer price represents 71.18 percent of the realised gross free-on-board value of cocoa.
COCOBOD estimates that cocoa production reached approximately 771,000 tonnes in the recently concluded season. However, the board’s production forecast for the 2026/27 season stands at 650,000 tonnes.
The lower production projection, combined with the substantial funding needed to purchase cocoa from farmers, increases the importance of securing adequate financing at competitive interest rates.
The board will need to balance the cost of borrowing, investor demand and the timing of cocoa purchases to ensure sufficient funds are available throughout the season.
Treasury Bill Yields Could Influence Future Cocoa Capital Issuances
Developments in Ghana’s domestic debt market are expected to influence the pricing and demand for subsequent Cocoa Capital commercial paper offerings.
Recent Treasury bill auctions have recorded softer demand alongside continued declines in short-term interest rates.
At the latest auction, yields on 91-day, 182-day and 364-day Treasury bills declined by four basis points, five basis points and three basis points, respectively.
These market movements provide important benchmarks for investors assessing the attractiveness of COCOBOD’s commercial paper relative to government securities and other short-term investment opportunities.
The next issuances will offer a clearer indication of whether the domestic financial market can absorb the planned GH¢16.3 billion programme at interest rates acceptable to both COCOBOD and investors.
Constant Capital has highlighted the pace of investor participation as a factor that could influence liquidity and pricing at the short end of Ghana’s domestic debt market as the programme progresses.
COCOBOD Seeks Long-Term Financial Sustainability
Beyond financing immediate cocoa purchases, the Domestic Cocoa Notes Programme is intended to establish a more flexible domestic capital-markets platform for the cocoa industry.
The initiative aims to support seasonal cocoa procurement, reduce dependence on foreign-currency borrowing and improve the management of collateral and repayment obligations.
By raising funds in stages, COCOBOD hopes to align its borrowing more closely with the timing of cocoa purchases and recycle available capital throughout the season.
Dr. Ransford Abbey has said the programme is intended to bring borrowing closer to the timing of cocoa purchases while reducing the board’s exposure to foreign-currency financing.
The performance of upcoming commercial paper tranches will be critical in determining whether the new model can deliver the required funding, support cocoa farmers and strengthen COCOBOD’s long-term financial sustainability.
For investors, financial institutions and stakeholders in Ghana’s cocoa industry, the programme’s progress will remain an important development to watch as the board navigates seasonal financing needs, domestic interest rates and its broader debt reduction objectives
Source: newsthemegh.com