Ghana is preparing a $1 billion domestic bond programme to finance cocoa purchases for the 2026/27 crop season, marking a major break from the foreign syndicated-loan model that has underpinned the country’s cocoa trade for more than three decades.
The proposed cedi-denominated debt issue is intended to give Ghana Cocoa Board, known as COCOBOD, more reliable local-currency funding to buy beans from farmers while reducing exposure to offshore lenders, dollar borrowing costs and forward-sales obligations. The debt is expected to be raised before the season that begins around August, at a time when the world’s second-largest cocoa producer is trying to repair a strained supply chain and restore confidence among farmers, buyers and international chocolate manufacturers.
The planned issuance forms part of a broader restructuring of cocoa financing after a period of severe stress in the sector. For years, Ghana relied on annual syndicated loans backed by forward cocoa sales, a structure that provided upfront liquidity but tied a large share of the crop to offshore financiers before beans were delivered. COCOBOD’s leadership has said the old model at times required 70 per cent to 92 per cent of the crop to be collateralised, limiting flexibility in pricing, procurement and delivery.
The shift to domestic capital markets comes after a sharp correction in global cocoa prices, weak demand and payment delays across Ghana’s cocoa purchasing chain. The government in February cut the farmgate cocoa price to GH¢41,392 per tonne, equivalent to GH¢2,587 per bag, from GH¢58,000 per tonne after international prices fell heavily from their 2024 peak. The move was designed to align local prices with market conditions and ease pressure on state-backed buyers, but it also reduced farmer income at a difficult point in the production cycle.
Liquidity has remained a central problem. Licensed buying companies have struggled to buy beans from farmers despite state efforts to clear arrears, while some growers have complained of delayed payments for beans already supplied. COCOBOD disbursed billions of cedis to help settle obligations, but purchasing clerks in some cocoa-growing districts have lacked cash to continue buying, weakening the link between official prices and actual farm-level transactions.
The distress is especially visible at Produce Buying Company, the state-owned buyer that once handled a large share of Ghana’s cocoa purchases. The company has faced heavy debts, unpaid salaries and pressure from creditors, with its market share falling to below 5 per cent from about 30 per cent in earlier years. Its inability to pay farmers and resume full purchasing operations has raised questions about whether Ghana can stabilise procurement without deeper balance-sheet repairs.
The domestic bond proposal is therefore both a financing tool and a test of market confidence. Ghana’s authorities are seeking to draw funds from local institutional investors, including pension funds and banks, through commercial notes and similar instruments. Lower domestic interest rates and improved macroeconomic conditions have strengthened the case for raising cedi funding, though the plan still carries risks if cocoa sales underperform, prices fall further or repayment structures are not clearly ring-fenced.
The pressure on Ghana’s cocoa system predates the latest financing plan. Production has been hit by bad weather, crop disease, ageing farms, illegal mining and smuggling. Output in the 2023/24 season dropped sharply, with COCOBOD data showing one of the weakest harvests in 15 years, while officials estimated that 160,000 tonnes of cocoa were lost to smuggling during that season. Weak payment systems and higher prices across borders encouraged some farmers and middlemen to bypass official channels.
Climate volatility has added another layer of uncertainty. Prolonged rainfall, reduced sunlight and fungal disease have affected yields, while swollen-shoot disease and illegal mining have damaged farms in key producing areas. COCOBOD has expanded spraying, disease control and input distribution programmes, but recovery remains uneven and farmers continue to face rising labour, fertiliser and transport costs.
The proposed funding overhaul also includes changes to the pricing framework. Officials have indicated that farmgate prices may be reviewed periodically, potentially on a quarterly basis, rather than being fixed for a whole season regardless of global market swings. The government has also signalled a move to link producer prices more closely to export values while ensuring farmers receive at least 70 per cent of gross free-on-board prices.
Ghana is also seeking to expand local processing, with a target of raising domestic processing from about 30-40 per cent of production to at least 50 per cent by the 2026/27 season. That strategy aims to reduce dependence on raw bean exports and capture more value inside the country, though it will require stable supply, working capital, energy reliability and stronger balance sheets among processors.
The proposed cedi-denominated debt issue is intended to give Ghana Cocoa Board, known as COCOBOD, more reliable local-currency funding to buy beans from farmers while reducing exposure to offshore lenders, dollar borrowing costs and forward-sales obligations. The debt is expected to be raised before the season that begins around August, at a time when the world’s second-largest cocoa producer is trying to repair a strained supply chain and restore confidence among farmers, buyers and international chocolate manufacturers.
The planned issuance forms part of a broader restructuring of cocoa financing after a period of severe stress in the sector. For years, Ghana relied on annual syndicated loans backed by forward cocoa sales, a structure that provided upfront liquidity but tied a large share of the crop to offshore financiers before beans were delivered. COCOBOD’s leadership has said the old model at times required 70 per cent to 92 per cent of the crop to be collateralised, limiting flexibility in pricing, procurement and delivery.
The shift to domestic capital markets comes after a sharp correction in global cocoa prices, weak demand and payment delays across Ghana’s cocoa purchasing chain. The government in February cut the farmgate cocoa price to GH¢41,392 per tonne, equivalent to GH¢2,587 per bag, from GH¢58,000 per tonne after international prices fell heavily from their 2024 peak. The move was designed to align local prices with market conditions and ease pressure on state-backed buyers, but it also reduced farmer income at a difficult point in the production cycle.
Liquidity has remained a central problem. Licensed buying companies have struggled to buy beans from farmers despite state efforts to clear arrears, while some growers have complained of delayed payments for beans already supplied. COCOBOD disbursed billions of cedis to help settle obligations, but purchasing clerks in some cocoa-growing districts have lacked cash to continue buying, weakening the link between official prices and actual farm-level transactions.
The distress is especially visible at Produce Buying Company, the state-owned buyer that once handled a large share of Ghana’s cocoa purchases. The company has faced heavy debts, unpaid salaries and pressure from creditors, with its market share falling to below 5 per cent from about 30 per cent in earlier years. Its inability to pay farmers and resume full purchasing operations has raised questions about whether Ghana can stabilise procurement without deeper balance-sheet repairs.
The domestic bond proposal is therefore both a financing tool and a test of market confidence. Ghana’s authorities are seeking to draw funds from local institutional investors, including pension funds and banks, through commercial notes and similar instruments. Lower domestic interest rates and improved macroeconomic conditions have strengthened the case for raising cedi funding, though the plan still carries risks if cocoa sales underperform, prices fall further or repayment structures are not clearly ring-fenced.
The pressure on Ghana’s cocoa system predates the latest financing plan. Production has been hit by bad weather, crop disease, ageing farms, illegal mining and smuggling. Output in the 2023/24 season dropped sharply, with COCOBOD data showing one of the weakest harvests in 15 years, while officials estimated that 160,000 tonnes of cocoa were lost to smuggling during that season. Weak payment systems and higher prices across borders encouraged some farmers and middlemen to bypass official channels.
Climate volatility has added another layer of uncertainty. Prolonged rainfall, reduced sunlight and fungal disease have affected yields, while swollen-shoot disease and illegal mining have damaged farms in key producing areas. COCOBOD has expanded spraying, disease control and input distribution programmes, but recovery remains uneven and farmers continue to face rising labour, fertiliser and transport costs.
The proposed funding overhaul also includes changes to the pricing framework. Officials have indicated that farmgate prices may be reviewed periodically, potentially on a quarterly basis, rather than being fixed for a whole season regardless of global market swings. The government has also signalled a move to link producer prices more closely to export values while ensuring farmers receive at least 70 per cent of gross free-on-board prices.
Ghana is also seeking to expand local processing, with a target of raising domestic processing from about 30-40 per cent of production to at least 50 per cent by the 2026/27 season. That strategy aims to reduce dependence on raw bean exports and capture more value inside the country, though it will require stable supply, working capital, energy reliability and stronger balance sheets among processors.
Topics
World