COCOBOD targets lower borrowing costs with tranche-based funding model

 By Joshua Worlasi AMLANU

Ghana Cocoa Board (COCOBOD) is preparing to introduce a tranche-based commercial paper programme ahead of the 2026/2027 cocoa season as part of efforts to reduce financing costs, broaden domestic participation in cocoa funding and lessen dependence on offshore borrowing.

This new structure will allow the cocoa regulator to raise funds incrementally rather than borrowing an entire season’s financing requirement upfront, a move that officials say will improve liquidity management and reduce interest expenses.

Speaking on the sidelines of the Ghana–UK Investment Summit in London, COCOBOD’s Deputy Chief Executive for Finance and Administration Ato Boateng said substantial progress has been made toward establishing the new financing mechanism.

“We have made significant progress and engaged all necessary advisors to support the issuance process. The advisors are working diligently to finalise the financing structure, which is now at an advanced stage, while addressing all regulatory requirements and concerns raised by the relevant authorities,” he said.

The programme is expected to raise working capital through commercial paper issuance targetted at pension funds, commercial banks, international cocoa buyers and other participants within the cocoa value chain. Authorities intend to launch the facility before the next crop season starts.

The initiative forms a key component of government efforts to move away from the offshore syndicated loan structure that has financed cocoa purchases for more than 30 years. Under that arrangement, COCOBOD annually secured pre-export facilities from international lenders, typically ranging between US$1billion and US$1.5billion backed by future cocoa export proceeds.

That model became increasingly difficult to sustain following Ghana’s debt crisis, rising global interest rates and concerns over COCOBOD’s financial position. The syndicated facility’s size declined to about US$800million during the 2023/2024 season, while borrowing costs increased significantly.

Mr. Boateng said pension funds have emerged as one of the strongest sources of potential capital under the new arrangement. Commercial banks are also expected to play a central role, with COCOBOD exploring mechanisms to strengthen their participation.

“We need to be innovative in our approach because we also want commercial banks to play an active role. To achieve this, we are exploring opportunities to bring Development Finance Institutions on board to enhance the lending capacity of participating banks,” he said.

A key feature of the financing framework is the proposed tranche-based drawdown mechanism. Instead of accessing the entire funding amount at once, COCOBOD will draw funds as cocoa purchases are made and repay investors as cash flows become available from cocoa exports.

“The objective is to structure the financing in tranches, enabling us to draw down only the funds required for cocoa purchases at any given time. Once those funds are no longer needed we can repay investors promptly, ensuring prudent use of resources and minimising financing costs,” Mr. Boateng said.

This strategy is expected to reduce the cost of carrying unused funds while creating greater flexibility in managing seasonal financing requirements.

The proposed issuance, estimated at around US$1billion equivalent in cedi-denominated instruments, is also being closely watched by investors as a measure of confidence in Ghana’s domestic debt market following the 2022/2023 Domestic Debt Exchange Programme (DDEP).

Analysts say the programme could help deepen local capital markets and reduce exposure to foreign exchange risks associated with dollar-denominated borrowing. The structure’s revolving nature will allow funds to be raised, deployed and repaid within a single crop cycle using cocoa export receipts.

The financing reforms come as COCOBOD works to address operational and financial pressures across the sector. The institution is estimated to carry liabilities of about GH¢32billion, with roughly GH¢11.9billion due for repayment in 2025. Licenced Buying Companies are also reportedly owed about                        GH¢10.1billion, contributing to liquidity constraints within the cocoa supply chain.

The sector has simultaneously faced production challenges. The country’s cocoa output fell sharply from approximately 1.04 million metric tonnes in the 2020/2021 season to around 531,000 tonnes in 2023/2024 before recovering modestly to an estimated 700,000 tonnes in 2024/2025.

Global market conditions add another layer of complications. Cocoa prices have retreated from record highs reached during the recent supply shortage, amid concerns over slowing chocolate demand and rising cocoa exchange inventories. Lower prices could reduce export earnings available to support sector financing.

However, supply risks remain elevated. Forecasts indicating a high probability of El Niño conditions have heightened concerns about potential weather disruptions across West Africa, while early assessments of the 2026/2027 crop point to below-average development on cocoa trees.

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