Ghana is facing difficulties raising funds on the domestic market to finance cocoa purchases for the 2026/27 season, with sources familiar with the sector telling JoyNews Research that local institutional investors are demanding higher returns before committing funds.
The financing challenge comes as the start of Ghana’s cocoa season has been delayed, while licensed cocoa buyers warn that about GH¢4 billion ($350 million) in outstanding debts could limit their ability to purchase beans from farmers.
Ghana opened its cocoa season in early August last year. However, by mid-September, the 2026/27 campaign had yet to begin, more than two weeks after neighbouring Ivory Coast, the world’s leading cocoa producer, launched its main crop.
Rising financing costs
According to the sources, domestic institutional investors are seeking higher risk premiums and coupon rates before participating in the financing programme.
Higher borrowing costs had already pushed the Ghana Cocoa Board (COCOBOD) out of the offshore syndicated loan market, according to the sources.
For more than three decades, COCOBOD financed cocoa purchases through syndicated loans from international banks. The board secured such financing at rates as low as 1.5% in 2016, but the rate later rose to about 8%.
COCOBOD also faced difficulties in its 2024 attempt to raise a $1.5 billion facility, according to local media reports.
Syndicated funding became difficult to secure following Ghana’s 2022 economic crisis, while about GH¢7.93 billion of COCOBOD’s cocoa bills were included in the 2023 domestic debt exchange.
For the 2024/25 season, COCOBOD abandoned the syndicated loan model for the first time since 1992 and instead relied on direct financing from international cocoa traders.
Sources said any attempt to return to the syndicated market could still expose the board to high interest costs.
Rollover contracts add pressure
Rollover contracts have also contributed to the financing difficulties.
During the 2023/24 season, COCOBOD had projected cocoa production of 800,000 tonnes but harvested only 432,145 tonnes. This resulted in 333,767 tonnes being rolled over at an average price of $2,661 per tonne, according to figures cited by the board.
COCOBOD’s Chief Executive estimated the resulting foregone revenue at about $941.58 million.
The rollover arrangements also influenced the trader financing model that replaced syndicated loans.
Finance Minister Dr Cassiel Ato Forson said international buyers had initially been attracted by the rollover price of $2,661 per tonne when the market price was around $2,000.
He said the financing model became less attractive once the price gap narrowed, making it difficult to sustain.
Domestic financing model
In February, Dr Ato Forson announced plans for Ghana to turn to the domestic market to finance cocoa purchases.
Under the proposed model, cocoa bonds would be issued domestically on COCOBOD’s balance sheet to create a revolving fund for purchasing cocoa during each crop year. Export proceeds would then be used to retire the bonds within the same season.
COCOBOD is targeting local pension funds, commercial banks, international investors and other participants in the cocoa value chain through its commercial paper programme.
Its Deputy Chief Executive for Finance and Administration, Ato Boateng, has identified pension funds as potential anchor investors.
Dr Ato Forson has also said the programme would not depend solely on Ghanaian banks but would seek funding from pension funds and non-resident investors.
However, sources said investors are demanding higher returns, potentially increasing the cost of the domestic financing model.
Farmers and buyers await price decision
The financing challenge comes against the backdrop of changes to Ghana’s cocoa farmgate price.
The Producer Price Review Committee reduced the producer price to GH¢41,392 per tonne from GH¢58,000, equivalent to GH¢2,587 per 64-kilogramme bag, effective February 12.
Dr Ato Forson attributed the reduction partly to what he described as buyers’ unwillingness to purchase Ghanaian cocoa because the beans had become uncompetitive and expensive.
The Chamber of Cocoa Marketers, Ghana, which represents licensed buying companies, estimates that the country could require about GH¢26 billion ($2.3 billion) to finance the 2026/27 season if the farmgate price rises by the expected 6%.
COCOBOD Chief Executive Dr Ransford Abbey has said that if the crop requires GH¢26 billion, the board plans to raise about half of that amount through 270-day commercial notes.
He has also expressed confidence that there is sufficient liquidity to raise about GH¢16 billion annually.
The Chamber, however, said its members are owed about GH¢4 billion from the previous season, while banks that provided them with credit are demanding repayment.
It has therefore called on the government to settle the outstanding debt, warning that the unpaid funds could affect the ability of licensed buying companies to purchase cocoa from farmers.
New pricing rules
Industry players have indicated that Ghana could increase its farmgate price by about 6%.
Bloomberg reported on September 9 that a price of GH¢2,737 per 64-kilogramme bag had been proposed, up from the current GH¢2,587.
The final price will be determined by the Producer Price Review Committee, which includes representatives from COCOBOD and the Ministry of Finance.
The new price will also be the first to be announced under the new Ghana Cocoa Board Act, which President John Mahama signed on August 26.
The law guarantees cocoa farmers a minimum of 70% of the gross free-on-board (FOB) export value of their cocoa.
Ghana had previously agreed with Ivory Coast to harmonise aspects of their cocoa policies. However, Ivory Coast has already announced its producer price for the 2026/27 main crop, maintaining it at 1,200 CFA francs per kilogramme.
That represents a 57.1% reduction from the 2,800 CFA francs per kilogramme set for the previous season.
The disparity has raised concerns within Ghana’s cocoa industry, with some industry sources warning that Ivory Coast’s lower producer price could influence Ghana’s pricing decision.They have also expressed concerns that the lower price in Ivory Coast could encourage cocoa smuggling into Ghana, Liberia and Guinea, and potentially Togo.
By:Rachael Djabakie