Ghana plans $1billion domestic bond to fund cocoa purchases ahead of 2026/2027 season

Dr. Richmond Akwasi Atuahene, Corporate Governance/ Banking Consultant

1.0 Overview of Ghana’s Cocoa industry

Ghana accounts for 20% of global production and much of the cocoa is produced by 762,000 smallholder farmers with farm sizes of 2-3 hectares. Ghana’s cocoa sector partly owes its prominence in global markets to substantial public investment in the sector and institutional reforms initiated in the mid-1980s. This public investment was in response to economic circumstances at the time. Rather than abolishing the Cocoa Marketing Board, the Government set out to reform the parastatal, including liberalizing the internal marketing of cocoa in 1993 and committing to increase farmers’ share of export prices. The marketing board established in 1947, which subsequently became COCOBOD is the regulator of the cocoa industry. In this capacity, COCOBOD sets producer prices, pays commission to licensed buyers to purchase cocoa and aggregates and stores cocoa beans. The functions of the Board as defined by the Ghana Cocoa Board Law, 1984 (PNDCL 81) as amended, include:• Scientific research on cocoa, through the Cocoa Research Institute of Ghana(CRIG), • Technical support on production to farmers, for control of pests and diseases, and training and extension services to the farmers through the Cocoa Health and Extension Division (CHED).• Issuance of licenses and provision of guidelines for purchasing cocoa beans by buying companies.• Quality assurance of produce by inspecting, grading and sealing each consignment of cocoa, through the Quality Control Company.• Sale and exports of cocoa beans through Cocoa Marketing Company. Ghana is established as the world’s second-largest producer of cocoa, contributing roughly 15-25% of global supply. Only Côte d’Ivoire produces more, with the two nations dominating the market. Cocoa has been main a backbone of the economy, providing roughly US$2 billion in annual foreign exchange until the past two years.

2.0 Financing Model over the past three decades anchored on Syndication Pre-Export Facilities

For more than three decades, COCOBOD’s financing model was anchored on syndicated pre-export facilities ranging from US$1 billion to US$1.5 billion annually. The loans were backed by cocoa receivables and repaid within 7–12 months from export proceeds. Between 2016 and 2020, borrowing costs were relatively low. In the 2016/17 season, pricing hovered near 1.5 percent. The 2018/19 facility of about US$1.3 billion priced at roughly 2.5 percent and was oversubscribed. Even during the COVID-19 period, the 2020/21 loan of US$1.3 billion carried a margin of LIBOR plus 1.75 percent. By 2023/24, however, the cost had climbed to roughly 8 percent in dollar terms as global rates rose and Ghana’s sovereign risk profile deteriorated. The amount also fell to US$800 million, well below previous levels. In 2024/25, authorities partially shifted to local funding after failing to secure US$1.5 billion offshore. Over the same period, cocoa production fluctuated sharply. Output peaked at 1,040,000 metric tonnes in 2020/21 before falling to around 531,000 metric tonnes in 2023/24. It is estimated at roughly 700,000 metric tonnes for 2024/25. Rising financing costs combined with volatile production placed strain on COCOBOD’s cash flows, amid other mismanagement. The syndicated loan model, once predictable and disciplined, became more expensive and harder to secure.

Ghana is planning to raise $1 billion through domestic bonds to finance cocoa purchases from farmers ahead of the 2026/2027 crop season, as the country moves to overhaul the way it funds and delivers cocoa to global buyers. According to Bloomberg, which cited anonymous sources familiar with the discussions, the proposed bond issuance is expected before the new cocoa season begins around August and will be denominated in Ghana’s local currency, the cedi. The move comes as Ghana, the world’s second-largest cocoa producer, grapples with severe market volatility and funding pressures following the sharp decline in cocoa prices after the commodity’s historic rally in 2024. Speaking at the Africa Cocoa Investment Forum in London on Wednesday, the Chief Executive of the Ghana Cocoa Board (COCOBOD), Randy Abbey, said the country was seeking to reduce its dependence on dollar funding and foreign lenders by turning to the domestic debt market. We are looking at funding the entire crop. We believe that the interest rates in Ghana now are at the right place for us to go into the market,” Abbey said. He explained that Ghana believes current borrowing conditions are favourable enough to support a large-scale domestic bond issuance, citing easing inflation and declining interest rates in the country

3.0 New Financing Model for Cocoa Purchases through Domestic Bonds

Ghana plans a $1 billion domestic bond to finance cocoa purchases amid funding pressures and market volatility challenges. For the 2026/2027 season, the Ghana Cocoa Board (COCOBOD) faces significant challenges in issuing domestic bonds (dubbed “cocoa bonds”) to finance purchases, primarily due to a weak balance sheet, high debt (GH¢32 billion as of early 2026), and potential market liquidity constraints in absorbing an estimated US$1 billion to $1.5 billion in annual issuance. These bonds aim to replace traditional, now-failed offshore syndicated loans. The new financing model will utilize domestic Cocoa Bonds to purchase cocoa and repay with cocoa proceeds within each crop year. The Bonds will be used to raise a revolving fund for COCOBOD to turn around at least once during the season. The model will also revive the indigenous Licensed Buying Companies that have been completely thrown out of business as a result of the current financing model With this new financing model, COCOBOD can sell beans of any volume to local processing companies to promote value addition and job creation. Ghana’s decision to pivot toward domestic cocoa bond issuance marks more than a financing adjustment rather it represents a structural evolution in how the country funds one of its most strategic sectors

The move marks a major shift in the country’s cocoa financing strategy as authorities seek to reduce dependence on foreign lenders and create a more sustainable funding structure for one of the nation’s most important export sectors. Ghana is aiming to replace foreign syndicated loans—which fell out of favor after production shortfalls and financial distress—with local cedi-denominated bonds. The bonds are designed to create a “revolving fund,” where cash is raised, used to buy cocoa, and paid back within the same crop season using proceeds from bean sales.

The move is expected to help protect the cocoa sector from exchange rate fluctuations while creating a more stable and predictable source of financing. The decision to turn to the domestic bond market comes at a time when the cocoa sector is facing unprecedented financial stress. After cocoa prices reached historic highs in 2024 due to global supply shortages, the market later experienced a sharp correction. According to official sources the domestic market has become increasingly attractive due to declining inflation and falling interest rates, creating favorable conditions for bond issuance

The proposed bond issuance is therefore seen not only as a financial intervention but also as a strategic effort to protect farmer livelihoods and maintain production levels in the face of economic uncertainty. By securing adequate funding before the new season begins, authorities hope to prevent supply disruptions and restore confidence across the cocoa value chain. Ghana is planning to raise $1 billion through domestic bonds to fund cocoa purchases from farmers ahead of the 2026/2027 crop season, as the country seeks to overhaul how it finances and delivers cocoa to global buyers. A shift towards using domestic Cocoa Bonds for purchasing, aimed at stopping the “collateral trap” of selling raw beans at low prices to foreign banks

4.0 Key Challenges in Issuing Domestic Cocoa Bonds (2026/2027):

Cocobod faces significant challenges in issuance of domestic bonds for 2026/2027 cocoa season due to severe liquidity constraints, a reliance on unsustainable, high interest financing and low confidence among investors following previous defaults. These challenges exacerbated by falling global cocoa prices, poor production yields and galamsey are forcing a shift from foreign syndicated loans to domestic borrowing risk market distortions

Trust Deficit after Domestic Debt Exchange 2022/2023

The trust deficit following Ghana’s Domestic Debt Exchange Programme (DDEP) in 2022/2023 refers to the profound loss of confidence by investors, financial institutions, and the general public in the government’s ability to manage public finances and honor its debt obligations. This deficit stems from the forced restructuring of bonds, which led to significant losses for local investors, a “credit crunch,” and a damaged financial ecosystem.

Trust Deficits is about lack confidence in the transparency and governance of local investment structures, leading to reluctance to engage through formal, data-collecting channels. The “Trust Deficit” after Ghana’s Domestic Debt Exchange Program (DDEP) 2022/2023 refers to the significant erosion of confidence by investors—including banks, pension funds, and individuals—in the Government of Ghana’s ability to act as a reliable borrower and steward of financial assets. Many individual bondholders and institutional investors, having suffered significant “haircuts” (net present value losses of ~30% for banks), became highly risk-averse, viewing government securities as no longer “risk-free”. The trust deficit has created long-term reluctance among institutional investors, with many focusing on short-term T-bills rather than long-term bonds, affecting the government’s ability to raise funds through conventional means.

Reduced revenue from falling global prices:

The world market price has dropped significantly from an average of US$7,200.00 per tonne to US$4,100 per tonne, making Ghana’s cocoa beans uncompetitive and creating liquidity. Global cocoa prices had dropped significantly in early 2026 to roughly US$4,100 per tonne which has undermined the financial viability of the cocoa industry and possibly reduce the revenue available to service the new bonds. With world market prices dropping significantly, revenue from cocoa exports—which secure these bonds—may fall short of expectations, putting repayment capacity at risk.

Deepening Liquidity Crisis and Debt Accumulation.

CocoBod faces immense difficulty financing cocoa purchases due to its debt overhang. This makes raising capital via new bonds challenging as a result of deficit trust. The Ghana Cocoa Board (COCOBOD) is experiencing a severe liquidity crisis and accumulating significant debt, driven by falling global prices, reduced production, and “criminal maladministration” under previous management, according to reports from early 2026. COCOBOD’s debt portfolio has reached approximately GH¢32.91 billion, resulting in negative equity and an inability to pay farmers on time, sparking widespread protests and fears of a long-term decline in the sector.

Unsustainable Debt Accumulation:

COCOBOD faces a debt of GH¢32.91 billion, with about GH¢11.92 billion due for payment in 2025. Licensed Buying Companies (LBCs) are owed roughly GH¢10.1 billion, making it difficult for them to pay farmers. The Ghana Cocoa Board (COCOBOD) is facing a severe financial crisis with an estimated GH¢32.5 billion in debt and a near 50% drop in production over three years, making proposed new cocoa bonds highly unattractive to investors, according to financial reports. Mismanagement, high interest on debt, and failing production have crippled the sector. COCOBOD owes approximately GH¢32.5 billion, with about GH¢11.92 billion due to be paid in 2025 alone

• Liquidity and Market Capacity:

Analysts are split on whether the domestic capital market can absorb the large volume of bonds needed without causing excessive volatility or drastically increasing yields. The traditional syndicated loan model for purchasing cocoa failed for the 2023/24 season due to a loss of confidence from international lenders. This created a liquidity gap, leading to massive delays in paying farmers for beans delivered since November 2025. Analysts question if the domestic market can absorb the anticipated US$1 billion to US$1.5 billion in annual bond issuance without significantly distorting liquidity or driving up yields

COCOBOD failed to deliver over 330,000 tonnes of cocoa in the 2023/24 season, which had been sold at low prices, causing huge revenue losses when global prices surged. Failed forward sales by the Ghana Cocoa Board (COCOBOD), involving over 330,000 tonnes of under-supplied, low-priced contracts, have severely crippled COCOBOD’s finances and triggered a loss of investor confidence in the Ghanaian cocoa sector. This crisis undermines the viability of new cocoa-backed bonds by creating massive, immediate debt repayments (over $1 billion in losses) that must be settled before new loans or bond funds can be utilized. The inability to meet contractual obligations over the 2023/24 crop season has damaged COCOBOD’s credibility with international lenders. This lack of trust makes attracting capital for new, long-term bonds difficult and expensive. The 333,767 tonnes of rolled-over contracts from 2023/24 must be honored, resulting in losses of over $1 billion. Proceeds from any new bond issuance are likely to be used for servicing these past debts rather than funding new production. The shift away from traditional syndicated loans to local financing—compounded by lower-priced forward contracts—limits the cash flow required to pay farmers promptly, creating an operational crisis that jeopardizes future production, which is meant to secure the new bonds

• Weakened Financial Position:

COCOBOD’s finances have suffered due to a 50% drop in production over three years, persistent losses, and past defaults on cocoa bills in 2023. Concerns about structural inefficiencies within CocoBod including high operational costs raise questions about the long term sustainability of using domestic market. COCOBOD’s financials have deteriorated severely, with outstanding debts reaching GH¢32 billion, raising doubts about their ability to service new debt.  Ghana’s Cocoa Board (COCOBOD) is planning to raise $1 billion in cedi-denominated domestic bonds for the 2026/27 season to bypass failed international syndicated loans. However, this plan faces high risks due to COCOBOD’s reported GH¢32 billion debt, ~50% production drops.

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• High Interest Rates & Inflationary Pressures:

Elevated inflation and high interest rates in Ghana may make the cost of borrowing domestically too expensive, creating a high debt service burden, despite recent, modest reductions in central bank policy rates. High-interest rates and inflationary pressures in Ghana (with inflation rising to 3.4% y/y in April 2026,) pose significant risks to COCOBOD’s new domestic bonds, likely forcing higher coupon rates (10–14% projected) to attract investors wary of debt restructuring. These high costs could cripple operating margins, increase interest expenses, and heighten financial strain. As COCOBOD seeks to raise up to $1 billion in domestic bonds, elevated market interest rates—potentially 200–400 basis points over government securities—will increase the cost of funds. Interest rates at 10–14% could, for instance, make debt servicing unsustainable before purchasing cocoa. Following debt restructurings and the failure to fully pay previous debts, investors are cautious. High inflation erodes the real return on bonds, making investors demand even higher premiums or reducing their appetite for COCOBOD debt

• Credibility & Investor Confidence Crisis

Following payment delays to farmers and LBCs (Licensed Buying Companies) in the 2025/2026 season, building investor confidence in the new domestic bond structure is critical. The shift to domestic financing follows the failure of traditional off-shore syndication and high profile defaults, creating uncertainty about the success of new cedi-denominated bonds. The restructuring of Ghana Cocoa Board (COCOBOD) bills in 2023—where short-term debt was converted into longer-dated, lower-interest bonds—severely impacted investor confidence, setting off a cascading crisis in the sector that continued to unfold in 2024, 2025, and early 2026. By 2022, COCOBOD’s finances had deteriorated, forcing a default and the restructuring of Cocoa Bills in 2023. The conversion of short-term financing instruments into long-term bonds broke the primary rule of commodity trading—that such instruments are backed by immediate future harvests—breaking trust in COCOBOD’s financial commitments

By 2024/25, international banks became unwilling to participate, forcing COCOBOD to shift toward a new financing model reliant on buyers/off-takers, which proved unsustainable

Domestic Absorption Capacity.

The proposed cocoa bond could be equivalent to about US$1 billion, or roughly GH¢11 billion to GH¢12 billion at current exchange rates. The central issue is whether Ghana’s domestic market can absorb recurring issuance of that scale without distorting liquidity conditions.

Ghana is proceeding with plans to raise roughly $1 billion through domestic bonds for the 2026/2027 cocoa season to fund purchases from farmers and reduce foreign debt reliance. While liquidity exists, analysts indicate the success depends on competitive pricing—likely 200–400 basis points above treasury rates—to restore investor confidence following previous restructuring. While some market analysts express concerns about the capacity of the local market to absorb such a large amount without crowding out other private sector credit, the government is moving forward with the support of local banks

• Declining in Cocoa Production:

Cocoa production has dropped by nearly 50% over the past three years due to disease (swollen shoot), illegal mining, climate change, and high, unproductive expenses like unnecessary jute sack imports.

Declining cocoa production in Ghana, which has dropped by nearly 50% over the past three years due to disease, illegal mining (galamsey), and severe financial constraints, significantly threatens the viability of COCOBOD’s new domestic bonds. This output crisis—exacerbated by an accumulated debt of GH¢32.5 billion—undermines the revenue needed for debt servicing

Actual production plummeted to 432,145 tonnes in 2023/24 against projections. This dramatic shortfall limits the revenue generation needed to repay lenders, directly affecting the attractiveness and sustainability of new domestic debt instruments. Illegal mining and swollen shoot disease are severely reducing farmable land, threatening long-term yield recovery, which is critical for supporting the structural reforms promised in the new financing models.

• Market Skepticism:
• The shift in financing from international pre-financing to domestic bonds comes at a time when the sector is managing both a 50% decline in output and price instability, potentially making investors cautious. Market skepticism regarding COCOBOD’s proposed 2026/2027 domestic cocoa bonds centers on the capacity of the local market to absorb US$1–$1.5 billion in debt, potential overcrowding of government securities, high interest rate demands, and lingering concerns over COCOBOD’s debt-ridden balance sheet, shifting risk from foreign to local investors

Creditworthiness and Past Defaults:

Investors are hesitant due to COCOBOD’s previous restructuring of debt obligations, causing skepticism about their ability to repay, especially after reported losses exceeding US$1 billion. The creditworthiness of the Ghana Cocoa Board (COCOBOD) and its recent financial struggles—including restructured cocoa bills, significant debt accumulation, and allegations of default in 2024–2026—are creating a challenging environment for new domestic bonds. While the government is implementing massive reforms to restore investor confidence, the historical, and in some cases, current, perception of high risk could affect the pricing and demand for new, locally-issued cocoa bonds.

Past Performance and Default Allegations:

While COCOBOD has historically boasted a clean record on syndicated loans, the 2024/2025 season saw severe, unprecedented “rollover contracts” of over 333,000 tonnes and reports of failure to pay Licensed Buying Companies (LBCs) due to lack of funds. A February 2026 report specifically stated that COCOBOD had defaulted on a bridge loan COCOBOD has been struggling with high levels of debt, including around GH¢33 billion total debt as of early 2025, with a reported restructuring of “cocoa bills” in 2023–2024 where bills were converted into bonds. As of April 2026, over GH¢2.3 billion in obligations was due, with another similar amount due later in the year, keeping pressure on the organization’s cash flow

Currency Mismatch Risks:

While export revenues are in US Dollars, the bonds will be cedi-denominated. Investors fear that significant depreciation of the cedi could make it harder for COCOBOD to honor obligations, despite the potential for offsetting higher cedi revenues. The currency mismatch risk in Ghana Cocoa Board (COCOBOD) domestic bonds stems from the entity generating revenue in US dollars (via cocoa exports) while servicing debt denominated in Ghana cedis (GHS). If the cedi depreciates, COCOBOD faces higher servicing costs relative to its earnings, potentially requiring significant foreign exchange buffers and careful hedging. While cocoa export revenues are in USD, the new bonds are designed in local currency (cedi) to shift financing internally, creating an automatic mismatch when the Cedi-USD exchange rate fluctuates. A major risk is that if the Cedi weakens significantly, COCOBOD will need more cedis to purchase the USD equivalent needed to maintain financial viability and pay farmers, straining its domestic cash flow. If cocoa prices drop or the cedi remains volatile, it becomes difficult for COCOBOD to maintain attractive farmgate prices in cedis for farmers, threatening future production

Conclusion

The new bonds, while aimed at raising $1 billion for the 2026/27 season, will likely be priced with a high-risk premium to satisfy cautious local investors. The success of these bonds hinges on whether these reforms (restructuring, debt transfer, and new management) are viewed as effective in restoring COCOBOD’s credibility as a reliable, self-liquidating entity rather than a risk to the national budget

• The new model involves issuing cedi-denominated bonds to create a revolving fund for purchasing cocoa, aiming to settle debts within each crop year. The government intends to support this with a new legal framework that links producer prices to global market realities (70% of gross FOB price), aiming for a 2026/2027 implementation. The shift to domestic bonds is designed to move away from over-dependence on foreign lenders and the associated risks of foreign currency fluctuations. The success of this move depends on whether local investors trust in the effectiveness of reforms designed to reduce COCOBOD’s debt and improve. These challenges and risks must be properly dealt with before engaging in the new financing model for the 2026/2027 cocoa seasons. The move to local financing is meant to secure a revolving fund for farmers, but it faces an uphill battle to establish credibility after severe financial constraints in previous seasons. If structured well, the bond plan could reduce dependence on foreign syndicated loans and volatile buyer pre-financing arrangements. The success of the bond issuance depends on successfully implementing structural reforms, including removing quasi-fiscal expenditures (like road construction) from COCOBOD’s books to improve their balance sheet.

Strategic Recommendations for Policy Direction

For a successful 2026/2027 cocoa bond issuance to finance purchases, Ghana Cocobod must address investor concerns by cleaning its balance sheet—specifically by converting GHC 5.8 billion in legacy debt to equity—and ensuring transparency to rebuild confidence after previous debt restructuring. Strategic recommendations include pricing the bonds competitively (e.g., 200–400 basis points above government securities) to attract institutional investors, limiting non-core expenditures, and integrating the bond with local processing initiatives (50% local processing target) to enhance long-term repayment capability

4. Non-Core Asset Transfer: Transfer approximately GHC 4.35 billion in road infrastructure liabilities away from Cocobod’s books to the Ministry of Roads and Highways, focusing the entity strictly on cocoa operations
5. Rigorous Transparency: Improve financial reporting transparency to restore investor confidence following the 2023 cocoa bill restructuring, ensuring buyers of the new bonds trust in repayment capability

• Support Local Processing Mandate: Align bond issuance with the government’s target to process at least 50% of cocoa beans locally, which improves the value proposition of the industry.

1. Revive Local Buying Power: Revive the Produce Buying Company (PBC) and support indigenous Licensed Buying Companies (LBCs) to ensure efficient collection and buying processes
2. Manage Price Volatility: Create a sustainable financing model that does not solely rely on the “roll-over” contract model, especially as global prices fluctuate
3. Maintain Stable Payouts: Ensure the Producer Price Review Committee (PPRC) sets a sustainable, competitive producer price that encourages farmers while keeping Cocobod financially solvent

In line with the new financing strategy, COCOBOD must support farmers with requisite technological packages for managing the virulent Cocoa Swollen Shoot Virus Disease, improving soil fertility, and controlling pests, adaptation to climate change and weather variability.The key initiatives must be implemented to include:

1. Compensatory-based rehabilitation: COCOBOD must undertake rehabilitation of diseased farms free of charge. The programme must involve: a one-off payment of compensation to both the landowners and the tenant farmers; cutting, treatment and replanting of affected farms; and maintenance of the farm for two years before handing over to the farmer.
2. Cocoa Board must re-introduce mass pruning: COCOBOD must acquire and distributed motorized pruners to cocoa co-operatives. Hitherto, pruning of cocoa farms was done by farmers using cutlasses which was ineffective and inefficient.
3. Cocobod may have to revisit mass spraying and Hi-Tech: The Cocoa Diseases and Pests Control Programme (CODAPEC) and fertilizer access and application programmes (Hi-Tech), have been re-invigorated to increase access to chemicals for pest and disease control and fertilizer for enhancing soil fertility. About 4.5million bags of fertilizer is provided to farmers annually on subsidy basis
4. Cocobod must urgent introduce comprehensive Cocoa Farmers Pension Scheme: COCOBOD is rolling out a contributory scheme under the new three-tier pension scheme for cocoa farmers
5. Cocobod should assist farmers to fight against illegal mining and galamsey.

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