Business News of 2026-10-15
COCOBOD falls GH¢610 million short of cocoa purchase funding target
Since last week, executives of both COCOBOD and its special purpose vehicle subsidiary Cocoa Capital PLC have been pondering how to navigate the 15% shortfall financing it targeted through its issuance of GHc4 billion in commercial paper a fortnight ago, but which only yielded GHc3.39 billion, this amounting to a GHc610 million shortfall.
This is because the money raised from the first tranche of a total of GHc14 billion being targeted though three tranches is insufficient for the purposes it is meant for under the current circumstances – financing the purchase of cocoa beans from farmers through Licensed Buying Companies during the first part months of the season and defraying part, if not most, of the GHc4 billion in arrears COCOBOD reportedly owes the LBCs.
While securing 84.8% of the target provides a substantial injection of short-term liquidity, the resulting GH¢610 million funding gap creates tight operational constraints for COCOBOD since the LBCs requirecash upfront to purchase beans directly from farmers at the recently increased farm gate price at the start of the harvest cycle, even as theunpaid arrears from the previous season is needed as working capital to jumpstart their operations for this one.
Industry sources say that three alternatives are under consideration.
One is reopening the first tranche by extending or initiating a follow-up window to capture leftover domestic liquidity. But because the first tranche was structured to cover the initial two months of cocoa aggregation (October and November), any decision to re-open the tranche to bridge the GH¢610 million shortfall must happen almost immediately – over the next fortnight at the longest – to be operationally viable.
An alternative also now under consideration is simply absorbing the deficit into the upcoming second (GH¢4 billion) and third (GH¢6 billion) tranches of the broader GH¢14 billion purchase facility. An exact calendar date for the opening of the second tranche has not yet been publicly released by COCOBOD or its transaction advisors.
The first tranche was designed to cover the initial two months of crop aggregation. The second tranche will open to finance the subsequent three months of the 2026/27 crop season, although COCOBOD has stated that the precise launch date and final amount of the second tranche will depend dynamically on immediate funding requirements and prevailing domestic market conditions.
Importantly though whether a re-opening of the first tranche or a roll-over of the shortfall into the second tranche is adopted, the coupon rate on offer may need to be reviewed upwards, adding to COCOBOD’s costs and squeezing its margins further.
Institutional investors – pension funds, insurance companies and commercial banks) – left the first tranche 15.2% undersubscribedbecause they view COCOBOD as carrying lingering credit risk following the 2023 cocoa bill restructurings. Simply re-offering the exact same 11% yield for the same risk profile will not magically unlock the GH¢610 million shortfall from hesitant fund managers.
To guarantee a full subscription, transaction advisors would likely need to sweeten the annual interest rate above 11% to meet investors’ demands for a higher risk premium
The third alternative is to turn to local commercial banks for short-term bridge financing to ensure bean purchases for the 2026/27 season remain unhindered.
Indeed, there is a strong possibility that COCOBOD will turn to domestic commercial banks to bridge the shortfall if its liquidity tightens, since under the Domestic Cocoa Notes Programme localcommercial banks have already been positioned as primary stakeholders, transaction liquidity providers, and eligible market participants.
But this would come with critical caveats since local banks are still highly cautious. During the recent Domestic Debt Exchange Programme (DDEP), banks had their short-term Cocoa Bills forcibly restructured into five year bonds. Furthermore, many banks are already heavily exposed to private LBCs who owe massive interest on loans because COCOBOD has delayed paying them GH¢4 billion in outstanding arrears from past crops.
The funding structure would therefore have to be heavily insulated with repayments explicitly backed by assigned cocoa export receivables generated via select forward sales contracts managed through locked, escrow accounts, this structure giving local banks high repayment confidence.
Expectedly banks would extend the bridge loan, but they would not do it cheaply. Banks will likely price a short-term corporate loan closer to the prevailing Ghana Reference Rate of 10% or the central bank policy rate, currently at 14% than to the 11% offered on the first tranche of the commercial paper, meaning COCOBOD could face a steep pricing structure about 15%.
An upward adjustment of the borrowing rate would severely squeeze COCOBOD’s finances. However, it is highly unlikely to trigger a reduction in the newly announced GH¢42,400 per tonne producer price for the 2026/27 season.
Instead, a higher risk premium would directly impact COCOBOD’s structural operational capacity, cash-flow margins, and future pricing frameworks through several mechanisms.
For one thing, when COCOBOD and the Ministry of Finance set the producer price at GH¢42,400 per tonne, they explicitly pegged it to exactly 71.18% of the realized gross Free-on-Board (FOB) value of Ghana’s cocoa. This leaves exactly 28.82% of cocoa export revenuefor COCOBOD to manage its own operations.
This 28.82% must cover all internal costs, including disease control (swollen shoot campaigns), fertilizer subsidies, administrative overhead, and interest payments on its debt. If COCOBOD is forced to raise its commercial paper yield significantly above 11% to attract investors, or taken more expensive bridge finance from local banks, debt-servicing costs would eat up a massive portion of that 28.82% buffer. COCOBOD would have less money left to manage the sector, putting strain on farm inputs and crop sustainability.
Besides, a higher interest rate could inadvertently trigger operationaldelays in how farmers get paid, if COCOBOD stalls its borrowing because it is haggling over high risk premiums with domestic institutional investors or local banks.
Little wonder that despite the financing raised less than a fortnight ago, COCOBOD chieftains are still uncomfortable.
