After COCOBOD changed its cocoa purchase financing strategy from foreign syndication to local financing, economist Courage Boti has praised the new approach, describing it as a smart shift that strengthens the local market.
He adds that the new approach also eases COCOBOD’s financial burden and boosts the domestic economy almost immediately.
For decades, Ghana relied heavily on offshore syndicated loans, covering nearly 70% of annual cocoa purchases. While it was effective in raising funds, the economist reveals the model meant most cocoa export proceeds first went to settle foreign debts, leaving only about 30% flowing back into the domestic economy.
The new strategy, Courage Boti says, is a turning point as the arrangement changes this imbalance.
“We have an arrangement now where the local market provides about 40 percent cedi of the amount needed to purchase cocoa, which means that 40 percent of the proceeds from cocoa sale is localised, is coming into the local market, and you have also the LBCs and all those who purchase that along the chain providing about 60 percent upfront to fund the purchases,” he remarked in an interview monitored by The High Street Journal.
Unlike the old system, where significant inflows bypassed the local economy to settle foreign creditors, this revised model channels funds into Ghana’s financial system before cocoa purchases even begin.
Another major benefit, the economist says, is cost savings for COCOBOD. By reducing reliance on syndicated loans, the institution cuts back on expensive external financing.
The economist emphasized that the arrangement doesn’t just save money but also enhances resilience. By anchoring financing locally, Ghana reduces its exposure to the uncertainties of the global credit market, while boosting the confidence and capacity of local financial institutions.
“What it does is that it takes away a component of that syndication cost that comes to COCOBOD over time, helping them in their finances, and that entire flow can impact the local market almost immediately because those things come before the purchase begins, and that provides enough cushioning or ammunition for the local market,” he added.
At a time when the cedi is under pressure and external financing conditions remain tight, this arrangement offers a double dividend as it stabilizes COCOBOD’s finances while injecting much-needed liquidity into the local market.
Courage Boti, therefore, believes that the new financing innovation, although borne out of difficulty in assessing foreign syndicated loans, is a win-win for COCOBOD and the broader economy.
