Although the government’s plan to finance cocoa purchases with domestic bonds has been welcomed as bold and innovative, a U.S.-based Ghanaian finance scholar is urging policymakers to pause and think through the technical and foreign exchange implications.
Professor Williams Kwasi Peprah of Andrews University believes the idea has merit.
However, he says key questions must be answered to avoid creating new problems while solving old ones.
Are These Really “Bonds”?
At the centre of his concern is a basic finance principle that bonds are typically long-term borrowing instruments. However, on the contrary, cocoa purchasing is seasonal and cyclical.
“In Ghana, cocoa buying is a yearly process,” he argues. “So are these bonds going to be raised and repaid within a year?, he questioned.
The finance professor explains that if the funds are borrowed and repaid within a single crop season, then the instrument may not technically qualify as a bond in the traditional sense.
Instead, it would resemble short-term borrowing or what finance professionals classify as money market instruments, such as commercial paper or treasury bills.
For him, this distinction is not just academic. It affects pricing, investor expectations, risk structure, and rollover strategy.
He is therefore questioning that if COCOBOD raises bonds every season and repays them within a year, does it mean it will return to the market annually to borrow again? He fears that should this happen, the country could be exposed to refinancing risk, especially if market conditions tighten or investor appetite weakens.
The Forex Question
Beyond the issue of the proper nomenclature, Professor Peprah raises an even more strategic concern which bothers on foreign exchange.
He explains that cocoa exports are one of Ghana’s main sources of foreign currency, helping stabilize the cedi and support the country’s current account.
If the new cocoa bonds are issued only in cedis and sold purely to domestic investors, the immediate financing challenge may be solved; however, it will be without additional foreign exchange into the system.
He believes that the country must also think about forex inflows.
The Proposal
To address the question of the forex inflow, the finance professor proposes that the government open the local bond issuance to international investors.
Not by borrowing externally in dollars, which could increase external debt, but by allowing foreign investors to bring dollars into Ghana, convert them into cedis, and purchase the domestic cocoa bonds.
In that scenario, Ghana would still raise funds in cedis for cocoa purchases, while benefiting from fresh forex inflows that strengthen reserves and support the current account.
“We need the cocoa proceeds to shore up our trading account, which is our current account. So, if the money that we are going to raise is going to be raised in Cedis, then we may see some issues with forex,” he pointed out.
He continued, “My advice is that the government must open up these bond markets also to the international markets. If I say international market, not to raise the money from the international market, but allow international investors to also bring dollars, convert them into cedis, and be able to purchase these bonds, local bonds. So, in that case, we will find a way to still maintain the forex that we need.”
The Bottomline
Professor Peprah believes that cocoa financing is not just about paying farmers. It is about managing liquidity, debt sustainability, and foreign exchange stability at the national level.
If structured well, the bond plan could reduce dependence on foreign syndicated loans and volatile buyer pre-financing arrangements.
If structured poorly, it could create annual borrowing pressure or miss an opportunity to attract much-needed foreign currency.
