Amid plans by the government to find a new financing mode for cocoa purchases, banking and financial consultant, Dr. Richmond Atuahene, has raised serious concerns over the Ghana Cocoa Board’s (COCOBOD) plan to raise about US$1 billion through domestic cocoa bonds.
Chief Executive Officer (CEO) of COCOBOD, Dr. Randy Abbey, has announced that the bond will be used to finance cocoa purchases for the 2026/2027 crop season. But the financial and banking expert is warning that the new financing structure could face significant market, liquidity, and credibility risks.
The proposed domestic bond programme represents a major shift in Ghana’s cocoa financing strategy after the collapse of the traditional offshore syndicated loan model that had financed cocoa purchases for decades.
COCOBOD is seeking to replace foreign syndicated loans with cedi-denominated domestic cocoa bonds aimed at creating a revolving fund to purchase cocoa from farmers and repay investors within the same crop season through proceeds from cocoa sales.
COCOBOD believes the new financing model will reduce dependence on foreign lenders, limit exchange rate risks, revive indigenous Licensed Buying Companies (LBCs), and support local cocoa processing and value addition.
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However, in an analysis by Dr. Atuahene copied to The High Street Journal, he argues that while the move appears strategically attractive, the proposed bonds face deep structural and financial vulnerabilities that could threaten their success.
Why COCOBOD Is Shifting from Syndicated Loans
According to Dr. Atuahene, the shift to domestic bonds follows the failure of the syndicated loan model after severe production shortfalls, weak financial management, and COCOBOD’s inability to meet forward cocoa delivery obligations.
He explained that international lenders lost confidence in the cocoa sector after COCOBOD reportedly failed to deliver more than 330,000 tonnes of cocoa sold under forward contracts during the 2023/2024 season, leading to losses estimated at over US$1 billion when global cocoa prices surged.
The situation worsened after cocoa bills were restructured into longer-term bonds under the Domestic Debt Exchange Programme (DDEP), damaging investor confidence and disrupting the traditional financing architecture of Ghana’s cocoa trade.
With this background of COCOBOD, he believes that the new financing model could face significant challenges. He therefore enumerates a number of risks that threaten the success of the $1billion domestic bond.
Trust Deficit After Domestic Debt Exchange
Dr. Atuahene believes one of the biggest threats to the proposed cocoa bonds is the lingering trust deficit created by Ghana’s 2022/2023 Domestic Debt Exchange Programme.
He noted that many investors, banks, pension funds, and individual bondholders suffered heavy losses during the restructuring exercise and no longer consider government-related securities risk-free.
According to him, the experience has made institutional investors increasingly reluctant to commit funds to long-term debt instruments, with many now preferring short-term treasury bills over longer-duration bonds. He warned that convincing investors to support another large-scale domestic bond programme linked to a heavily indebted COCOBOD would be extremely difficult.
Falling Cocoa Prices Threaten Repayment Capacity
The financial consultant also warned that declining global cocoa prices could undermine COCOBOD’s ability to repay the proposed bonds.
He noted that cocoa prices have dropped sharply from average highs of about US$7,200 per tonne to nearly US$4,100 per tonne, significantly reducing export revenue expectations.
Because cocoa export proceeds are expected to service the bonds, lower international prices could weaken cash flows and increase repayment risks. He cautioned that the bonds’ sustainability depends heavily on stable cocoa prices and strong export revenues, both of which remain uncertain.
Deepening Liquidity Crisis and Mounting Debt
Dr. Atuahene further pointed to COCOBOD’s worsening debt position and liquidity crisis as major concerns for potential investors. He stated that the institution’s debt portfolio has ballooned to nearly GH¢33 billion, with billions due for repayment within the next two years.
He explained that COCOBOD’s financial distress has already delayed payments to farmers and Licensed Buying Companies, creating operational strain across the cocoa value chain.
According to him, investors may question why an institution struggling with existing obligations should be trusted with additional large-scale borrowing.
Concerns Over Domestic Market Absorption Capacity
Another key concern raised by Dr. Atuahene is whether Ghana’s domestic financial market has the capacity to absorb such a massive bond issuance without creating market distortions.
He noted that the proposed US$1 billion to US$1.5 billion annual issuance could crowd out private sector credit and put pressure on liquidity within the banking system. He added that investors would likely demand significantly higher yields to compensate for perceived risks, potentially increasing borrowing costs for COCOBOD.
Failed Forward Sales Continue to Haunt COCOBOD
Dr. Atuahene argued that COCOBOD’s failed forward sales remain a major credibility issue weighing on investor confidence. He explained that proceeds from any new bond issuance may ultimately be diverted toward settling old liabilities and rollover contracts rather than financing fresh cocoa purchases.
According to him, this creates uncertainty over whether the new financing structure would genuinely support cocoa production or merely refinance existing financial distress.
Weak Financial Position Raises Sustainability Questions
The banking consultant also questioned the long-term sustainability of the domestic bond strategy given COCOBOD’s deteriorating financial position.
He cited nearly 50% declines in cocoa production over the past three years, rising operational costs, and persistent financial losses as indicators of deeper structural problems within the sector.
He warned that unless operational inefficiencies and governance weaknesses are addressed, the new bond programme could become another short-term solution to a long-term crisis.
High Interest Rates Could Increase Debt Burden
Dr. Atuahene further warned that elevated interest rates and inflationary pressures could make domestic borrowing extremely expensive for COCOBOD. He projected that investors may demand coupon rates between 10% and 14% or even higher due to perceived risks associated with the bonds.
According to him, such borrowing costs could significantly increase COCOBOD’s debt servicing burden and weaken already fragile operating margins.
Investor Confidence Crisis Remains a Major Threat
The analyst stressed that restoring credibility remains central to the success of the proposed bonds.
He said delayed payments to farmers and LBCs during recent crop seasons, coupled with debt restructuring and reported defaults, have severely damaged confidence in COCOBOD’s financial management.
Dr. Atuahene warned that without strong governance reforms, transparency, and credible repayment guarantees, investors may remain cautious despite government support for the programme.
Declining Cocoa Production Threatens Bond Viability
He also identified falling cocoa production as a major risk to the success of the bonds. According to him, cocoa output has dropped sharply due to swollen shoot disease, illegal mining activities, climate change, and inadequate investment in farms.
He explained that lower production directly weakens the export revenues needed to service the bonds, thereby increasing default risks.
Currency Mismatch Risks Persist
Dr. Atuahene further noted the risks associated with the mismatch between COCOBOD’s dollar-denominated export revenues and the cedi-denominated structure of the proposed bonds.
He warned that significant depreciation of the cedi could increase financing pressures and complicate repayment obligations, despite cocoa export earnings being earned in foreign currency.
Market Skepticism Growing
Overall, Dr. Atuahene believes the proposed cocoa bonds represent a bold but highly risky financing experiment at a time when Ghana’s cocoa sector is battling declining production, rising debt, weak investor confidence, and volatile global prices.
The Bottomline
For Dr. Atuahene, while the shift to domestic financing may reduce dependence on foreign lenders, he cautioned that without comprehensive structural reforms, stronger governance, and improved production performance, the proposed bond programme could face significant resistance from investors and potentially deepen financial pressures within the cocoa sector.
