COCOBOD gets $1.7bn to buy cocoa

International finance institutions have reposed confidence in the Ghanaian economy by offering to lend US$1.7 billion to the Ghana Cocoa Board (COCOBOD) for the purchase of cocoa beans in the 2014/2015 cocoa season.

The level of confidence of the participating banks in Ghana’s economy was reflected in the over-subscription of the loan by 15 per cent.

Although the board budgeted for and got approval from Parliament to raise US$1.7 billion to fund cocoa purchases, the banks offered to lend it US$1.95 billion, about US$255 million higher than the intended amount.

A delegation from COCOBOD, led by its Chief Executive Officer, Dr Stephen Opuni, and a Deputy Minister of Finance and Economic Planning, Mr Cassiel Ato Forson, signed for only US$1.7 billion and returned the excess to the offering banks.

The agreement on the loan, which was syndicated from a consortium of banks from across the world, was signed in Paris, France, yesterday.

Dr Opuni and Mr Forson signed on behalf of the board, while the heads and representatives of the contributing banks signed for their respective institutions.

Dr Opuni said the board was overwhelmed by the high patronage that the syndication had earned from the international financial market over the years and gave an assurance that the loan would be used for the purpose for which it was taken.

Impact on economy 

Beyond serving as ready cash for the payment of cocoa purchased from farmers, the coming in of the loan is timely, as it will help shore up the country's reserves and consequently help stabilise the cedi, which has lost over 30 per cent of its value to the US dollar. 

The loan will also help improve liquidity in the system.

The country's reserves were US$4.7 billion in the first quarter of the year but they dropped to US$4.5 billion in July on the back of constant withdrawals to fund the current account deficit. 

The current state of the reserves translates into 2.5 months of import cover, but they could rise to 3.5 months (US$6.5 billion) after the coming in of the cocoa loan.

This is because although the loan will be used to purchase cocoa through licensed buying companies (LBCs), the money will first be lodged at the Bank of Ghana (BoG), which will in turn convert it to cedis and subsequently disburse it in tranches to the board for onward payment for cocoa beans.

That process will help strengthen the currency against its major trading partners, especially the US dollar.

Trade financing facility 

This year's syndicated loan is US$200 million higher than the US$1.5 billion that was raised in the 2013/14 cocoa season and will be used to fund cocoa purchases  in the 2014/15 cocoa season.

The COCOBOD, which regulates Ghana's premium cocoa sector, has, since 1993, resorted to loan syndication from the international finance market to purchase cocoa beans from farmers through the LBCs.

The amount raised per season has been on the increase, rising from US$140 million in the 1992/1993 cocoa season to US$2 billion in the 2011/2012 season — the period the country grossed over one million metric tonnes of cocoa.

The loan is often guaranteed by the season's cocoa beans, thereby making the entire arrangement a cocoa trade-financing facility.