Accra:The Ghana Cocoa Board's introduction of new cocoa notes is drawing attention as a competitive alternative to government Treasury bills for banks, pension funds, and insurers in the country. Both financial instruments are tapping into the same limited pool of domestic savings.
According to Ghana Web, Cocoa Capital PLC, the financing arm of COCOBOD, has issued 266-day commercial paper with an 11 percent yield, surpassing the 9.71 percent yield offered on the government's 364-day Treasury bill at a recent auction. This has positioned the cocoa notes as an attractive option for investors considering where to allocate funds over a one-year period.
Market analysts had previously noted the potential competition between the cocoa notes and the government bills, emphasizing the need for Cocoa Capital to offer a sufficient premium to attract investors away from the safer sovereign paper. Despite substantial domestic liquidity, the market faces constraints from various investment options.
Data from the Bank of Ghana indicates a decline in demand for the government's one-year bill, coinciding with the launch of the cocoa notes. In September, bids for the 364-day bill were GHS1.21 billion, but dropped significantly in early October as the cocoa notes were introduced. However, demand for these bills rebounded recently, with bids rising to GHS1.12 billion at the last auction.
Although it is unclear whether funds have shifted directly from Treasury bills to cocoa notes, the timing suggests a new competitive dynamic in Ghana's debt market. COCOBOD plans to issue further commercial paper tranches as part of its GHS16.3 billion program, as well as bonds expected to offer higher yields.
The government is also engaging in the market, seeking GHS3.8 billion at its next Treasury bill auction. The competition between these financial instruments is expected to continue, providing investors with more options while potentially impacting the funding costs for both the government and COCOBOD.