Bank of Ghana (BoG) Governor Dr Johnson Asiama has endorsed the Ghana Cocoa Board’s (COCOBOD) decision to finance cocoa purchases through the domestic capital market instead of relying on syndicated foreign loans, describing the move as a positive step for the country’s financial system.
Speaking after the Monetary Policy Committee (MPC) meeting, Dr Asiama said raising funds locally through commercial paper would strengthen Ghana’s financial markets while reducing pressure on the banking sector.
According to him, COCOBOD’s decision to mobilise funds within the domestic market to finance cocoa purchases for export is a long-overdue reform.
“I think it’s rather a good one. What it means is they are mobilising money locally to fund the purchases of cocoa for export, which we believe is a good thing. It’s one thing we should have done long ago,” he said.
The governor explained that commercial banks have limitations in financing COCOBOD because of regulatory capital requirements, making the capital market a more sustainable source of funding.
“The reliance on banks to fund COCOBOD has its limits because of their capital base. Moving to the capital markets to raise commercial paper to finance cocoa purchases is the right way to go,” he stated.
Dr Asiama further noted that the transition would also eliminate the large liquidity injections previously associated with COCOBOD’s annual pre-financing arrangements.
“We used to have the pre-financing regime, where in the fourth quarter we had a huge liquidity injection on the balance sheet of the central bank. That will no longer be the case because the money will now be mobilised within the financial system,” he explained.
The BoG Governor also addressed concerns about private sector lending, revealing that credit to businesses is already increasing compared to the same period last year.
“If you heard me right in the statement, private sector credit is actually going up compared to last year. It’s increasing quite rapidly,” he said.
Although banks continue to invest significantly in government securities, Dr Asiama said the financial sector is undergoing a transition that will eventually see more lending directed to businesses as interest rates continue to decline.
“Yes, banks are still investing in government securities, but we believe we are in transition. Over time, as rates continue to fall, we will see greater recourse to private sector lending by the banks,” he noted.
To accelerate credit growth, the governor said the Bank of Ghana is implementing several reforms, including the introduction of a new digital credit framework and measures to strengthen banks’ risk management systems.
He explained that these initiatives are intended to improve banks’ capacity to lend while maintaining financial stability.
“We are introducing new digital credit initiatives and working with banks to strengthen their risk management frameworks to support greater credit provision. Several other measures are also being introduced, which will see private sector credit grow to even higher levels,” Dr Asiama said.
The governor’s remarks underscore the central bank’s strategy to deepen Ghana’s capital markets, reduce reliance on external borrowing and expand access to credit as macroeconomic conditions continue to improve.
