• A transparent methodology is expected to reshape Africa’s risk profile

• Confidence grows as the pan-African agency project advances

• Afreximbank’s lending capacity depends on improved ratings

Africa can convince global debt market investors to adopt a fairer, more contextualized assessment of its risk, according to Dr. Yemi Kale, Chief Economist and Director of Research at the African Export-Import Bank (Afreximbank). He said current international rating agency methodologies are often poorly suited to African realities.

"A new African agency will naturally encounter resistance, like any rating agency in its early stages. But by adopting a transparent approach, clearly explaining its methodologies, and justifying its assessments, it will be able to demonstrate its rigor and gain credibility. The major international rating agencies themselves had to go through this stage before being accepted by the markets," he stated.

This view is gaining ground across the continent as the project to create an African sovereign rating agency progresses. Operations are set to begin in September 2025. The development comes as Afreximbank raised concerns over Fitch Ratings’ latest assessment, which downgraded the bank's issuer profile, citing non-performing loans at 7.1% in 2024. Afreximbank contests this, estimating the ratio at 2.33% as of June 30, 2025. The difference stems from varying methodologies, with Fitch highlighting risks in countries such as South Sudan, Zambia, and Ghana.

In contrast, China Chengxin Credit Rating Group (CCXI), partly owned by Moody’s, praised Afreximbank for improving its non-performing loan ratio between 2023 and 2024. In a report dated December 19, 2024, CCXI assigned the bank an AAA rating with a stable outlook. It emphasized Afreximbank’s strategic role, rigorous risk management, operational agility, strong profitability, prudent liquidity management, and solid short-term commitments coverage.

While a recent JP Morgan analysis shows investors are currently more focused on Afreximbank’s bond yields than client risk, Dr. Kale admitted Fitch's downgrade could impact the bank’s financing costs. He also noted global economic uncertainty, citing risks such as escalating trade wars under Donald Trump’s return to the U.S. presidency, security tensions in the Middle East, and other global crises that could affect Africa.

Dr. Kale pointed to the importance of monitoring U.S. dollar trends. A stronger dollar could boost local currency export revenues but raise the cost of foreign currency debt service. A weaker dollar would lower export revenues and harm African economies’ external positions, especially given Africa’s trade ties with China, which face pressure from the U.S. and European Union.

He also mentioned diversifying Afreximbank’s funding sources. Turning to shareholders for a capital increase remains an option but is limited by pressures on African states’ and central banks’ reserves. As of March 2025, paid-up capital approached $1 billion, just one-fifth of authorized capital. However, the bank had accessible equity funds worth $7.46 billion.

Afreximbank’s financial strength is key to meeting its objectives, particularly amid rising demand for intra-African trade financing. As the institution transitions from the decade under Nigerian Professor Benedict Oramah, it must sustain trade support and adapt to the continent’s evolving trade landscape.

Key priorities include geographical diversification of its portfolio, currently concentrated in West Africa (39.6%) and North Africa (28.2%), and greater support for industrialization. This sector, critical for reducing import dependence, accounted for just 6.5% of outstanding financing at the end of 2024, compared to 46.8% for the financial sector and 19% for oil and gas.

Idriss Linge