Afreximbank cuts ties with rating agency

African Export-Import Bank (Afreximbank) has terminated its credit-rating relationship with Fitch Ratings.

A statement issued by the bank over the weekend says the decision was taken because Fitch’s credit-rating process does not provide an accurate understanding of AfreximBank’s establishment agreement, mission, and development-focused mandate.

“This decision follows a review of the relationship, and its firm belief that the credit-rating exercise no longer reflects a good understanding of the bank’s establishment agreement, its mission and its mandate,” the statement reads.

The global credit-rating industry is dominated by the ‘Big Three’ agencies S&P Global Ratings, Moody’s Investors Service and Fitch Ratings, which control approximately 95% of the market.

These agencies evaluate the creditworthiness of companies and countries to assess risk for investors – ultimately determining interest rates on debt.

The bank did not indicate whether it intends to appoint another international credit-rating agency in the near future.

International rating agencies have for years been scrutinised for alleged bias ratings against African nations, with studies suggesting these subjective assessments cost the continent up to N$1.2 trillion annually.

A United Nations Development Programme (UNDP) report estimates Namibia could save up to N$2.1 billion annually if ratings were fair and based on accurate data.

This translates to potential savings of over N$10 billion in debt servicing costs over five years.

The UNDP report highlights similar situations across 13 African countries, suggesting a continental issue.

The agency advocates for greater transparency in rating methodologies, exploring alternative rating systems and strengthening existing African credit-rating agencies.

Ultimately, the UNDP calls for the establishment of a pan-African rating agency to provide a more balanced and Africa-centric perspective.

Afreximbank is a multilateral financial institution that finances developmental projects through loans to African countries.

The bank also launched a Pan-African Payment and Settlement System that was adopted by the African Union as the payment and settlement platform to underpin the implementation of the African Continental Free Trade Area (AfCFTA).

The bank has set up a US$10 billion adjustment fund to support countries effectively participating in the AfCFTA.

At the end of December 2024, Afreximbank’s total assets and contingencies stood at over US$40.1 billion, and its shareholder funds amounted to US$7.2 billion.

Afreximbank has investment grade ratings assigned by GCR (international scale) (A), Moody’s (Baa2), China Chengxin International Credit Rating Co., Ltd (CCXI) (AAA), and Japan Credit Rating Agency (JCR) (A-).

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