Debate on African Multilateral Ratings presents opportunities

 … As Afreximbank steps up with South Africa’s full membership

BY KEHINDE OLAOSEBIKAN

There has been growing buzz over the past few weeks after Afreximbank cut ties with Fitch Ratings. Rather than relapse into emotions or unhelpful speculations to drive responses, it is both advisable and expedient to first look at the facts on the ground. This should begin with a careful assessment of the history of the relationship and how it has evolved over the years to arrive at the present juncture.

History and fallout 

On 23 January, 2026, the African Export-Import Bank (Afreximbank) officially terminated its credit rating relationship with Fitch Ratings agency. This decision, according to the Bank, “follows a review of the relationship, and its firm belief that the agency’s credit rating exercise no longer reflects a good understanding of the Bank’s Establishment Agreement, its mission, and its mandate.” The Bank went on to assure stakeholders and the relevant publics that its business profile remains robust, underpinned by strong shareholder relationships and the legal protections embedded in its Establishment Agreement, signed and ratified by its member states.

Following this notice, Fitch Ratings, on 28 January, 2026, announced the downgrading of the Bank’s Long-Term Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-‘. Fitch also downgraded Afreximbank’s Short-Term IDR to ‘B’ from ‘F3’ and the long-term ratings on the bank’s global medium-term note programme and debt issuance to ‘BB+’ from ‘BBB-‘. Fitch has subsequently withdrawn Afreximbank’s ratings, saying that the downgrade reflects its revision of Afreximbank’s policy importance risk to ‘medium’ from ‘low’ following the announcement of an agreement on Ghana’s debt to Afreximbank in the context of Ghana’s broader restructuring. Fitch said that it “has now chosen to withdraw the ratings for commercial reasons, announcing that it will no longer provide ratings or analytical coverage for the Bank.”

Fitch Ratings, Inc. is one of the statistical rating organisations (NRSRO) designated by the U.S. Securities and Exchange Commission.

Afreximbank-Fitch relations

Historically, Afreximbank had in the past submitted itself to investment grade ratings, beginning with Moody’s rating report of 2017. It has been 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-). Therefore, it will not be true to say that the current downturn in its relationship with Fitch Ratings could be due to its unwillingness to be held up to scrutiny or scrupulous performance monitoring. Truth is, Afreximbank has never been shy to have the torch held to its performance. It has been held up to scrutiny countless times, and its performance has been satisfactory.

Relations between Afreximbank and Fitch Ratings became troubled after the agency posted a downgrade of the credit rating of the Bank on 4 June 2025, on the strength of its assessment of the exposure of three African nations – Ghana, Zambia, and South Sudan – to the Bank. The Bank countered this rating, arguing that it betrayed a lack of understanding of the agreements underlying the Bank’s dealings with its partner sovereign entities underpinned by the Bank’s Establishment Agreement.

According to the African Peer Review Mechanism (APRM), “Fitch justified its decision by citing a perceived increase in credit risk and weak risk management policies, based on its estimate that the bank’s non-performing loans (NPLs) stood at 7.1%. This estimate stems from Fitch’s classification of exposures to the sovereign Governments of Ghana (2.4%), South Sudan (2.1%) and Zambia (0.2%) as NPLs. Notably, this 7.1% figure is significantly higher than the 2.44% ratio reported by Afreximbank in its own disclosures.”

The APRM further raised its concern with Fitch Ratings’ misclassification of Afreximbank’s sovereign exposures to the Governments of Ghana, South Sudan and Zambia as NPLs, noting that: “This classification raises critical legal, institutional and analytical issues which the APRM strongly contests. The assumption that Ghana, South Sudan and Zambia would default on their loans to Afreximbank is inconsistent with the 1993 Treaty establishing the Bank to which the indebted countries are both founding members, shareholders and signatories. The Multilateral Treaty signed in 1993 is legally binding on all member countries, imposing specific legal obligations related to the Bank’s protection, immunities and financial operations.”

The APRM went on to argue that: “By virtue of this Treaty, loans extended by Afreximbank to its member countries are governed by a framework of intergovernmental cooperation and mutual commitment, rather than typical commercial risk principles. It is, therefore, legally incongruent to classify a loan to member countries as non-performing, especially when the borrower states are shareholders in the lender institution, no formal default has occurred and none of the sovereigns have repudiated the obligation.”

In conclusion, APRM observed that “Fitch’s unilateral treatment of these sovereign exposures – as comparable to market-based commercial loans – despite their backing by treaty obligations and shareholder equity stakes, is flawed. Doing so reflects a misunderstanding of the governance architecture of African financial institutions and the nature of intra-African development finance. Fitch has misinterpreted the invitation extended by Ghana, South Sudan and Zambia to Afreximbank to discuss the loan repayments as signalling an intention to default and/or to lift the Preferred Creditor Status.”

The APRM further called upon Fitch Ratings “to re-examine its criteria and assumptions in this case and to engage in technical consultations with Afreximbank and other relevant African stakeholders,” advising that, “Objective, transparent and context-intelligent credit assessments are critical to ensuring fair treatment of African institutions in the global financial system.”

It has since transpired that the rating agency’s assessment was hasty and did not factor in ongoing negotiations to rebalance the exposures of the three countries under reference.

Fitch claims that its 2025/2026 downgrades of Afreximbank were driven by increased credit risk, non-performing loans exceeding 6%, and a change in risk profile from moderate to high. It is a claim that Afreximbank challenges. Increasingly, it does appear that divergent cultures of risk assessment may conflict here.

However, this is not the first time that Fitch and, indeed, other rating agencies will be way off the mark on matters of professional advice that they purport to offer, even in well-organised markets. The main credit rating agencies, including Fitch, were once accused of misrepresenting the risks associated with US mortgage-related securities, which included the collateralised debt obligation (CDO) market. There were large losses in the CDO market that occurred despite being assigned top ratings by the credit rating agencies (CRAs).

For instance, losses on $340.7 million worth of collateralised debt obligations (CDO) issued by Credit Suisse Group added up to about $125 million, despite being rated AAA by Fitch. However, differently from the other agencies, Fitch was warning the market on the constant proportion debt obligations (CPDO) with an early and pre-crisis report highlighting the dangers of CPDOs in 2007.

The way forward

The current situation, however, presents opportunities for African economies and entities to develop their own strong internal systems and controls that shield them from being talked down to by foreign agencies that may not be sufficiently familiar with the local operating environment and legal provisions.

It is obvious that many agencies use their ratings exercises to drive traffic towards themselves in a cycle that increasingly looks like a self-fulfilling prophecy. So, if Fitch Ratings says that an entity is sub-par, the entity may start behaving in ways that could prove such an assessment to be true. African entities need to develop self-confidence and assertiveness grounded in expertise and competence, and rooted in a superior understanding of their own operating environment.

Also, the Nigerian experience may suggest that not too much stock should be set on ratings, no matter how beautifully packaged and presented. So many bank awards for top performance have in the past gone to financial institutions that went under soon thereafter. It has even been suggested that banks under threat of collapse, sometimes “purchase” these awards to bolster an unfounded confidence in the public mind and in the markets.

Indeed, the market’s own assessment of Afreximbank’s fundamentals tells a different story from Fitch’s downgrade. Following the selloff triggered by the rating cut, investment bank, JP Morgan, upgraded its view on Afreximbank bonds from “underweight” to “overweight,” noting that the market repricing had “created more value in these bonds and made them attractive relative to benchmarks.” According to Reuters, JP Morgan expressed confidence in Afreximbank’s underlying financial strength, institutional structure, and ability to navigate sovereign debt restructuring while maintaining strong shareholder support. This vote of confidence from a major market player underscores that Fitch’s assessment may not reflect the full picture of the Bank’s resilience and strategic importance to African trade and development.

Breaking News

While signing off on this piece, the Accession of South Africa becoming a full sovereign member (Class A shareholder) of the African Export-Import Bank kindled the media space.  Welcoming the full membership of South Africa in Afreximbank, the Portfolio Committee on Trade, Industry and Competition says “it marks an important moment for the country’s economic future and its trade with Africa…

“The signing of the instrument of Ascension by President Cyril Ramaphosa and Afreximabank’s President, Dr George Elombi, will allow South Africa to leverage the Bank’s stronger investment grade rating and Preferred Creditor Status. This offers more protection than standard commercial debt. It enables more competitive financing and risk coverage for South African exporters, state-owned enterprises, and private companies.’’

Going forward, Afreximbank should maintain its mantra of: Do the work; not chase the ratings. Every student knows that you need to study hard and do well. Aiming to please the examiner can never take the place of the work and grind that goes into studying hard to pass tests.

In conclusion, and to deploy a soccer metaphor, training well under a good coach, and preparing for every match as a “must-win,” rather than counting on a pliant referee or the ratings of football analysts, is the way to top the league tables.

Without a doubt, Afreximbank under the leadership of its President, Dr George Elombi, and his team deserve upgrades and kudos, not the downgrades of Fitch.

*Olaosebikan, journalist and public affairs analyst, writes in from Abuja, Nigeria.