Fitch Ratings’ decision to downgrade the African Export-Import Bank (Afreximbank) to BBB- from BBB status has ignited a fierce debate over how international credit agencies assess African financial institutions. The move has been met with strong opposition from the African Peer Review Mechanism (APRM), which argues that Fitch’s analysis misrepresents the unique legal and institutional framework governing Afreximbank operations.
The downgrade was attributed to concerns over rising credit risks and what Fitch described as “weak risk-management policies”. At the heart of the dispute is Fitch’s classification of loans to the governments of Ghana, South Sudan, and Zambia as non-performing, pushing its estimated non-performing loan (NPL) ratio to 7.1%, which not only exceeds the 2.44% reported by Afreximbank but also the 6% ‘high-risk’ threshold outlined in Fitch’s criteria at the end of 2024.
According to Fitch Ratings, if countries like Ghana or Zambia include Afreximbank’s loans in their debt restructuring deals, it would weaken the bank’s standing as a preferred lender. As a result, the bank would appear less reliable and increase the risks associated with its operations.
However, the APRM contends that this assessment ignores the binding multilateral treaty that established Afreximbank in 1993, under which member countries, including Ghana and Zambia—both founding shareholders—are legally obligated to honour their financial commitments.
Unlike commercial loans, Afreximbank’s sovereign exposures are backed by intergovernmental agreements and shareholder equity, making traditional default risk metrics inapplicable. It is therefore legally incongruent to classify a loan to member countries as non-performing, especially when the borrower states are shareholders in the lending institution, no formal default has occurred, and none of the sovereigns has repudiated the obligation.
The downgrade has already started to affect the pan-African multilateral financial institution, as its dollar bonds dipped following the announcement, with its 2031 maturity bond falling to 86.5 cents—the lowest since January.
Higher borrowing costs could constrain the bank’s ability to provide much-needed financing to African nations, particularly at a time when global capital markets remain restrictive and traditional development aid is shrinking.
Fitch’s methodology has been sharply criticised, as it stands accused of applying a commercial risk framework to what is fundamentally a development finance institution. By treating Afreximbank’s sovereign exposures as comparable to private-sector loans, Fitch overlooks the political and legal safeguards embedded in the bank’s structure.
The APRM is now urging Fitch to revisit its assessment, as Afreximbank has long been a critical lender for the continent, stepping in when international bond markets shut out African sovereigns. It is calling for deeper engagement with African stakeholders to ensure that ratings reflect the continent’s financial realities rather than imported risk models.
