On 23 January, Afreximbank ended its relationship with Fitch Ratings in a disagree- ment over the status of the bank’s debts. The dispute centres on whether recent African sov- ereign debt defaults should count among Afreximbank losses. Yet it also ties in to a wider mistrust of the big three credit rat- ing agencies – Fitch, Moody’s and Stand- ards & Poor’s – among African govern- ments and institutions, who argue that they unfairly rate African risk, pushing up financing costs for everyone on the continent.

Multilateral trade finance bank Afrex- imbank announced that it had terminated its credit rating relationship with Fitch following “a review of the relationship, and its firm belief that the credit rating exercise no longer reflects a good un- derstanding of the Bank’s Establishment Agreement, its mission and its mandate”. It had previously paid Fitch to provide the rating.

It took the decision after Fitch cut its rating in June 2025 to BBB-, one step above junk status, with a negative out- look, suggesting a further downgrade was likely because of high levels of credit risk and weak risk management.

Afreximbank believes that it has preferred creditor status (PCS) in the same way as the IMF and World Bank and so should not book losses on loans to debt defaulted countries, such as Zambia and Ghana. It insists that this stipulation is included in its charter. Fitch argues that Afreximbank’s decision to accept a less attractive restructuring of its loans to Ghana showed that it did not benefifit from preferred creditor status.

There is no precise defifinition of which organisations benefifit from pre- ferred creditor status but it is gener- ally accepted that it is conferred on institutions that offffer concessional finance. However, Reuters reported last year that the Paris Club of mainly Western creditor countries may consider Afrex- imbank’s loans to debt-defaulted coun- tries as commercial lending.

Moody’s also downgraded Afrex- imbank’s rating to Baa2 last July, two steps above junk, but that agency did not take preferred creditor status into account on Afreximbank in any case.

US investment bank JP Morgan had previously warned of the risks surround- ing Afreximbank becoming involved in sovereign debt restructuring and some investors sold Afreximbank bonds follow- ing the Fitch downgrade. However, this prompted JP Morgan to describe Afrex- imbank bonds as “overweight”, mean- ing that it expects them to outperform similar bonds, partly because of expected support from Afreximbank’s sovereign shareholders, which would make them more attractive investments.

“We think that this has created more value in these bonds and made these attractive relative to benchmarks”, the investment bank said in a statement. Afreximbank will stay in JP Morgan’s investment grade-only bond indexes be- cause Moody’s continues to rate it.

Afreximbank’s shareholding breaks down as 64% African governments and public institutions, 26% African financial institutions and private investors, 7% non-African institutional investors and 3% general investors. Its business profile “remains robust, underpinned by strong shareholder relationships and the legal protections embedded in its Establish- ment Agreement, signed and ratified by its member states”, the bank said in a statement.

The African Union’s African Peer Re- view Mechanism (APRM) quickly leapt to Afreximbank’s defence, arguing that: “Any future ratings issued by Fitch in respect of the Bank would be unsolicited and non-participatory, and therefore risk misinforming investors”.

The APRM is an African-led peer eval- uation mechanism for good governance. Five days after Afreximbank’s decision to end its relationship with the agency, Fitch announced that it had “chosen to with- draw the ratings for commercial reasons” and would no longer provide ratings or analytical coverage for the bank.

African governments and organisa- tions often argue that the agencies over estimate risk and underestimate economic improvements on the continent in their ratings for African sovereigns, corpora-tions and other institutions, resulting in ratings that are overly conservative.

Critics contend that the credit rating models were mainly built for developed markets and that the agencies still do not have suffifficient presence on the ground in Africa to fully understand the nuances of African economies and economic conditions. The agencies’ role in the 2008 global fifinancial crisis also suggests that their credit judge- ments are fallible. For their part, the main agencies stand by their Afri- can ratings and insist that they ap- ply the same methodologies to every economy. 

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