NAIROBI, June 9 – A key African Union-affiliated institution has strongly criticized the recent downgrade of the African Export-Import Bank (Afreximbank) by Fitch Ratings, calling the move unjustified and based on a fundamental misinterpretation of sovereign loan exposures. The African Peer Review Mechanism (APRM), a continental oversight body mandated with establishing Africa‘s own credit ratings framework, has urged a review of Fitch’s assessment and demanded a reevaluation of the data that underpinned the rating.
Fitch Ratings downgraded Afreximbank’s long-term issuer default rating to BBB-, positioning it only one notch above non-investment grade, often referred to as “junk” status. The downgrade from BBB was attributed to what Fitch described as elevated credit risks and alleged weaknesses in the bank’s risk management structure. Central to the downgrade was Fitch’s calculation that the bank’s non-performing loans (NPLs) exceeded the 6% threshold it considers indicative of high risk.
However, the APRM has pushed back firmly against this assessment, stating that Fitch’s classification of certain sovereign loans—particularly to Ghana, South Sudan, and Zambia—as non-performing is analytically unsound and institutionally problematic.
In a detailed statement issued late Friday, the APRM expressed concern that Fitch failed to adequately consider the legal and treaty-based framework under which Afreximbank operates. The bank, which was established by a multilateral treaty in 1993, enjoys preferred creditor status among its member states—many of which are also shareholders.
“The APRM notes with concern Fitch Ratings’ misclassification of Afreximbank’s sovereign exposures to the Governments of Ghana, South Sudan and Zambia as NPLs,” the body said. “This classification raises critical legal, institutional, and analytical issues which the APRM strongly contests.”
Afreximbank’s most recent quarterly report indicated that its non-performing loan (NPL) ratio was 2.44% at the close of March, significantly under Fitch’s 6% benchmark for high credit risk. The bank has not publicly responded to the downgrade, but it previously stated that none of its member-state loans were subject to restructuring negotiations.
The APRM emphasized that loans provided by Afreximbank are governed by a framework of intergovernmental cooperation, not typical market-based commercial lending terms. This, the body argues, shields such loans from the standard classifications of default and performance risk used by commercial credit rating agencies.
APRM stated that suggesting Ghana, South Sudan, and Zambia might fail to meet their commitments to Afreximbank contradicts both the intent and the legal responsibilities outlined in the 1993 Treaty—an agreement these countries helped establish and formally endorsed as founding members.
The core of the dispute lies in how Fitch interprets risk in the context of sovereign exposures by multilateral financial institutions. While Fitch maintains that it applies globally consistent rating criteria, APRM insists that this uniformity overlooks the unique legal instruments binding African multilateral institutions and their member states.
Afreximbank, headquartered in Cairo, plays a crucial role in supporting trade finance across the African continent. Its mission is to bolster intra-African and extra-African trade by providing credit facilities, guarantees, and advisory services. It has been instrumental in recent years in mobilizing financing for critical sectors and in responding to economic shocks, including those caused by the global pandemic and geopolitical disruptions.
The rating downgrade poses significant concerns, not just for Afreximbank, but also for the broader African financial ecosystem. Lower credit ratings typically lead to higher borrowing costs, reducing the institution’s ability to mobilize affordable capital for its initiatives.
In its defense, Fitch reiterated that its decision-making process is governed by clear, transparent criteria. A spokesperson for the agency stated that all ratings are derived from independent analysis and that key metrics and assumptions are published regularly to ensure accountability.
Nevertheless, APRM contends that the classification of sovereign exposures as non-performing, especially in the context of treaty-backed, shareholder-supported loans, lacks merit. “Fitch’s unilateral treatment of these exposures as though they were commercial debts, subject to ordinary credit risk, is flawed and disregards the legal character of the bank’s operations,” the APRM said.
The agency has called for an urgent dialogue involving Fitch, Afreximbank, and other relevant African institutions. The aim, according to APRM, is not only to challenge the current rating but also to ensure that global credit rating agencies better understand and respect the distinct governance and financial frameworks of African multilateral institutions.
This dispute also comes at a time when Africa is preparing to launch its own independent credit rating agency under the umbrella of the African Union. The forthcoming agency is expected to provide alternative assessments that better reflect the realities of African economies and financial institutions, correcting what many see as persistent biases in global ratings.