The African Peer Review Mechanism (APRM), a specialised instrument of the African Union, has strongly criticised international credit rating agency Fitch Ratings for its recent decision to downgrade the African Export-Import Bank (Afreximbank) from ‘BBB’ to ‘BBB-’ with a negative outlook.
In a statement issued on Sunday, the APRM said the downgrade was based on flawed classifications of sovereign loans, warning that such assessments risk distorting perceptions of African multilateral institutions.
Fitch had justified its downgrade on the grounds of elevated credit risk, estimating Afreximbank’s non-performing loan (NPL) ratio at 7.1% above its 6% threshold for “high risk” institutions. Central to this figure were exposures to Ghana (2.4%), South Sudan (2.1%), and Zambia (0.2%), which Fitch categorised as non-performing.
However, Afreximbank’s own disclosures put the NPL ratio at just 2.44%, a stark contrast to Fitch’s estimate and one the APRM argues is based on a misinterpretation of sovereign exposure within a treaty-backed multilateral framework.
“This classification raises critical legal, institutional, and analytical issues,” the APRM stated. “Fitch’s assumptions disregard the nature of the bank’s founding treaty, signed in 1993, which binds member states including Ghana and Zambia to uphold the bank’s immunities and obligations.”
The APRM stressed that Afreximbank’s sovereign loans are governed by intergovernmental cooperation, not commercial banking norms. It noted that no formal default has occurred, nor have the countries involved repudiated their commitments.
“To classify these loans as non-performing simply because repayments are under discussion is not only premature it’s legally incongruent,” the statement said. “This fails to reflect the preferred creditor status that protects institutions like Afreximbank.”
The APRM accused Fitch of overlooking the bank’s shareholder structure, treaty protections, and the unique role of African development finance institutions, stating that the rating agency had “erroneously treated sovereign-backed treaty-based loans as if they were high-risk, unsecured commercial loans.”
Call for Reassessment and Dialogue
The APRM urged Fitch to revisit its criteria and engage in technical consultations with Afreximbank and African regulators to ensure fair and context-specific evaluations.
“Objective, transparent, and context-intelligent credit assessments are critical to ensuring the integrity of Africa’s position in global capital markets,” the statement added.
Despite the downgrade, Fitch maintained a ‘medium’ risk profile for Afreximbank, citing strong fundamentals such as:
- Robust capitalisation, with a projected 21% usable capital to risk-weighted assets ratio through 2027.
- Strong equity-to-assets and guarantees ratio (19%).
- Excellent internal capital generation capacity.
Fitch also acknowledged ongoing capital injections under a $2.6bn capital increase plan, of which $2.1bn has already been paid.
Global Contrast: Chinese Rating Agency Awards AAA
In contrast to Fitch’s position, earlier this year, China Chengxin International Credit Rating Co. (CCXI) assigned Afreximbank a ‘AAA/Stable’ rating its highest making Afreximbank the first African multilateral institution to receive such recognition from the Chinese agency.
Encouraged by the CCXI rating, Afreximbank is now exploring access to the Panda bond market in 2025 to further boost trade and investment between Africa and China.
