NAIROBI—Imagine taking an exam and answering every question correctly, only to fail because your paper was graded against the answer key for a different exam. That, in a nutshell, is what happens when African institutions are assessed by major credit-rating agencies like Fitch, Moody’s, and S&P.
Consider the recent dispute between Fitch and the African Export-Import Bank. In June 2025, Fitch downgraded Afreximbank, saying it had become concerned about the bank’s sovereign loans, particularly to heavily indebted borrowers like Ghana and Zambia. Afreximbank pushed back. As a multilateral development bank (MDB), it argued, it enjoys preferred-creditor status. Therefore, its sovereign loans should not be treated like ordinary commercial debt.
Afreximbank and Ghana announced a deal that allowed Ghana to avoid defaulting on its debt in December 2025, yet Fitch did not change its view. Afreximbank ended its contract with Fitch the following month, after which the agency issued an unsolicited downgrade to BB+ and withdrew its coverage entirely.
A ratings methodology can be applied correctly and still get the risk wrong. If it does not account for preferred-creditor status, or for what actually happens to an MDB’s claims when a member state runs into trouble, it is missing an integral part of the picture.
Senegal is a case in point. In October 2025, Moody’s downgraded the country for the third time in a year, citing its growing reliance on domestic and regional financing rather than the Eurobond market. Senegalese bonds fell sharply, at one point trading at around 60 cents on the dollar. S&P has since downgraded Senegal as well.
Increasing domestic and regional debt, however, can be a deliberate step to reduce foreign-currency exposure. And borrowing to finance productive investment is not the same as borrowing to cover recurring budget shortfalls. Some of the factors shaping credit risk across Africa are easy to miss if you don’t know what to look for, especially when it comes to how preferred creditors are treated and how local guarantees and economic structures—such as the degree of informality in the economy—affect solvency. Even what looks like a default on paper may in practice be just a temporary pause between institutions that expect to keep doing business with each other.
As of this writing, only 32 African countries are rated by Fitch, Moody’s, and S&P, and just three—Botswana, Mauritius, and Morocco—are investment grade. The Big Three rating agencies also cover fewer than 10% of Africa’s companies and public institutions. According to the United Nations Development Programme and AfriCatalyst, African countries could save up to $74.5 billion if credit-rating agencies priced their risk more accurately. A forthcoming analysis of more than 500 sovereign bonds issued over the past two decades will show that African sovereigns paid approximately 66 basis points more than comparable non-African borrowers after accounting for fundamentals, ratings, and other measured factors, with credit ratings explaining the largest share of the gap.
Against this backdrop, the long-awaited Africa Credit Rating Agency, which was launched in Mauritius on October 7, could have a huge impact on the cost of capital across the continent. But launching AfCRA is the easy part. Its success will ultimately depend on its ability to publish a clear, transparent methodology.
That methodology should be African by design. AfCRA should, for example, look for preferred-creditor status in treaties and consider the full range of refinancing options available to a country like Senegal, from domestic debt and regional banks to Panda or even diaspora bonds. The point is not to produce better ratings for African borrowers, but to provide a more complete and accurate assessment. An exam like this might prove even harder to pass, because it may well ask for information that the major credit agencies do not think to request.
Investors will quickly lose interest if AfCRA looks like an agency flattering African borrowers. It will have to publish its methodology in full, so that investors can see for themselves how it determines its ratings. Until then, detractors will argue that by setting up a homegrown agency, Africa is effectively grading its own homework.
AfCRA will not replace the Big Three credit-rating agencies. But it can act as a second reader, assessing borrower governments with a deeper knowledge of how their institutions and markets actually function. For decades, Africa has been graded against the wrong answer key. It can now write its own.
Copyright: Project Syndicate, 2026.
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