Fitch downgrades Afreximbank, draws scrutiny from African stakeholders - Trade Treasury Payments

• Home
• Blog
• Articles
• Fitch downgrades Afreximbank, draws scrutiny from African stakeholders

Fitch downgrades Afreximbank, draws scrutiny from African stakeholders

Fitch Ratings has downgraded the African Export-Import Bank’s (Afreximbank) long-term issuer default rating from ‘BBB’ to ‘BBB–’, assigning a negative outlook based on heightened risk exposure linked to sovereign lending. The move, announced on 4 June 2025, places Afreximbank one notch above non-investment grade and reflects what Fitch describes as “elevated credit and concentration risks” within the bank’s portfolio.

The rating agency flagged exposures to Ghana, Zambia, and South Sudan (three countries currently dealing with or emerging from sovereign debt restructuring) as a central driver behind the action. Fitch estimates the bank’s non-performing loan (NPL) ratio to be 7.1%, exceeding the 6% benchmark typically applied in its high-risk threshold. That figure includes several loans Fitch considers at risk of impairment, even where payments remain current.

Additional concerns relate to transparency and risk reporting practices. While Fitch acknowledged Afreximbank’s strong liquidity profile, solid capital buffers, and status as a preferred creditor, it argued that these strengths were insufficient to offset the underlying pressures it now sees in the bank’s operating environment.

Afreximbank challenges classification

In a public response issued on 10 June, Afreximbank rejected the rationale for the downgrade, asserting that the Fitch assessment inaccurately categorises certain sovereign loans as non-performing. The bank stated its actual NPL ratio stands at 2.44%, as reported under IFRS 9 standards. The discrepancy, it said, stems from a failure to recognise the legal nature of loans extended under its Establishment Agreement – a multilateral treaty with supranational provisions.

Specifically, Afreximbank noted that its facilities to countries such as Ghana, Zambia, and South Sudan are underpinned by intergovernmental agreements and secured through structured arrangements that include sovereign guarantees, project-linked receivables, and escrow accounts. No default events have occurred under the relevant agreements, nor has the bank entered any formal debt restructuring processes.

Afreximbank also took issue with Fitch’s interpretation of its internal governance and risk disclosure processes, reaffirming its full alignment with IFRS and Basel principles, adding that liquidity and capital metrics remain consistent with strong investment-grade comparables.

African Peer Review Mechanism flags methodological inconsistencies

The African Peer Review Mechanism (APRM), a governance initiative under the African Union, weighed in shortly after the Fitch announcement, describing the downgrade as methodologically flawed and disconnected from the unique legal structure of treaty-backed multilateral finance. The APRM’s concern centred on the classification of sovereign exposures as commercial loans, which it argues misrepresents their enforceability and underlying risk.

In its statement, the APRM urged rating agencies to reassess how they evaluate exposures made under multilateral development frameworks, particularly when those loans serve counter-cyclical policy roles in fragile or transitioning economies. It also noted that punitive ratings may lead to systemic consequences by raising capital costs for institutions that are designed specifically to operate in the higher-risk jurisdictions that traditional lenders hesitate to engage.

The agency called for structured dialogue between credit rating agencies and African development finance institutions (DFIs), suggesting that reforming the current rating framework may be necessary to better capture legal distinctions and policy-driven mandates. 

Implications for African development finance architecture

The downgrade has sparked renewed discussion about the interaction between global credit rating frameworks and financial development institutions on the continent. Afreximbank, as one of Africa’s leading DFIs, supports many key areas such as trade facilitation and project finance, among others. It is also particularly active in economies facing volatility or constrained market access.

While Fitch’s action does not directly impair Afreximbank’s operations, it may affect the bank’s pricing in international capital markets and limit the competitiveness of its offerings relative to peers. For many African sovereigns, this could translate into more expensive access to development financing.

The bank’s capital and liquidity position remains strong. As of its latest reporting period, Afreximbank maintains capital adequacy well above regulatory thresholds and reports diversified collateral structures and sovereign-backed exposure. Nevertheless, the reputational impact of a rating action at this level may present short-term challenges in investor perception and risk-weighted pricing.

Some regional policymakers argue that the current system places African DFIs in a double bind, expected to support member states in periods of stress, while simultaneously penalised for the risks such support entails. As these institutions continue to scale up their mandate to align with Agenda 2063 and the African Continental Free Trade Area (AfCFTA), scrutiny of how credit risk is defined will likely intensify.

Toward greater alignment between mandate and methodology

Calls for reform are not new, but the Afreximbank case may be a tipping point. Both the bank and the APRM have signalled readiness to engage with rating agencies to develop frameworks that better reflect the unique positioning of multilateral African institutions. Among the proposals gaining traction are differentiated rating models for treaty-based lenders and greater transparency around assumptions used in sovereign risk weighting.

In the meantime, Afreximbank has reiterated its commitment to its core trade finance mandate, noting that the downgrade does not affect its existing operations or funding programmes. 

Fitch has yet to issue a follow-up response but maintains that its assessment reflects consistent application of global criteria across comparable institutions. Whether that framework can or should adapt to African-specific institutional designs remains a point of active debate.

The Afreximbank review may prove to be the beginning of a much-needed conversation.