Africa’s largest trade finance institution, Afreximbank, is in the spotlight after Fitch Ratings downgraded the bank to junk status on January 29, 2026, citing concerns over sovereign loan classifications and preferred creditor status. The move prompted Afreximbank to terminate its relationship with Fitch, while the African Union’s peer review body publicly criticized the rating agency’s methodology. The downgrade contrasts sharply with the bank’s recent performance, as net income rose 29% in 2024, totaling nearly $974 million.
At the heart of the controversy are differences in reported non-performing loan (NPL) ratios. Afreximbank cites a 2.44% NPL, while Fitch calculated 7.1%, a gap equating to $1.4 billion in disputed classifications. The discrepancy stems from sovereign loans to Ghana, South Sudan, and Zambia being treated differently under African multilateral frameworks versus standard commercial lending criteria. The African Peer Review Mechanism argues that Fitch misunderstood these structures, noting that these states are both borrowers and shareholders in Afreximbank.
The downgrade also raises questions about Afreximbank’s “preferred creditor” status, a legal designation that can protect multilateral institutions during debt restructurings. While the bank maintains its treaty obligations prevent participation in sovereign debt negotiations, recent agreements, such as the $750 million arrangement with Ghana, have fueled debate. Fitch’s methodology assumes that restructuring participation reduces creditworthiness, a view contested by the bank and African regulators.
Afreximbank’s rapid expansion may have contributed to the scrutiny. Total assets reached $40.1 billion by 2024, with over $22 billion in financing approved that year alone. Experts suggest that success has exposed the bank to heightened ratings scrutiny, unlike smaller African institutions. African analysts argue that standard rating frameworks, designed for Western multilateral banks like the World Bank, fail to capture the unique governance and financial resilience of institutions like Afreximbank.
The fallout from the downgrade extends beyond Afreximbank. Higher borrowing costs could affect trade finance across the continent, while the dispute underscores the need for African-centered credit rating frameworks. The emergence of the African Credit Rating Agency signals a push toward locally adapted methodologies. Analysts warn that until rating models evolve, successful African financial institutions may continue to face criticism for features that Western models misinterpret as risk.
source:southernafricantimes