Tinubu Advocates for Fairer African Financial System to End High Borrowing Costs

President Bola Tinubu has called for a more equitable global financial system, highlighting that African countries continue to pay disproportionately high borrowing costs. Writing in an opinion piece, Tinubu criticized major international credit rating agencies for misjudging African economies, arguing that the so-called “Africa premium” has unfairly penalized the continent and hindered its access to international capital.

Tinubu singled out the world’s three major rating agencies—Fitch, Moody’s, and S&P Global Ratings—for wielding outsized influence over investment decisions in Africa. He explained that these agencies’ assessments often fail to capture local economic realities, combining quantitative data with subjective judgements that are sometimes opaque, leading to inflated borrowing costs and missed lending opportunities. A 2023 UNDP report cited by Tinubu estimated these distortions cost Africa around $75 billion annually.

Only three African nations currently hold investment-grade ratings, despite IMF projections that the continent will be the world’s fastest-growing region in 2026. Tinubu argued that establishing a continental credit rating agency is a necessary corrective, noting that reliance on distant assessments often amplifies global market swings rather than reflecting individual countries’ fundamentals. Commodity-dependent economies are particularly vulnerable to downgrades during global price drops, even when their fiscal reserves remain strong.

The Nigerian president highlighted recent improvements in economic transparency and policy reforms that helped boost investor confidence, including fuel subsidy removal, exchange-rate liberalization, GDP rebasing, and better reporting of central bank lending. Despite these gains, he noted that Nigeria’s ratings still lag behind actual reforms, with November’s dollar-denominated bonds oversubscribed 5.5 times, demonstrating that market sentiment often outpaces formal ratings adjustments.

Tinubu emphasized that a continent-wide ratings agency could capture reform momentum in real time, giving African nations a fairer platform to compete in global capital markets. “Africa’s success is not a regional concern but a global opportunity,” he wrote, pointing out that by mid-century, the continent will represent a quarter of the world’s working-age population. Such an agency, he suggested, would serve as an early signal of progress, helping African countries reduce borrowing costs and achieve financial parity on the international stage.

source: punch