The African Peer Review Mechanism (APRM), a self-monitoring instrument of the African Union, has strongly criticized Fitch Ratings’ decision to downgrade the African Export-Import Bank (Afreximbank) from ‘BBB’ to ‘BBB-‘ with a negative outlook. The APRM contends that Fitch’s downgrade, based on an assessment of Afreximbank’s non-performing loans (NPLs), is fundamentally flawed due to a misclassification of loans to Ghana, South Sudan, and Zambia as NPLs. The APRM argues that this classification ignores the unique legal and institutional framework governing Afreximbank’s relationship with its member states, specifically citing the 1993 treaty establishing the bank. This treaty, to which Ghana and Zambia are founding members and shareholders, establishes a framework of intergovernmental cooperation and mutual commitment that supersedes typical commercial lending risk assessments. The APRM emphasizes that these loans are backed by treaty obligations and shareholder equity stakes, making them fundamentally different from standard commercial loans.
The APRM takes issue with Fitch’s calculation of Afreximbank’s NPL ratio at 7.1%, significantly higher than the 2.44% reported by the bank itself. This discrepancy arises from Fitch’s classification of loans to Ghana (2.4%), South Sudan (2.1%), and Zambia (0.2%) as NPLs. The APRM vehemently disagrees with this categorization, arguing that it misconstrues the nature of these sovereign exposures. The organization stresses that no formal default has occurred, nor have any of the countries repudiated their obligations. The invitations extended by these countries to Afreximbank for discussions on loan repayments, interpreted by Fitch as a sign of potential default, were simply part of ongoing dialogue within the framework of the treaty, and did not indicate an intention to default or revoke Afreximbank’s Preferred Creditor Status.
The APRM asserts that Fitch’s methodology demonstrates a lack of understanding of the governance structure of African financial institutions and the unique dynamics of intra-African development finance. By applying conventional commercial lending risk assessment criteria to a multilateral development bank operating within a distinct legal and institutional framework, Fitch has, according to the APRM, misrepresented the true financial health of Afreximbank. The APRM calls for Fitch to reconsider its criteria and assumptions, advocating for a more context-sensitive approach to credit assessments of African institutions. They emphasize the importance of objective, transparent, and contextually aware evaluations to ensure fair treatment within the global financial system.
Despite the downgrade, Fitch acknowledged several positive aspects of Afreximbank’s financial position. They maintained a ‘medium’ assessment of the bank’s business profile risk, recognizing its operation within a challenging environment characterized by weak credit quality, low per capita income, and high political risk. Furthermore, Fitch highlighted Afreximbank’s strong capitalization, evidenced by a ‘moderate’ usable capital to risk-weighted assets ratio, a ‘strong’ equity to assets and guarantees ratio, and ‘excellent’ internal capital generation. Fitch projected stability in these ratios over the forecast period, assuming continued growth in banking operations and the successful implementation of the bank’s approved capital increase plan.
This contrasting assessment by Fitch, acknowledging Afreximbank’s strong financial fundamentals while simultaneously downgrading its rating based on a contested NPL classification, underscores the APRM’s concerns about the rating agency’s methodology. The APRM argues that a nuanced understanding of the African financial landscape and the unique legal frameworks governing institutions like Afreximbank is essential for accurate and fair credit assessments. This incident highlights the complexities and potential pitfalls of applying standardized global financial metrics to institutions operating within distinct regional contexts.
Further supporting the APRM’s position is the ‘AAA/Stable’ rating assigned to Afreximbank by China Chengxin International Credit Rating Co., Ltd (CCXI) earlier in the year. This rating, the highest possible, recognizes Afreximbank’s leading role as a multilateral financial institution in Africa. The contrasting assessments by Fitch and CCXI underscore the importance of considering diverse perspectives and methodologies in evaluating the financial health of African institutions. Afreximbank’s exploration of the Chinese Panda bond market in 2025 further highlights its robust financial standing and its strategic pursuit of diversified funding sources to support trade and investment between China and Africa. The APRM’s critique of Fitch’s downgrade ultimately calls for a more nuanced and contextually aware approach to credit rating assessments that acknowledges the unique characteristics of African financial institutions and the legal frameworks within which they operate.
