Afreximbank’s downgrade by Fitch ‘not based on reality’

• The African Peer Review Mechanism (APRM) defends Pan-African Lender, Afreximbank, challenges western risk metrics.
• On 4 June 2025, Fitch Ratings revised the bank’s long-term foreign currency issuer default rating downward from ‘BBB’ to ‘BBB-’ and assigned a negative outlook.
• Fitch claims lender has 7.1% non-performing loan ratio while as lender places its NPL at a lower 2.44%.

The African Peer Review Mechanism (APRM) has strongly criticized Fitch Ratings over its recent decision to downgrade the African Export-Import Bank (Afreximbank), describing the move as flawed and based on a fundamental misunderstanding of intra-African financial architecture.

On 4 June 2025, Fitch Ratings revised Afreximbank’s long-term foreign currency issuer default rating downward from ‘BBB’ to ‘BBB-’ and assigned a negative outlook. The agency justified its decision by citing increased credit risks and alleged deficiencies in risk management, singling out what it claimed to be a 7.1 per cent non-performing loan (NPL) ratio.

According to Fitch, this figure stems from classifying the lender’s exposures to the governments of Ghana (2.4 per cent), South Sudan (2.1 per cent) and Zambia (0.2 per cent) as NPLs.

However, the bank’s own reporting places its NPL ratio at a considerably lower 2.44 per cent. This sharp discrepancy has drawn the attention of the APRM, which argues that Fitch’s assessment not only inflates perceived risks but also misrepresents the unique structure of multilateral financial relationships within Africa.

APRM says treaty obligations ignored in Afreximbank evaluation

In its official response, the APRM emphasized the foundational legal framework under which the pan-African lender operates. The bank, established through a multilateral treaty signed in 1993, enjoys the backing of its member states, many of whom—such as Ghana and Zambia—are both signatories and shareholders. This treaty confers specific legal protections and operational immunities that differentiate Afreximbank from standard commercial lenders.

APRM officials argue that it is “legally incongruent” for Fitch to classify loans extended to shareholder states as non-performing, particularly in the absence of a formal default or any repudiation of obligations by the borrowing countries.

“By virtue of the treaty,” APRM stated, “these sovereign exposures are not commercial liabilities but instruments of intergovernmental cooperation and mutual development.” Fitch’s rating methodology, the APRM contends, fails to account for these nuanced distinctions.

Fitch ‘misreading sovereign intentions‘

A central point of contention lies in Fitch’s interpretation of ongoing repayment discussions between the bank and the governments of Ghana, South Sudan, and Zambia. According to the rating agency, these negotiations signal a material risk of default and a weakening of Afreximbank’s Preferred Creditor Status.

The APRM vehemently disagrees. It argues that such engagements are not red flags but routine exercises in financial diplomacy. None of the sovereign borrowers has defaulted, nor have they expressed any intention to disavow their commitments. To conflate dialogue with delinquency, APRM notes, betrays a poor understanding of African sovereign lending practices and undermines efforts to build robust, cooperative financial institutions on the continent.

A call for contextual intelligence

The APRM’s intervention comes under the mandate of the African Union, which empowered the body to support African nations in navigating and challenging international credit rating assessments. The current case, APRM warns, illustrates how rating agencies—when relying on commercial templates unsuited for development finance—can unintentionally distort market perceptions and damage African institutions’ access to capital.

“Objective, transparent and context-intelligent credit assessments are critical,” the APRM stated. It called on Fitch Ratings to enter into technical consultations with Afreximbank and relevant African stakeholders in order to revisit the criteria and assumptions that led to the downgrade.

Toward fair financial representation

This is not the first time African institutions have pushed back against Western credit rating models. The critique aligns with a broader continental movement demanding equity and accountability in the global financial system. African leaders and institutions have repeatedly decried the lack of local contextualization in credit scoring, which often results in disproportionately high borrowing costs for African states and institutions.

For the lender, a downgrade by a major agency like Fitch could have tangible consequences—raising borrowing costs, dampening investor confidence, and complicating its mission to finance Africa’s trade and development goals. But the APRM’s robust response may also signal a shift: African institutions are no longer content to be passive recipients of externally imposed assessments.

Read also: Afreximbank first quarter 2025 net profit surges by 21% to $215 million