By Lucy Ogalue, News Agency of Nigeria (NAN)
For decades, the question of who determines Africa’s creditworthiness has remained central to debates about the continent’s access to affordable finance.
The issue gained a new dimension with the unveiling of the Africa Credit Rating Agency (AfCRA) in Port Louis, Mauritius.
The agency is expected to provide independent, Africa-focused assessments of sovereigns, sub-national governments, companies and financial institutions.
Its emergence follows years of debate over whether conventional credit-rating models adequately capture Africa’s economic, institutional and developmental realities.
For African policymakers, the stakes extend beyond ratings.
Credit assessments influence borrowing costs, investment decisions and access to capital needed for infrastructure, healthcare, education and industrial development.
At the inauguration, Claver Gatete, Executive Secretary of the United Nations Economic Commission for Africa (ECA), said persistent African risked premiums cost the continent about 75 billion dollars annually in excess interest payments.
He said the burden diverted scarce public resources from development priorities, including infrastructure, health and education.
“When perceptions of risk do not fully reflect the realities of a country’s economy, the consequences are obvious. Governments pay more to borrow. Investment is becoming harder to attract,” Gatete said.
However, Africa’s case is not simply that international rating agencies are wrong.
An International Monetary Fund (IMF) working paper published in 2025 found limited evidence of systematic credit-rating bias against sub-Saharan African countries after accounting for economic fundamentals.
The analysis also identified global financing conditions, governance, political risks and domestic economic characteristics as significant influences on borrowing conditions.
The Organisation for Economic Cooperation and Development (OECD), however, highlighted the difficult financing environment confronting the continent.
Its 2025 Africa Capital Markets Report showed that about 80 per cent of rated African countries were classified as high-risk or below in 2024.
The report indicated that only Botswana and Mauritius had investment-grade ratings in the OECD dataset, while 24 other rated African sovereigns were assessed as high-risk or default-equivalent.
African dollar-denominated bond yields reached about nine per cent in 2024, the highest among the regions covered by the report.
Against this background, AfCRA enters a financial landscape where the cost of capital remains a major development constraint.
African Union Commission Chairperson, Mahmoud Youssouf, described the agency as an important pillar of efforts to strengthen Africa’s financial architecture.
He said AfCRA would provide investors with independent, technically rigorous and Africa-focused analysis of economies and credit risks.
However, Youssouf stressed that the agency was not established to shield African borrowers from scrutiny or guarantee favourable ratings.
“Rather, its purpose is to provide additional analysis based on African data, expertise and realities,” he said.
That distinction is crucial because AfCRA’s credibility will depend on its willingness to deliver both positive and negative assessments.
Amb. Marie-Antoinette Rose-Quatre, Chief Executive Officer of the African Peer Review Mechanism, said independence must guide the agency’s operations.
“Independence must not be a slogan used at launch; it must be the discipline by which this institution lives,” she said.
She stressed the need for evidence-based, transparent and technically rigorous assessments protected from political interference.
UN Special Adviser on Africa, Ahunna Eziakonwa, also said African financial institutions must embrace the agency.
“We cannot ask global capital to trust what African capital treats as optional.
“For AfCRA to influence markets, African pension funds, banks, insurers, development finance institutions and central banks must recognise and use its ratings.
“Regulatory recognition will also be important because institutional investors operate within investment and risk-management rules that often depend on recognised credit assessments,” she said.
Mauritius Finance Minister, Jyoti Jeetun, linked AfCRA’s potential to the broader objective of mobilising capital for African development.
She said Mauritius could serve as a platform connecting capital with opportunities in infrastructure, renewable energy, telecommunications, healthcare and agribusiness.
She added that credible risk assessments could help investors distinguish genuine risks from those arising from inadequate information.
Misheck Mutize, one of AfCRA’s architects, described the agency as more than another rating institution.
He said it could become a lever for expanding Africa’s capital markets and directing investment towards infrastructure, energy and manufacturing.
“The objective is particularly relevant to the African Continental Free Trade Area (AfCFTA), which seeks to create a single continental market.
“Businesses will need affordable, long-term capital to expand across borders and take advantage of emerging regional opportunities.
“More comprehensive corporate and financial-institution ratings can improve the information available to investors and lenders.
“A second credible source of assessments can also encourage competition and improve analytical quality across the ratings industry,” he said.
Afreximbank Executive Vice-President, Denys Denya, said methodology would be central to AfCRA’s success.
“The rating methodology AfCRA develops must recognise the uniqueness of our environment and its institutional structures,” he said.
He urged the agency to establish its own standards while maintaining independence and African ownership.
However, AfCRA’s emergence does not remove the genuine economic challenges confronting African countries.
These include debt sustainability, governance, political instability, fiscal management, foreign-exchange risks and underdeveloped domestic financial markets.
The IMF findings and OECD analysis both suggest that Africa’s financing challenges cannot be explained entirely by rating-agency bias.
Gatete acknowledged that better ratings would only be part of the solution.
He said African countries must strengthen macroeconomic management, domestic resource mobilisation, public financial management and responsible fiscal policies.
“Reliable economic and debt data will also be essential.
“Any rating agency, global or African, can only be as accurate as the information available to it,” Gatete said.
Independent analysts have similarly warned that the agency’s greatest test will be credibility rather than its African identity.
Dennis Shen, a lecturer in finance and former sovereign analyst at Scope Ratings, said investors would ultimately judge the agency by its record.
“A new rating agency begins with a promise while investors ultimately require a track record,” he said.
He added that the hardest test would come during periods of market stress, when rating agencies must make uncomfortable assessments.
Former Nigerian Vice-President, Yemi Osinbajo, also warned that AfCRA must operate according to international standards.
“It cannot just be a chauvinistic or nationalistic agency,” he said.
Economist Carlos Lopes said AfCRA could expand information, competition and local knowledge within a highly concentrated global ratings market.
Economist Jason Braganza similarly linked the agency’s establishment to the continent’s high cost of capital.
The OECD, however, identified several factors behind Africa’s comparatively weak ratings, including limited financial development, weak institutions, political risks, budget-transparency challenges and debt distress.
AfCRA must therefore demonstrate that its methodology captured genuine risks while identifying strengths and resilience that might be overlooked.
Its governance, ownership structure, financing model, regulatory recognition and ability to attract skilled analysts would also shape investor confidence.
The agency’s unveiling is part of a wider effort to reform Africa’s position within the global financial architecture.
The African Union has linked AfCRA to greater financial sovereignty and the continent’s Agenda 2063 objectives.
The UN Office of the Special Adviser on Africa estimated that inaccurate and unfair credit assessments cost the continent about 74.5 billion dollars annually.
Lower financing costs could potentially release resources for infrastructure, health, education and social protection.
Businesses could also secure longer-term financing for expansion and job creation, while domestic investors gain access to more investment opportunities.
However, these benefits are not automatic.
While AfCRA cannot solve fundamental issues like borrower insolvency, currency volatility, political unrest, or weak fiscal governance, its value lies in providing the market with a reliable new source of data.
The agency’s true impact will not stem from the optics of its Mauritius launch; rather, it hinges on its analytical independence, the caliber of its ratings, and the trust those evaluations build.
As Gatete noted, its credibility will have to be earned “rating by rating.”
In the long run, experts say Africa’s goal extends beyond merely establishing a new credit rating institution. It is an effort to give the continent a reliable voice in how its unique economic risks are evaluated and priced.(NANFeatures)