Africa Has To Own Its Credit Story, Not Merely Complain About Its Cost

By Enam Obiosio

We have complained for years that Africa pays too much to borrow, that our economies are misunderstood, and that international credit ratings often fail to capture the realities of our markets. Now, with the African Union (AU)’s launch of the African Credit Rating Agency (AfCRA), we have an opportunity to move beyond complaint and begin building an institution capable of changing how the world evaluates African risk.

I welcome this development, but I do not mistake the launch of an agency for the resolution of a continental problem. Africa has created a platform. Whether that platform becomes a credible instrument of financial transformation depends on the independence of its judgements, the quality of its analysis and its willingness to tell uncomfortable truths about our economies.

The AfCRA, approved by the AU in 2017 and operationalised through the African Peer Review Mechanism (APRM), was launched in Mauritius, where it is headquartered. Its mandate responds to longstanding concerns that the assessments of international agencies, including Fitch Ratings, Moody’s Ratings and S&P Global Ratings, influence borrowing costs without always adequately reflecting African economic conditions.

We must confront the issue honestly. Credit ratings matter because they influence investor confidence, the cost of government borrowing and the terms on which businesses obtain capital. When a country is judged riskier, its access to affordable financing can deteriorate. That cost can travel through public debt servicing, infrastructure investment, private-sector credit and employment.

President Yoweri Museveni of Uganda, represented at the launch by Amos Lugoloobi, Uganda’s Minister of State for Finance, Planning and Economic Development, identified the continent’s problem as one of inadequate resource mobilisation and underdeveloped human resources, alongside high borrowing costs.

I agree with the central argument: Africa does not lack economic potential. But potential is not performance, and natural resources are not the same as productive capacity. We cannot demand that investors recognise our opportunities while neglecting the institutions, infrastructure, skills and policy consistency required to convert those opportunities into reliable returns.

The Chairperson of the African Union Commission, Mahmoud Ali Youssouf, stressed that the agency must assess African risks objectively while remaining independent. That independence is not a ceremonial requirement. It is the foundation on which the agency’s credibility must stand.

H.E. Ambassador Marie-Antoinette Rose Quatre, Chief Executive Officer of the African Peer Review Mechanism, articulated the institutional urgency: “Africa could no longer postpone the institutions required to tell its own economic story with rigour and credibility.”

She also made an important distinction. AfCRA was not created merely to compete with existing international agencies. Its purpose is to offer assessments that are “rigorously independent, materially unbiased, credible and firmly rooted in Africa’s true measure.”

We should hold the agency to those words. Our objective must not be to establish an African institution that awards favourable ratings simply because the issuers are African. That would replace one credibility problem with another. If AfCRA becomes a political instrument for defending governments against unwelcome assessments, investors will discount its conclusions, and the agency will become irrelevant precisely when the continent needs it most.

I believe Africa needs a credit rating institution that understands its markets deeply enough to distinguish genuine risk from poorly contextualised risk, without confusing contextual understanding with excuses for weak economic management.

A country’s exposure to external shocks, infrastructure deficits or structural constraints deserves rigorous analysis. So do fiscal indiscipline, policy reversals, opaque public accounts, currency instability and unsustainable debt. An African rating agency must examine both sides of that equation.

The stakes are considerable. According to the African Peer Review Mechanism, Africa’s capital market is worth approximately four trillion dollars, yet instruments representing less than five percent of its value carry a credit rating. That gap suggests an opportunity to widen access to formal credit assessment, particularly for sub-national governments, corporations and issuers whose financing needs may not be adequately served by existing coverage.

We should not interpret that opportunity as proof that ratings alone will unlock capital. Ratings can improve information and comparability; they cannot manufacture viable projects, guarantee repayment or eliminate investment risk. Africa must therefore connect AfCRA’s work to stronger financial disclosure, credible corporate governance, dependable data and disciplined public finance.

The concerns raised over sovereign downgrades in countries such as Ghana and Zambia illustrate the consequences of expensive borrowing and difficult debt conditions. The African Peer Review Mechanism has also criticised Fitch Ratings over its downgrade of the African Export-Import Bank, arguing that the assessment misunderstood African financial institutions. Fitch, for its part, maintains that its ratings follow globally consistent and transparent criteria.

We should not resolve this disagreement through nationalism. We should resolve it through evidence. If an international rating is wrong, AfCRA must demonstrate why through transparent methodology, verifiable data and defensible analysis. If an African institution is financially vulnerable, AfCRA must say so, regardless of its political importance or continental symbolism.

The argument made by Denys Denya, Senior Executive Vice-President for Finance, Administration and Banking Services at the African Export-Import Bank, represented at the launch on behalf of President and Chairman Dr George Elombi, raises another important question.

“Why should Dangote Group, which is rapidly expanding its footprint across Africa, be confined by Nigeria’s credit ratings?” he asked. He also questioned why major banks operating across several African jurisdictions should be limited by national ratings.

These questions expose a critical challenge in cross-border investment. A company operating across several countries may have a financial position, business model and risk profile that cannot be adequately represented by a single national rating. AfCRA could help investors distinguish corporate strength from sovereign exposure, provided its methodology supports such distinctions.

President Bola Ahmed Tinubu has also argued that the so-called “Africa premium”, the gap between perceived and actual risk, inflates the cost of capital. His position reinforces the case for better African risk analysis. But we must recognise that the premium will not disappear merely because an African agency exists.

We need credible institutions, predictable regulation, stronger domestic revenue systems and transparent public borrowing. We need businesses that publish reliable financial statements and governments that honour contractual obligations. We must also build deeper domestic capital markets so that African savings can finance more African enterprises.

AfCRA is expected to focus primarily on local-currency debt instruments while covering sovereign, sub-sovereign and corporate issuers. Its ownership structure is equally significant: despite emerging from an African Union decision, it is not intended to be owned by African governments. That separation could help protect its assessments from direct political pressure, but only if governance arrangements, funding and operational decisions preserve genuine independence.

I want AfCRA to succeed because Africa needs institutions that understand its realities and can command international respect. But I want it to succeed on merit, not sentiment. Its ratings must be trusted by African pension funds, banks, institutional investors and businesses as much as by international capital providers.

We have spent too long arguing about who controls our economic narrative. We must now demonstrate that we can produce better evidence, enforce stronger standards and accept independent scrutiny.

Africa’s credit story should neither be written exclusively by outsiders nor dictated by our political preferences. We must build the capacity to tell it accurately ourselves.

Enam Obiosio is a public relations and investor relations practitioner and journalist with experience in arts and business journalism, with expertise spanning financial markets, economic policy, infrastructure, corporate communications, and the creative economy.