Fitch Downgrades Afreximbank’s Credit Rating to One Notch Above Junk, Flags Weak Risk Management and Sovereign Debt Exposure

Fitch Ratings lowered the African Export-Import Bank (Afrixhbank) to BBB-, placing the Pan-African lender to a notch above the speculative note, as concerns increase on its exposure to sovereign borrowers in distress and the credibility of its risk management policies.

According to Reuters, the American rating agency has also awarded a negative perspective, signaling the additional downglation potential.

Place Afrexbank dift in a precarious position, Fitch citing “high credit risks” and “low risk management practices” as the main concerns. A major pitch of demotion was the exposure of the bank to the restructuring of sovereign debt in countries such as Ghana, Zambia and Malawi, where Fitch said that the insistence of the bank on its status as a favorite multilateral creditor cannot resist under pressure.

Fitch estimated that the non-efficient loan ratio of Afrexbank is 7.1% at the end of 2024, a figure which contrasts strongly with the 2.44% reported by the bank itself in its finances of the first quarter. The agency has attributed the difference to differences in accounting standards, stressing that the adoption of flexibilities by the bank under IFRS 9 allows it to classify certain risky loans such as performing – an approach that Fitch considers too opaque compared to other multilateral development banks.

“The revision of” low “risk management reflects low transparency in the recent loan performance notification,” Fitch said in its press release. “This also reflects that the definition of Fitch of NPLs differs from the bank’s approach, which uses flexibilities offered by IFRS 9.”

Negative prospects indicate that Fitch Place Afreximbank on effective degradation monitoring, reflecting the growing possibility that some of the bank’s loans can be included in the sovereign debt restructuring agreements. If this happens, warned Fitch, this could lead to a reassessment of the overall importance of the bank’s policy and to increase concerns about its strategic orientation.

Reuters had pointed out earlier that Forexbank had assured investors in private that Ghana remains up to date on its loan obligations and that it would not participate in any restructuring effort involving Member States. However, the Ghanaian authorities have contradicted this assertion, declaring that the country had not made payments of debt services to the bank for two years and now sought to restructure its loans, including those due to Afrexbank.

Fitch said these conflicting signals on the state of reimbursements and the restructuring intention have put the risk controls and the bank’s policy under new control.

“Inclusion in sovereign debt restructuring would probably lead us to revise our currently at low risk assessment” of the political importance of the bank, “said the agency.

AFREXIMBANK has not yet responded to demotion, but silence has not done much to calm the anxiety of investors. The institution, whose shareholders include African governments, central banks and private investors, has positioned itself as a critical source of funding for African countries, excluded from international capital markets. Its role has not become more important than rich nations reduce foreign aid and concessional loans.

However, demotion occurs at a time when the bank expands its loan profile in fragile savings and entering strategic sectors such as energy and infrastructure, where the risk of reimbursement is significantly higher. Analysts warn that a supplement could significantly increase borrowing costs for Afrexbank, limit its access to favorable international credit lines and mitigate its capacity to provide necessary capital through the continent.

Development also highlights a broader concern about transparency and governance in African multilateral lenders, especially when traditional donors tighten tax support. With defects and sovereign restructuring now more frequent across the continent, banks like Afreximbank are facing mounting pressure to reconcile their political ambitions with financial prudence.

Now, the spotlights remain on how Afrexbank will react to the meticulous examination, which he revises his risk classifications to line up with global standards, and how she will sail in the delicate balance between maintaining her favorite creditor status and the support of sovereign borrowers in financial distress.