Keypoints:
- APRM rejects Fitch’s NPL classification
- Legal treaty defends African sovereign loans
- Fitch urged to consult African stakeholders
THE African Union’s African Peer Review Mechanism (APRM) has sharply criticised Fitch Ratings’ recent downgrade of the African Export-Import Bank (Afreximbank), calling the move analytically and legally flawed.
The APRM urged Fitch to ‘re-examine its criteria and assumptions’ and to engage in direct technical consultations with Afreximbank and African stakeholders.
Fitch cites higher credit risk
On June 4, Fitch Ratings lowered Afreximbank’s long-term foreign currency issuer default rating from ‘BBB’ to ‘BBB-’ with a negative outlook.
Fitch attributed the downgrade to what it described as a heightened credit risk and weak risk management policies at the bank. Central to its decision was an estimate that Afreximbank’s non-performing loans (NPLs) stood at 7.1 per cent—far above the bank’s own reported 2.44 per cent.
This higher figure is based on Fitch classifying Afreximbank’s loan exposures to Ghana (2.4 per cent), South Sudan (2.1 per cent), and Zambia (0.2 per cent) as non-performing.
Legal backing for African loans
However, the APRM contests Fitch’s classification of these sovereign exposures. In its statement, it stressed that such treatment ‘raises critical legal, institutional and analytical issues’.
‘The assumption that Ghana, South Sudan and Zambia would default on their loans to Afreximbank is inconsistent with the 1993 Treaty establishing the Bank,’ the APRM noted. Both Ghana and Zambia are founding members, shareholders and signatories to the treaty.
The APRM explained that the treaty imposes binding legal obligations on member countries, including protections for the Bank’s operations and a framework rooted in intergovernmental cooperation—distinct from typical commercial lending risk.
‘It is, therefore, legally incongruent to classify a loan to member countries as non-performing, especially when the borrower states are shareholders in the lender institution, no formal default has occurred and none of the sovereigns have repudiated the obligation,’ the APRM stated.
APRM urges revision and dialogue
The APRM also criticised Fitch’s interpretation of loan repayment discussions between Afreximbank and the three governments as an intent to default or revoke the Bank’s Preferred Creditor Status.
‘Fitch’s unilateral treatment of these sovereign exposures – as comparable to market-based commercial loans – despite their backing by treaty obligations and shareholder equity stakes, is flawed,’ the APRM declared.
The organisation called for a more ‘objective, transparent and context-intelligent’ approach to credit assessments and warned against misreading the governance structure of African financial institutions.
‘Fitch has misinterpreted the governance architecture of intra-African development finance,’ the APRM said, adding that only through consultation with African actors can global ratings fairly reflect Africa’s unique financial ecosystem.
