Fitch Downgrades Afreximbank to Junk Status and Withdraws Future Ratings Amid Bitter Dispute

In a dramatic escalation of tensions between global credit rating agencies and African financial institutions, Fitch Ratings has downgraded the African Export-Import Bank (Afreximbank) to junk status and withdrawn all future ratings of the multilateral lender. The final ratings change to BB+ from BBB- marks the conclusion of an increasingly combative relationship between the ratings agency and one of Africa’s most significant development finance institutions.

The downgrade comes after months of public dispute between Afreximbank and Fitch over the agency’s assessments of the Cairo-based lender, in which Fitch flagged persistent concerns over high credit risks, weak risk-management policies, and whether the bank would be forced to take losses on loans to debt-distressed member nations.

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The Ghana Question Central to Ratings Dispute

At the heart of the conflict lies Afreximbank’s exposure to Ghana, which announced a “resolution” of its $750 million loan to the bank on December 25, 2025. The settlement, whose exact terms remain undisclosed, followed a protracted negotiation over whether Afreximbank’s loans should be included in Ghana’s broader commercial debt restructuring programme.

“The bank’s inclusion in Ghana’s restructuring underlines its weakening policy importance, in our view,” Fitch wrote in its final rating action. The ratings agency said the apparent losses taken in Ghana’s debt restructuring raised the bank’s risk profile to ‘high risk’ from ‘medium’, fundamentally altering its credit assessment.

Reuters reported that the Paris Club of official lenders embraced the resolution with Ghana, a signal that the bank took a hit on the loan. “We view this as evidence that Afreximbank did not benefit from its preferred creditor status,” Fitch wrote, directly challenging the bank’s long-standing claim to special protection from sovereign debt restructuring.

The $750 million facility was approved by Ghana’s Parliament on July 20, 2022, at a time when the West African nation had lost access to international bond markets following a series of credit rating downgrades. The loan was disbursed in August 2022 in three tranches and carried a three-year grace period, supporting Ghana’s balance of payments, trade finance needs, and critical infrastructure spending at the peak of the country’s economic crisis.

Afreximbank Severs Ties First

In an unprecedented move, Afreximbank terminated its relationship with Fitch on Friday, January 23, 2026, citing a “firm belief” that the agency’s rating approach no longer reflected an understanding of the bank’s mission and mandate. This marked a rare instance of a major financial institution publicly severing ties with one of the “Big Three” global credit rating agencies.

“This decision follows a review of the relationship, and its firm belief that the credit rating exercise no longer reflects a good understanding of the Bank’s Establishment Agreement, its mission and its mandate,” Afreximbank stated in its announcement. The bank emphasized that its business profile remains robust, underpinned by strong shareholder relationships and legal protections embedded in its Establishment Agreement, signed and ratified by its member states.

Fitch’s withdrawal of Afreximbank’s rating, which it said was for “commercial reasons,” leaves only Moody’s among the “Big Three” agencies to rate the pan-African lender. Moody’s had already downgraded Afreximbank to Baa2, two notches above junk status, in July 2025, though the agency has never granted the bank a ratings “uplift” for preferred creditor status.

The Preferred Creditor Status Controversy

The fundamental disagreement centers on whether Afreximbank enjoys “preferred creditor status” – a long-standing practice in global finance that gives multilateral development banks priority in being repaid when a country faces financial distress. The World Bank, International Monetary Fund, and regional development banks in Asia and Latin America all enjoy this protection as a matter of established practice.

For traditional multilateral lenders like the IMF and World Bank, preferred creditor status is an unwritten privilege based on decades of practice and convention. However, for African multilateral development banks, it is enshrined in law. The founding treaties of Afreximbank, the African Development Bank, and the Trade and Development Bank explicitly establish this status, registered under Article 102 of the UN Charter, making them binding under international law.

Afreximbank has consistently argued that its founding charter, signed by 53 African states in 1993, provides it with preferred creditor status that legally shields its loans from restructuring. The bank maintains that it is not participating in debt restructuring negotiations related to any of its member countries, arguing that doing so would violate its establishment treaty.

However, the practical application of this status has come under increasing scrutiny as African countries face mounting debt pressures. Ghana’s Finance Minister, Dr. Cassiel Ato Forson, stated during negotiations that “we do not believe that their debt is senior to any other restructurable debt. The Afrexim debt is part of our restructurable envelope.”

The Rating Agency Methodology Dispute

Fitch’s June 2025 downgrade, which preceded the recent move to junk status, was based on increased exposure to sovereign borrowers like Ghana, South Sudan, and Zambia, all of which were undergoing or at risk of debt restructuring. The agency cited significant disagreement over how to classify non-performing loans.

Fitch estimated Afreximbank’s non-performing loan ratio at 7.1%, substantially higher than the 2.3% reported by the bank itself. This discrepancy stems from Fitch’s classification of exposures to Ghana (2.4%), South Sudan (2.1%), and Zambia (0.2%) as non-performing loans, pushing the total above the 6% “high risk” threshold outlined in Fitch’s criteria.

Afreximbank rejected this characterization, arguing that Fitch’s definition of NPLs differs from the bank’s approach, which uses forward-looking information and aligns with International Financial Reporting Standards (IFRS 9). The bank maintained that its actual NPL ratio stood at 2.44% in the first quarter of 2025.

Fitch also revised its assessment of the bank’s risk management policies to “Weak” from “Moderate,” citing low transparency in reporting loan performance relative to its peers and concerns about the bank’s shift toward unsecured lending to sovereigns under financial stress.

African Union Challenges Fitch’s Assessment

The controversy attracted sharp criticism from the African Peer Review Mechanism (APRM), the African Union’s governance and credit rating watchdog. In a strongly worded statement issued on June 9, 2025, the APRM called Fitch’s downgrade “flawed” and challenged the agency’s methodology.

“The APRM notes with concern Fitch Ratings’ misclassification of Afreximbank’s sovereign exposures to the Governments of Ghana, South Sudan and Zambia as NPLs,” the watchdog stated. “This classification raises critical legal, institutional and analytical issues which the APRM strongly contests.”

The APRM argued that the assumption Ghana, South Sudan, and Zambia would default on their loans to Afreximbank is inconsistent with the 1993 Treaty establishing the bank, to which Ghana and Zambia are both founding members, shareholders, and signatories. The multilateral treaty is legally binding on all member countries, imposing specific legal obligations related to the bank’s protection, immunities, and financial operations.

“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. “Doing so reflects a misunderstanding of the governance architecture of African financial institutions and the nature of intra-African development finance.”

More recently, on Tuesday, January 27, 2026, the African Union’s ratings watchdog warned that Fitch Ratings risked misinforming investors if it continued to issue credit assessments of Afreximbank after the bank had terminated the relationship.

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The Broader Debate on Rating Agency Bias

The dispute has reignited long-standing debates about whether the “Big Three” ratings agencies – Moody’s, Fitch, and S&P Global Ratings – fairly assess the risk of lending in Africa. The African Union and some African nations have alleged that these agencies, all headquartered in New York, do not properly account for the continent’s economic realities, resulting in systematically higher borrowing costs.

A 2023 UNDP study revealed that African countries could save up to $74.5 billion if credit ratings were based on less subjective assessments. This, in turn, would enable them to repay debt principal and free up liquidity for investments in human capital and infrastructure development.

Dr. Yemi Kale, Group Chief Economist and Managing Director of Research and Trade Intelligence at Afreximbank, noted in June 2025 that flawed and externally-biased credit rating models are pushing up the cost of borrowing for African countries, despite their improving macroeconomic outlook. According to Kale, international credit rating agencies continue to assess African economies using one-size-fits-all models that do not reflect the structure, risks, or policy frameworks within the continent.

All three major agencies have consistently denied bias, stating that their ratings follow the same formula across continents and are based on objective financial and economic criteria.

Market Implications and Alternative Ratings

Afreximbank’s bonds did not react significantly to the termination announcement, though US investment bank JPMorgan had already cut its view on Afreximbank bonds earlier in January, citing concerns that Fitch could cut its rating to junk after reports emerged that the bank would take a loss on Ghanaian loans.

Despite severing ties with Fitch, the impact of the junk rating remains tangible. Investors continue to reference Fitch’s assessment when pricing Afreximbank bonds, and with Fitch now out of the picture, more weight will fall on Moody’s evaluations, intensifying scrutiny on the bank’s sovereign exposure, asset quality, and reporting standards.

Afreximbank maintains ratings from several other agencies besides the Big Three. China Chengxin International Credit Rating Co. (CCXI) assigned Afreximbank an “AAA/Stable” rating earlier this year, recognizing the bank as a leading multilateral financial institution on the continent. Afreximbank is the first African multilateral financial institution to receive a AAA rating from CCXI. The bank also holds an A2 rating from GCR, a South African ratings agency, and is rated by Japan Credit Rating Agency.

However, these alternative ratings carry far less weight in international capital markets, where the Big Three control approximately 95% of the market in key financial centers. This market dominance explains why, despite holding a triple-A rating from a Chinese agency, it is the Fitch rating that has generated the most market attention and impact.

The African Credit Rating Agency Initiative

The controversy has energized the African Union’s push to launch its own African Credit Rating Agency (AfCRA), scheduled to begin issuing ratings by late 2025 or early 2026. The agency, backed by the African Union and funded by public and private stakeholders, aims to provide a homegrown alternative to the Big Three that better understands the continent’s unique economic dynamics and governance structures.

Proponents argue that an African rating agency with deeper exposure to and understanding of African markets could provide more nuanced and contextually appropriate assessments. The initiative has gained momentum following high-profile disputes like the Afreximbank case, which supporters cite as evidence of the need for an African voice in credit ratings.

However, critics point to significant challenges facing the initiative. Building a truly world-class credit rating agency to match the reputation of the Big Three, while deepening coverage across African sovereigns and corporates, would require substantial resources. Aborted efforts to create a European alternative to the Big Three in the aftermath of the global financial crisis were estimated to cost roughly $400 million.

Moreover, other regions that have created alternative rating voices, such as the Caribbean, have not reported any decline in Big Three influence even after more than two decades of operation. The fundamental challenge is that investors trust ratings from agencies with established track records and global recognition, creating a self-reinforcing cycle that is difficult for newcomers to break.

Implications for African Development Finance

The downgrade and subsequent severing of ties between Afreximbank and Fitch carries broader implications for African development finance. Afreximbank plays a central role in financing trade and development across the continent, particularly in supporting sovereigns with limited access to global capital markets. Higher funding costs resulting from downgrades could increase the interest rates the bank must charge to African borrowers, potentially scaling back the volume of new loans available for development projects.

Daniel Cash, an associate professor of law at Aston University in the UK who has written extensively about ratings agencies, characterized the dispute as “less a dispute between Afreximbank and Fitch and more a reflection of a deeper ambiguity about how preferred creditor status is defined for hybrid multilateral lenders.”

The development also reflects a broader shift in how multilateral African banks are treated by rating agencies – increasingly like commercial lenders rather than policy-driven institutions with special status. This shift could have long-term consequences for development finance across the continent.

Fellow South-focused institution Trade and Development Bank (TDB) is also battling for preferential creditor status in Malawi and Zambia, where governments owe it $323 million and $555 million respectively. Fitch revised TDB’s rating outlook from stable to negative in September 2024, again citing concerns that sovereign debt restructuring “could lead to significant credit losses for the bank.”

A Rare Public Rupture

Afreximbank’s move represents an unusual development in the global ratings market because it constitutes a rare, issuer-led termination of a major credit rating relationship following a downgrade – and in full public view. While financial institutions occasionally discontinue relationships with rating agencies, such decisions typically occur quietly and are framed as routine business decisions rather than public disputes over methodology and mandate.

The public nature of this rupture distinguishes it from typical rating relationship changes. Rather than a behind-the-scenes business decision, Afreximbank’s termination followed a months-long public dispute with Fitch over methodology, legal interpretation, and risk assessment, making it a market-facing event with broader policy implications.

The controversy underscores fundamental questions about the governance of global finance and the role of rating agencies in assessing institutions from emerging markets. As Southern-led multilateral development banks grow in size and importance, their treatment by traditional rating agencies will likely remain a contentious issue with significant implications for development finance and sovereign debt management.

The Path Forward

The International Monetary Fund welcomed the agreement in principle reached between Ghana and Afreximbank in December 2025 as “a crucial step toward completing Ghana’s debt restructuring.” Julie Kozack, Director of the IMF’s Communications Department, noted that the agreement was consistent with the comparability of treatment under the framework of the Official Creditor Committee and aligned with the objectives and parameters of the IMF-supported programme.

Despite severing ties with Fitch, Afreximbank remains financially sound and strategically important to African development. The bank has expressed interest in exploring opportunities to tap into the Chinese Panda bond market in 2025 to support and facilitate accelerated trade and investment between China and Africa and to expand its existing funding partnerships.

However, the episode may have narrowed the bank’s margin for error in global credit markets. With only Moody’s remaining among the Big Three agencies rating Afreximbank, the bank faces intensified scrutiny of its operations, particularly regarding sovereign exposures, asset quality, and transparency in financial reporting.

For Fitch, the withdrawal marks the end of its coverage of one of Africa’s most significant multilateral development banks. The agency declined to comment on Afreximbank’s termination announcement, maintaining its position that the rating actions were based on objective analysis of credit risk according to its established methodology.

The broader implications of this dispute will likely reverberate across African finance for years to come, influencing debates about the role of international rating agencies, the preferred creditor status of regional multilateral institutions, and the viability of alternative approaches to credit assessment on the continent. As African economies continue to navigate complex debt challenges, the relationship between African institutions and global financial gatekeepers like rating agencies will remain a critical issue affecting the continent’s access to affordable capital for development.

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By: Montel Kamau

Serrari Financial Analyst

29th January, 2026