Afreximbank Downgrade: A Warning Signal for Africa’s Trade Finance Future

By Danilo Desiderio

The African Export-Import Bank (Afreximbank) has once again found itself in the crosshairs of global credit rating agencies, with Moody’s latest downgrade raising alarms about the continent’s financial stability and trade capacity.

Just weeks after Fitch Ratings cut Afreximbank’s credit outlook, Moody’s followed suit, lowering its long-term issuer rating from Baa1 to Baa2 – now just two notches above speculative or “junk” status. While the move may not have come as a surprise to market observers, it underscores growing concerns over Afreximbank’s asset quality and the broader implications for Africa’s access to affordable trade finance.

Moody’s had already signaled potential risks in a 2024 report, pointing to deteriorating loan performance and increasing exposure to countries facing economic distress. The agency’s decision aligns with Fitch’s earlier assessment that Afreximbank’s non-performing loans could reach 7.1 percent by the end of 2024 – well above Fitch’s own 6 percent threshold for high-risk portfolios.

These assessments have not gone unchallenged. The African Peer Review Mechanism (APRM) recently disputed Fitch’s methodology, arguing that the agency misinterpreted loan restructuring requests from South Sudan, Zambia, and Ghana as defaults – a characterization APRM claims contradicts the legal framework established under the 1993 treaty founding Afreximbank.

Defaults, Disputes, and Legal Repercussions

However, the rating agencies’ concerns are not without merit. Afreximbank recently secured a landmark US$657 million arbitration victory against South Sudan’s central bank in London, a clear indication of the country’s failure to meet its obligations.

Meanwhile, Zambia has openly contested Afreximbank’s preferred creditor status, classifying its debt as commercial and subject to restructuring. Ghana faces a similar impasse.

In the case of Afreximbank, the downgrades serve as a wake-up call – not just for the bank, but for African policymakers who must now confront the structural vulnerabilities that leave key financial institutions exposed.

Whether or not these cases constitute formal defaults, the reputational and financial damage is mounting. And the stakes extend far beyond the balance sheet of a single institution.

Afreximbank plays a critical role in bridging Africa’s persistent trade finance gap, estimated at around US$100 billion annually in the recently released Africa Trade Report 2025. As the continent’s premier multilateral financial institution, it provides essential liquidity to African economies, often at preferential rates.

Rising Costs and the Risk to African Integration

Now, with its creditworthiness under scrutiny, Afreximbank may face higher borrowing costs – costs that will inevitably be passed on to its member states and private sector partners. This could significantly constrain its ability to support intra-African trade and industrial development, particularly at a time when the continent is striving to implement the African Continental Free Trade Area (AfCFTA).

The situation also reignites the debate over the influence of international credit rating agencies on sovereign and supranational borrowing costs – a topic explored in depth in this publication through analysis provided by UNCTAD. Critics argue that such ratings can be both reactive and overly punitive, especially for institutions operating in complex geopolitical and economic environments.

In the case of Afreximbank, the downgrades serve as a wake-up call – not just for the bank, but for African policymakers who must now confront the structural vulnerabilities that leave key financial institutions exposed.

Without a coordinated effort to strengthen risk management, improve transparency, and diversify funding sources, Africa risks losing one of its most important engines of trade and development.

The time has come for African leaders to take decisive action – to protect Afreximbank, safeguard trade finance, and ensure the continent’s economic future remains firmly in African hands.

Danilo Desiderio serves as the CEO of Desiderio Consultants Ltd in Nairobi, Kenya, specializing in African customs, trade, and transport policies. He is a customs and trade expert at the World Bank and a senior associate to the Horn Economic and Social Policy Institute (HESPI).