….Moody’s Cuts Afreximbank’s Rating Over Rising Credit Risks
Moody’s Downgrade Triggers Alarm for Afreximbank
By NIyi JACOBS
Fresh concerns have emerged over the financial health of the African Export-Import Bank (Afreximbank) after Moody’s Investors Service downgraded the bank’s long-term issuer and senior unsecured ratings from Baa1 to Baa2. The U.S.-based ratings agency attributed the downgrade to weaker-than-expected asset performance and rising risks from unsecured sovereign lending—particularly to distressed countries like Ghana and Zambia.
Moody’s also lowered the bank’s medium-term note programme and long-term bank deposit ratings, although it affirmed its short-term rating at P-2. While the agency changed the outlook from negative to stable, analysts say the downgrade marks a critical moment for the pan-African lender.
The downgrade is largely driven by Afreximbank’s shift from its traditional trade finance portfolio to more unsecured lending to African governments under economic strain. The agency noted that this change significantly increases the bank’s vulnerability to default, especially under the G20 Common Framework, which requires sovereign debt restructurings that often impose losses on private creditors. Ghana and Zambia—two of Afreximbank’s key sovereign borrowers—are currently undergoing debt restructuring.
Moody’s also expressed concern about the bank’s funding model, stating that Afreximbank’s once-diverse funding sources have narrowed, making it more exposed to shifts in market conditions and borrowing costs. The bank’s rising exposure to sovereign stress, combined with declining funding quality, paints a more fragile financial outlook.
Despite the downgrade, Moody’s said the bank’s capital adequacy remains resilient in the face of current challenges. Strong profitability, recent shareholder capital injections, and adequate provisioning were cited as stabilizing factors that could help absorb future losses. These strengths, according to Moody’s, support the bank’s ability to withstand a range of outcomes related to its sovereign exposures.
However, the downgrade could affect Afreximbank’s ability to attract low-cost capital and shake investor confidence. Analysts warn that unless the bank recalibrates its lending strategy and reduces exposure to high-risk sovereigns, it may face further downgrades from other rating agencies such as Fitch and S&P.
Moody’s added that improvements in the operating environment of key borrower countries could exert upward pressure on Afreximbank’s rating. Additionally, enhancing the bank’s capital structure, widening its access to market funding, and adjusting its business model to better manage sovereign credit risk could lead to future rating upgrades.
Afreximbank, which has positioned itself as a key driver of intra-African trade and continental development, now faces pressure to prove that its bold lending strategy will not undermine its long-term stability
