<\/p>\n
The three major credit rating agencies \u2013 Moody\u2019s, S&P Global and Fitch \u2013 have often differed among themselves when rating African institutions and countries.<\/p>\n
Their opinions don\u2019t have to be aligned, but a huge gap in the ratings suggests inaccuracies in the analyses.<\/p>\n
Wrong ratings have consequences. They drive up the cost of capital. Lower ratings indicate higher risk, and lead investors to demand higher interest rates to compensate for that risk.<\/p>\n
When a sovereign (country) is downgraded, its borrowing costs increase. It has to pay more interest on the same amount of debt, and has less chance of getting funding for development.<\/p>\n
Read:<\/p>\n
Rating agencies and Africa
\nGodongwana hits out at credit rating \u2018bias\u2019 as upgrade awaited
\nAfrican countries can\u2019t resolve their debt crisis under a system rigged against\u00a0them<\/p>\n
In the last three years, there have been notable examples of rating agencies differing significantly in their decisions.<\/p>\n
The first example is African Export-Import Bank. Between June 2025 and June 2026, the three major agencies reached materially different conclusions about the creditworthiness of the bank. The African Union has highlighted the flawed ratings.<\/p>\n
The second example is Fitch Ratings\u2019 downgrade of the Nigerian industrial group Dangote Industries Limited on 6 August 2024. It cited risk linked to the construction of a refinery.<\/p>\n
A year later, the Dangote Oil Refinery proved to be a transformative project that rebalanced Nigeria\u2019s trade position. It reduced the country\u2019s imports and increased its domestic production. Fitch was wrong and its rating downgrades put the completion of the project at risk.<\/p>\n
The African Finance Corporation shows a similar divide. S&P New York and its Chinese subsidiary gave widely differing assessments.<\/p>\n
And finally, Moody\u2019s downgraded Kenya in July 2024 while S&P maintained its B-rating.<\/p>\n
These examples highlight the same problem: the differences between rating agencies ostensibly looking at the same set of risk factors.<\/p>\n
ADVERTISEMENT<\/p>\n
CONTINUE READING BELOW<\/p>\n
In my view these discrepancies present African countries with two opportunities:<\/p>\n
Challenge the ratings, or
\nDiversify their ratings and funding relationships away from the Western markets.<\/p>\n
Lastly, the differences highlight the need for rating agencies to be more objective and base their ratings on factual data and fundamentals.<\/p>\n
The differences<\/p>\n
Fitch downgraded the African Export-Import Bank twice, from BBB to BBB- in June 2025 and subsequently to BB+ in January 2026 before withdrawing its rating. This means Fitch stopped assigning ratings to the bank after its contract was cancelled.<\/p>\n
Both Moody\u2019s and S&P maintained investment-grade ratings, assigning Baa2 and BBB+, respectively. This is a three notch difference between Fitch and S&P on the same institution.<\/p>\n
This rarely happens in other continents because the three international rating agencies assess largely similar risk factors in an entity\u2019s ability to repay its loans.<\/p>\n
The question is whether Fitch\u2019s three-notch downgrades of Afreximbank were driven by facts about the bank or by analysts\u2019 own subjective misjudgements.<\/p>\n
Asian agencies tend to recognise the policy importance of Afreximbank, which plays a strategic role in financing Africa\u2019s trade and development.<\/p>\n
As a result they recognise its preferred creditor status, that its member countries continue to repay the bank\u2019s loans even during periods of crises.<\/p>\n
Fitch, however, argued that Afreximbank\u2019s role in Africa was diminishing and it was not a preferred creditor because the International Monetary Fund said so.<\/p>\n
S&P Global Ratings aligned with China\u2019s Chengxin International Credit and Japan Credit Rating Agency.<\/p>\n
When Fitch Ratings downgraded Dangote Industries it said the risk was refinancing linked to a new oil refinery. Fitch speculated that delays in meeting funding requirements would make financial restructuring or default more likely, and that could trigger further downgrades.<\/p>\n
ADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n
Faced with such a conservative and speculative outlook, Dangote Industries Limited decided to end its contract with Fitch Ratings. It said the rating no longer made commercial sense and the group would instead focus on securing ratings from African-based rating agencies.<\/p>\n
A year later, the Dangote Oil Refinery has turned Nigeria into a regional exporter and bolstered its energy security.<\/p>\n
Moody\u2019s downgraded Kenya on 8 July 2024 after the government withdrew planned tax hikes in response to protesters. S&P decided to wait for Kenya\u2019s August 2024 budget.<\/p>\n
The Moody\u2019s downgrade resulted in a two-notch rating split on Kenya between Moody\u2019s and S&P. Within six months Moody\u2019s had reversed the downgrade with an outlook upgrade. Skipping from negative, past \u201cstable\u201d, to positive. It is highly unusual for a rating agency to revise its outlook within six months and to skip one notch.<\/p>\n
It can be argued that the revision was an implicit admission by Moody\u2019s that its earlier ratings were incorrect.<\/p>\n
Kenya incurred approximately US$150 million in additional interest costs on existing Eurobond debt as investors rushed to sell off their bonds.<\/p>\n
Alternatives<\/p>\n
The high cost of capital, driven by weak ratings from the international rating agencies, is pushing Africa to shift towards Asia for foreign funding sources.<\/p>\n
Five African countries have already issued a combined $5 billion in bonds from Japan, China, Hong Kong, Korea and the United Arab Emirates over the past two years.<\/p>\n
This shift has made Asian rating agencies more relevant as no country or institution would raise capital in Asia without a rating from local rating agencies. These are giving some African institutions stronger assessments than their Western peers. Asian agencies are equally independent and credible.<\/p>\n
ADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n
Read:<\/p>\n
S&P rejects Africa ratings bias claims: \u2018No different treatment\u2019
\nFitch changes its criteria on pausing debt repayments
\nPrivate credit rating agencies shape Africa\u2019s access to debt<\/p>\n
When Fitch Ratings downgraded Afreximbank to speculative grade, Asian rating agencies saw it differently. Chengxin International Credit Ratings Co kept a stable AAA rating on Afreximbank.<\/p>\n
Japan Credit Rating Agency rates the bank A- stable for its Samurai bond programme. They differ widely from Fitch on the same institution, with the same balance sheet and the same mandate.<\/p>\n
What needs to change<\/p>\n
The widening rating splits among the three international rating agencies present an opportunity for African sovereigns and their institutions.<\/p>\n
First, rather than accepting rating assessments that prove to be analytically flawed, African sovereigns and their institutions must challenge these ratings. In my view, this will help the rating agencies be more thorough. It will also bring flawed ratings to the attention of international investors.<\/p>\n
Read: Africa needs its own credit rating agency: Here\u2019s how it could\u00a0work<\/p>\n
Second, African entities need to diversify their ratings and funding relationships away from the Western markets. Domestic rating agencies have demonstrated a more nuanced understanding of local realities.<\/p>\n
Lastly, the rating agencies need to be more objective. Analysts\u2019 sentiments and frustrations should not find their way into the rating process.<\/p>\n
Misheck Mutize, Post Doctoral Researcher, Graduate School of Business (GSB), University of Cape Town.\u00a0<\/p>\n
This article is republished from The Conversation under a Creative Commons licence. Read the original article.<\/p>\n
#flawed #credit #ratings #Africa #result #bias<\/p>\n","protected":false},"excerpt":{"rendered":"
The three major credit rating agencies \u2013 Moody\u2019s, S&P Global and Fitch \u2013 have often…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[2364,6361,2535,6472,948,3403],"_links":{"self":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/11611"}],"collection":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11611"}],"version-history":[{"count":0,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/11611\/revisions"}],"wp:attachment":[{"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11611"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11611"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11611"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}