Group Chief Economist and Managing Director of Research and Trade Intelligence at the African Export-Import Bank (Afreximbank), Dr Yemi Kale, has said that flawed and externally-biased credit rating models are pushing up the cost of borrowing for African countries, despite their improving macroeconomic outlook.
Kale made this known on Wednesday during a Q&A session with journalists at the launch of Afreximbank’s flagship African Trade Report 2025, themed “African Trade in a Changing Global Financial Architecture.”
The launch was held on the sidelines of the bank’s Annual Meetings (AAM2025) in Abuja.
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. The result, he explained, is an artificially high perception of risk that raises the cost of capital across African markets.
“When you increase the cost of funds for African banks to grow money, and when those banks have to lend back to African countries, it becomes a burden. You can’t lend more than what you borrowed, so the pressure builds,” he said.
Africa needs its own rating system
Kale argued that the solution is for the continent to establish its own rating system that understands its unique development context.
“We need an African-centred rating agency that develops indicators that make sense for African countries,” he said. “Other regions like Asia already have theirs. We have to build ours to reflect our realities.”
He noted that resistance from global stakeholders is likely in the early stages, but insisted that credibility will grow with use and transparency.
“Initially, they’ll push back, of course,” Kale said. “But as more African countries adopt and use them, the international community will have no choice but to accept them, just like the current rating agencies were eventually accepted.”
Kale also pointed to alternative funding channels as a way to ease reliance on the Eurobond market, where African countries often face punitive rates due to poor credit assessments. He mentioned that partnerships with countries like China, as well as increased domestic capital mobilisation, could offer a sustainable path forward.
He added that African financial institutions are already working to raise more capital to increase lending capacity and reduce external dependencies. “We have a good mix of alternative financing options available,” he said.
Despite global pressures, Africa stays resilient
While acknowledging the tough global economic climate, Kale stressed that Africa has remained relatively resilient, in part due to its limited integration into the global financial system—a factor he believes is now working in the continent’s favour.
“What used to be a weakness has become our strength. The global trade wars and geopolitical tensions are having limited direct effects on us,” he said.
He also highlighted the growth of intra-African trade as a positive trend, noting that it serves as a buffer against external shocks. Kale revealed that, for the first time in Nigeria’s history, the country traded more with African nations than with any other region—a sign that trade within the continent is gaining traction.
The African Trade Report 2025 reviews macroeconomic developments across Africa and provides strategic guidance for governments, policymakers, and businesses looking to navigate a turbulent global financial landscape.
