Global credit rating agency, Moody’s, has downgraded the long-term issuer and senior unsecured ratings of the African Export-Import Bank (Afreximbank) from Baa1 to Baa2 while revising the outlook from negative to stable.
The downgrade reflects growing concerns over the bank’s asset quality, capital exposure to distressed sovereigns, and a narrowing range of funding sources.
Moody’s also lowered Afreximbank’s senior unsecured Medium-Term Note (MTN) program rating to (P)Baa2 from (P)Baa1 and its long-term bank deposit rating to Baa2 from Baa1. The bank’s short-term deposit rating was affirmed at P-2.
“The rating downgrade to Baa2 is driven by weaker asset performance than previously expected, which negatively impacts capital despite some mitigating factors,” Moody’s stated in its 2025 credit review.
Shift Toward Riskier Sovereign Lending Raises Red Flags
Moody’s highlighted Afreximbank’s recent strategic pivot from traditional trade finance to unsecured sovereign lending, particularly to distressed economies such as Ghana and Zambia, as a key factor behind the downgrade.
“The bank’s shift to unsecured lending to sovereigns under stress has introduced significant risks, diverging from its typical focus on trade finance,” the agency noted.
The bank’s exposure to Ghana and Zambia, both undergoing debt restructuring under the G20 Common Framework, poses capital risks. Moody’s estimates that these exposures represent 3% and 0.2% of Afreximbank’s total assets, and 8% and 0.4% of its equity (net of provisions), respectively.
The Common Framework mandates that multilateral and private creditors, including Afreximbank, absorb comparable losses. This creates legal and operational challenges, particularly given the bank’s treaty-based structure, which traditionally shields it from sovereign debt restructuring.
Liquidity Strong but Funding Diversity Weakens
Moody’s acknowledged Afreximbank’s efforts to bolster liquidity, noting that the bank increased its cash reserves from $4.6 billion at the end of 2024 to $9.5 billion in early 2025, enough to cover debt obligations and net loan disbursements for six quarters.
However, the agency warned that maintaining such high liquidity levels is costly and unsustainable in the long term.
“Historically strong in diversified, low-cost funding, the bank has relied more on bilateral and syndicated loans than market-based sources,” Moody’s said.
The bank did not issue any bonds in 2022 or 2023 due to unfavorable market conditions. While it returned to the market with a $520 million Samurai bond in late 2024 and a $303 million Panda bond in early 2025, Moody’s described these as modest relative to Afreximbank’s overall funding needs.
Outlook Stable, But Risks Remain
Despite the downgrade, Moody’s assigned a stable outlook to Afreximbank’s ratings, citing balanced risks and resilience in its capital adequacy under various stress scenarios.
“This resilience is supported by strong profitability, shareholder capital injections, and existing provisions, which collectively enable the bank to manage and absorb potential losses,” the agency said.
Moody’s also noted that 41% of the bank’s sovereign exposure to Ghana and Zambia had already been provisioned by the end of 2024. The bank’s consistent earnings and capital generation, along with support from member states, have helped maintain its financial buffer.
However, Moody’s cautioned that continued exposure to challenging markets such as Egypt and Nigeria, despite some recent improvements, still weighs on the bank’s risk profile.
Path to Rating Upgrade
- Moody’s indicated that a future upgrade could be possible if Afreximbank demonstrates sustained improvement in asset quality, enhanced capital structure, and broader access to market-based funding.
- A stronger credit profile among its shareholder base and enhancements to its business model that reduce credit risk while supporting sovereigns could also support a higher rating.
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