UN says inaccurate credit ratings cost Africa $74.5 billion annually

Inaccurate and context-poor sovereign credit ratings are estimated to cost African countries about $74.5 billion annually through higher borrowing costs and lost financing, the United Nations has said.

The UN Office of the Special Adviser on Africa disclosed this just before the formal launch of the Africa Credit Rating Agency (AfCRA) in Port Louis, Mauritius, on Wednesday.

AfCRA is expected to provide independent, Africa-focused credit assessments of sovereigns, sub-sovereigns, companies and institutions.

Africa pays high cost of capital despite lower default rate

The UN said the cost reflects what it described as a major development penalty for a continent whose actual sovereign default experience is lower than prevailing risk perceptions suggest.

• “Africa’s actual default rate is far lower than what its credit ratings imply, yet the continent pays the highest cost of capital in the world,” the UN said.

It said inaccurate ratings that fail to adequately reflect African economic realities were estimated to cost the continent $74.5 billion annually.

• “That is a tax on Africa’s development, paid for no good reason,” the UN said.

The issue has particular relevance for Nigeria, which has repeatedly raised concerns at the United Nations over what it considers a disproportionate risk premium attached to African sovereign borrowing.

At an ECOSOC special meeting on credit ratings in March, Nigeria compared its borrowing costs with those of an unnamed highly indebted European economy.

Nigeria told the meeting that its debt-to-GDP ratio was considerably lower, it had never defaulted on sovereign debt and its foreign reserves were stronger.

Despite this, Nigeria said its recent dollar-denominated sovereign bonds carried yields of between 8.6% and 9.1%.

The unnamed European country, by comparison, borrowed at about 3.9% to 4.0%, Nigeria said.

Nigeria also questioned why profitable banks and businesses could operate successfully within African economies while their sovereigns remained below investment grade.

It argued that international credit rating agencies needed to engage more deeply with domestic investors and local economic actors rather than rely mainly on externally generated assumptions.

Nigeria further raised concerns about the limited physical presence of major global rating agencies across Africa, saying this could constrain their understanding of local economic realities.

AfCRA to provide Africa-focused credit assessments

The UN said AfCRA is intended to help close information and methodology gaps through more transparent assessments rooted in African data, expertise and economic context.

• The agency is expected to place greater weight on factors that conventional ratings may inadequately capture, including informal-sector activity, vulnerability and resilience.
• AfCRA is also expected to improve market intelligence and challenge historical biases in perceptions of African sovereign risk.
• The African Union said the agency would complement, rather than replace, existing international credit rating agencies.

It said AfCRA would operate independently, be private-sector driven and self-funded, with governments barred from owning shares to protect its credibility.

What you should know

The launch of AfCRA follows years of concerns among African governments that conventional sovereign ratings can increase borrowing costs and restrict fiscal space for development.

Nairametrics earlier reported that the African Union officially launched the African Credit Rating Agency (AfCRA) on October 7, 2026, to provide an Africa-focused alternative to the dominant global rating agencies.

The agency is expected to operate independently and provide credit assessments based on African economic data and local market conditions, while complementing existing international rating agencies.

Earlier, Nairametrics also reported that the African Development Bank is launching an initiative to help African countries improve their credit ratings by strengthening economic data and transparency, with the aim of reducing perceptions of higher risk and borrowing costs.