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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is president of the Federal Republic of Nigeria
Africa is paying too much to borrow. Calls to end the “Africa premium” — the gap between how Africa is assessed and the reality of its economies — can no longer be ignored. Fitch, Moody’s and S&P Global Ratings, the three dominant global credit rating agencies, wield outsized influence over Africa’s access to international capital. Their judgments shape investor behaviour, yet they consistently misjudge African risk.
Just three African countries are rated investment grade, even as the IMF projects the continent to be the world’s fastest-growing region this year. Africa is now establishing its own credit rating agency; it is a necessary corrective. Detractors claim Africa wants to mark its own homework. The evidence suggests otherwise: a 2023 UN Development Programme report notes that “idiosyncrasies” in credit ratings cost Africa $75bn annually in excess interest and foregone lending.
An African credit rating agency would address the greatest weakness of the “Big Three”: limited on-the-ground presence. In their models, quantitative data is weighed against subjective judgments on political risk, institutional strength and policy durability. How those judgments are reached — and how much they count — is left to opaque “analyst discretion”. Conclusions drawn from afar fail to capture local realities.
Relying on such judgments means global market cycles trump individual states’ economic fundamentals. Many countries across the continent have export-led economies based on commodities. When prices fall or markets tighten, African nations are downgraded swiftly and broadly — even when their reserves are strong, fiscal buffers are intact and debt profiles remain manageable. Downgrades then become self-fulfilling, raising borrowing costs and straining public finances.
But an African credit rating agency will not suffice on its own. The agency must earn the confidence of global capital with assessments anchored in the sort of timely, comprehensive data to which international markets respond.
Better data has been partly responsible for Nigeria’s recent upgrades: improving the timeliness and breadth of economic statistics; bringing previously off-balance-sheet central bank lending on to the official public debt register; rebasing GDP to reflect economic reality more accurately; publishing more budget documents to strengthen fiscal transparency. The rest reflects hard policy choices, such as the removal of a wasteful fuel subsidy and the liberalisation of the exchange rate. Non-oil growth has helped diversify the economy as the naira, for the first time, decouples from global crude prices.
Even so, Nigeria’s ratings still lag behind reforms and market sentiment. Our November dollar-denominated bonds were oversubscribed 5.5 times. Slow upward adjustments are commonplace across Africa, especially when set against the speed of downgrades. Smaller countries, lacking Nigeria’s scale and analyst coverage, bear the cost of this delay most.
A continent-wide credit rating agency will capture reform momentum in real time. Delayed upgrades cost money: African countries cannot afford to wait years to access markets after implementing hard reforms. Nations must stand on their own feet — especially in the wake of aid cuts. But they should be able to do so on a level playing field.
We understand that global capital will still look to the established agencies for validation. However, if an African agency can identify progress earlier, later corroborated by the Big Three, it will gain credibility while serving as an early signal to both markets and those agencies. It is not a replacement, but a complement. Affordable access to credit will determine whether Africa becomes the growth engine that its demographic boom promises. By mid-century, the continent will account for a quarter of the world’s working-age population. Africa’s success is not a regional concern, but a global opportunity.
