The initiative represents an ambitious attempt to recalibrate the way global markets measure Africa’s economic risks, as the African Union prepares to launch the Mauritius-headquartered African Credit Rating Agency (AfCRA) in the second quarter of 2026. Many African policymakers have argued for decades that the continent’s economic potential has been systematically misread by the world’s leading rating agencies, S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings, whose assessments heavily influence borrowing costs.
The frustration is understandable. A widely cited United Nations Development Program study estimates that what it calls the “African risk premium” costs the continent approximately $74.5 billion each year in excessive borrowing costs and missed financing opportunities. Political reactions sometimes get violent. Ghana publicly rejected Fitch’s downgrade in 2023, arguing that the assessment did not reflect ongoing fiscal reforms.
At first glance, AfCRA promises a modified lens, a credit rating methodology based on Africa’s economic structure, institutional realities, and development trajectory. The logic is fascinating. Africa understands Africa better. But the central question is not whether Africa can set up its own credit rating agency. The question is whether global capital markets and the multilateral institutions that shape them will treat those ratings as trustworthy.
Credit ratings are more than just opinions. They are embedded in financial regulations, investment obligations and risk models across global finance. Banks, pension funds, and insurance companies frequently rely on the ratings of the “big three” because the regulatory frameworks of major financial centers from New York to London explicitly allow them to calculate capital adequacy ratios. The immediate impact on borrowing costs may be limited until AfCRA receives a similar assessment from regulators.
This is not a challenge unique to Africa. Partly in response to similar concerns about Western financial domination, China established its own agency, the Grand Duke World Credit Ratings. Discussions are also taking place in the Arab world about the establishment of regional rating agencies. Africa itself already has several domestic rating agencies, including Nigeria’s Agust & Company, Francophone Africa’s Bloomfield Investment Corporation, and South Africa’s Sovereign Africa Ratings.
In fact, global distributors are increasingly integrating these emerging competitors. In 2022, Moody’s Corporation acquired a majority stake in Global Credit Ratings, the continent’s largest rating agency. Such acquisitions strengthen the deep-rooted oligopolistic structure of the global credit rating industry.
Still, the argument that African risks are systematically mispriced is contested. According to Moody’s Investors Service’s own research, default rates for African sovereign borrowers are broadly in line with default rates for similarly rated countries in other parts of the world. Rising borrowing costs may reflect structural realities such as reduced fiscal transparency, weak regulatory institutions, a large informal economy, and governance indicators that correlate with sovereign credit risk.
AfCRA hopes to address this dynamic by providing more “context-intelligent” assessments. One potential niche is in borrower ratings, which are largely ignored by global institutions. Approximately 40 percent of African governments and more than 90 percent of African companies remain undervalued in international markets. Bridging this information gap could help deepen the continent’s domestic bond markets.
However, ratings alone do not determine capital flows. Investors ultimately follow the balance sheet. This is where deeper structural challenges emerge. Africa’s financial architecture lacks the scale of multilateral institutions that support the credit systems of developed countries.
Africa’s multilateral financial institutions (AMFIs), including the African Development Bank, African Export-Import Bank, African Finance Corporation, West African Development Bank, and Trade and Development Bank, have a combined balance sheet of approximately $70 billion. However, they account for less than 3% of external funds raised by African governments. The World Bank, International Monetary Fund and private creditors hold more than 40 percent of Africa’s external debt.
This imbalance highlights a fundamental truth: the credit rating ecosystem is only as powerful as the financial institutions that can act on it. Without strong African multilateral financial institutions, African rating agencies risk becoming symbolic rather than transformative.
In the United States and Europe, credit ratings are embedded in deep domestic financial systems. Institutions such as the European Investment Bank and the European Stability Mechanism provide countercyclical financing that strengthens the credibility of regional financial markets. Africa has no comparable scale.
Even the highly respected African Development Bank, despite its AAA rating, cannot single-handedly entrench an alternative rating system across the continent. The implication is clear. AfCRA’s success will depend less on the sophistication of its methodology and more on the strength of its surrounding organizations.
If Africa wants to have a greater say in its credit ratings, it needs to simultaneously strengthen its financial structures. Increasing paid-up capital to Africa’s multilateral financial institutions, expanding partnerships with global institutional investors, and deepening local currency debt markets will significantly strengthen the continent’s financial leverage.
Introducing regional regulations may also help build trust. Just as Chinese rating agencies initially gained traction through domestic regulatory mandates, African financial regulators may require AfCRA ratings for certain infrastructure projects and intra-African loans under the African Continental Free Trade Area framework.
After all, better ratings alone won’t fill the continent’s estimated $221 billion annual infrastructure funding gap. This requires financial institutions with balance sheets and credibility to match.
Mayowa Oyatogun is a strategy and business planning specialist based in the UK.
