Fitch Downgrades Afreximbank To ‘BBB-’; Outlook Negative

Fitch Ratings has downgraded African Export-Import Bank’s (Afreximbank) Long-Term Issuer Default Rating (IDR) to ‘BBB-’ from ‘BBB’ with a negative outlook. It also downgraded the bank’s Short-Term IDR to ‘F3’ from ‘F2’ and the long-term ratings on the bank’s Global Medium-Term Note Programme and debt issuances to ‘BBB-’ from ‘BBB’.

According to Fitch, the downgrade and negative outlook was due to low transparency in loan performance reporting compared to multilateral peers and differing non performing loans (NPL) definitions under IFRS 9, while the Negative Outlook reflects concerns that sovereign debt restructurings may include Afreximbank exposures, undermining its policy role and increasing strategic risk.

It foresees Afreximbank’s NPLs to rise above six per cent reaching a high risk threshold at the end of 2024. Fitch now classifies loans to Ghana, South Sudan, and Zambia as non-performing, raising its calculated NPL ratio for Afreximbank to 7.1% at end-2024—above the 6% high-risk threshold—while the bank’s own reported NPL ratio, which excludes these exposures, declined to 2.3%.

In its latest rating of the bank, Fitch said “we assume the Fitch-calculated NPL ratio will fall below 6% by end-2027, reflecting continued strong loan growth and our assumption that some of the exposures currently in arrears will resume loan repayment before the end of the forecast period. We note that the bank operates with a high level of collateral and credit risk mitigants and has already taken relatively large provisions on some sovereign exposures, which would reduce any potential further negative financial impact for the bank.

“Based on its own criteria of loan performance, and publicly available information, Fitch considers the exposure to the Ghana sovereign (2.4% of loans) as non-performing (it considered this exposure as performing at the last review). Combined with other exposures that Fitch considers non-performing (such as South Sudan, 2.1 per cent of loans, and Zambia, 0.2 per cent), Fitch’s own measure of the NPL ratio deteriorated to 7.1 per cent at end-2024, surpassing the per cent ‘high’ risk threshold. In contrast, Afreximbank’s reported NPL ratio (which excludes the exposures to Ghana, Zambia and South Sudan) improved to 2.3 per cent in 2024 (2023: 2.5%).

“The downgrade of Afreximbank’s ratings reflects the downward revision of our solvency assessment from ‘a-’ to ‘bbb+’, principally reflecting ‘high’ credit risks (previously ‘moderate’) and ‘weak’ risk management policies (previously ‘moderate’). The increased credit risk stems from the rise in the bank’s non-performing loans (NPLs) ratio as calculated by Fitch, which exceeded the six per cent ‘high risk’ threshold outlined in Fitch’s criteria at end-2024.

“The revision of risk management to ‘weak’ reflects low transparency in the recent reporting of loan performance relative to multilateral development bank peers and that Fitch’s definition of NPLs differs from the bank’s approach, which makes use of flexibilities offered by IFRS 9.”

It furthered that the Negative Outlook reflects the risk that the debt owed to Afreximbank by some of its sovereign borrowers might be included in the perimeter of these sovereigns’ debt restructuring. This would put pressure on our assessment of the bank’s policy importance and heighten the risk associated with its strategy.

It also pointed out the bank’s low transparency and weak risk management, saying it “revised its assessment of Afreximbank’s risk management policies to ‘Weak’ from ‘Moderate’ to reflect recent cases of weak transparency on loan performance relative to peers as well as the bank’s increased risk from its sovereign loan portfolio.”

Fitch assessed shareholders’ capacity to support Afreximbank at ‘bb-’, based on the average rating of key shareholders (ARKS) accounting for more than 50 per cent of the bank capital.

The sovereign upgrades of Egypt and Nigeria, Afreximbank’s two largest shareholders, in April 2025 improved the ARKS to ‘B+’ from ‘B’. Credit risk mitigants on callable capital (covering 40 per cent of USD4.3 billion) enhance the support capacity by one notch to ‘bb-’. The support assessment also reflects the ‘strong’ propensity of shareholders to support the bank, which has been consistently demonstrated by ongoing capital injections and dividend reinvestments.