Tinubu Writes For FT, Says Africa Paying Too Much To Borrow, Needs Own Rating Agency

President Bola Ahmed Tinubu has declared that Africa is paying an unjustifiable premium to access global capital, urging the continent to establish its own credit rating agency to correct what he described as persistent misjudgements by dominant global ratings firms.

The president, in a piece in the Financial Times of London, argued that the so-called Africa premium, the gap between how African economies are assessed and their underlying realities, continues to inflate borrowing costs and constrain development financing.

According to him, Fitch Ratings, Moody’s Investors Service and S&P Global Ratings wield outsized influence over Africa’s access to international capital, yet their assessments frequently fail to reflect economic fundamentals on the ground.

He noted that the greatest weakness of the big three rating agencies is their limited ground presence, as their models weigh quantitative data “against subjective judgements on political risk, institutional strength and policy durability.”

“How those judgements are reached, and how much they count, is left to opaque ‘analyst discretion’. Conclusions drawn from afar fail to capture local realities.”

He pointed out that only three African countries are rated investment grade, even though the International Monetary Fund (IMF) projects the continent to be the world’s fastest-growing region this year.

According to him, an African credit rating agency would address these challenges.

Tinubu cited a 2023 report by the United Nations Development Programme (UNDP), which estimated that “idiosyncrasies” in credit ratings cost Africa about $75 billion annually in excess interest payments and foregone lending opportunities.

The president maintained that the establishment of an African credit rating agency is “a necessary corrective,” even as he dismissed criticism that the continent seeks to mark its own homework. He warned that reliance on external judgements often amplifies global market cycles at the expense of country-specific fundamentals.

He also cautioned that relying on external judgements 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,” he stated.

Tinubu, however, acknowledged that credibility would be central to the success of any continental rating agency, noting that such an institution must earn the confidence of global capital markets through timely and comprehensive data.

“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,” he stated.

Highlighting Nigeria’s recent rating improvements, he attributed them partly to better data transparency and tough policy reforms. These include rebasing gross domestic product, publishing more budget documents, bringing previously off-balance-sheet central bank lending into the public debt register, removing the fuel subsidy and liberalising the exchange rate.

“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.”

According to the President, a continent-wide rating agency would capture reform progress in real time and serve as an early signal to markets, complementing rather than replacing the established global firms.

“Africa’s success is not a regional concern, but a global opportunity,” Tinubu stated, adding that affordable access to credit will determine whether the continent can harness its demographic boom and emerge as a global growth engine.