The African Union’s ratings watchdog warned on Tuesday that Fitch Ratings could “misinform investors” if it continues to issue credit ratings on Afreximbank after the lender cut ties with the agency, according to Reuters report.
Afreximbank, formally known as the African Export-Import Bank, announced on Friday that it had ended its relationship with Fitch, citing concerns about the quality of the agency’s approach.
In a statement released on Monday, the African Peer Review Mechanism said it viewed Afreximbank’s decision as justified.
“Any future ratings issued by Fitch in respect of the Bank would be unsolicited and non-participatory, and therefore risk misinforming investors,” the APRM said.
Fitch declined to comment on the APRM’s position. In June, Fitch downgraded Afreximbank’s credit rating to one notch above “junk” status, pointing to elevated credit risks and weak risk-management practices, and placed the lender on a “negative outlook,” a term that signals the possibility of a further downgrade.
The APRM said Afreximbank’s decision was not related to the downgrade itself, adding that differences over the quality of Fitch’s “rationale, analytical framing, and interpretation of risk sources” were sufficient reasons to end the relationship.
Don’t Miss This:
Afreximbank Scales Up Trade Financing To Deepen Intra-African Trade
The African Union and several African governments have long argued that the so-called “Big Three” ratings agencies, Moody’s, Fitch and S&P Global Ratings, do not fairly assess lending risks in Africa, which they say pushes up borrowing costs.
All three agencies have rejected accusations of bias and maintain that they apply the same methodologies worldwide.
Afreximbank, which focuses on trade and project finance, is also facing scrutiny over whether it enjoys “preferred creditor status,” a designation that could protect its loans to debt-distressed countries such as Ghana and Zambia from losses in the event of defaults.
Fitch has warned that any erosion of this status could trigger further rating actions.
The lender is also rated by Moody’s, which downgraded Afreximbank in July to two notches above “junk,” although the agency has never applied a ratings “uplift” for preferred creditor status.
Don’t Miss This:
Africa Must Expand Factoring Volumes To €240 Billion To Boost SMEs – Afreximbank
Image Credit: CNBC Africa
