Africa’s New Credit Rating Agency Must Win Investor Trust To Lower Continent’s Cost Of Capital, Experts Say

The Africa Credit Rating Agency (AfCRA) was officially launched in Mauritius on Wednesday under an African Union (AU)-backed initiative to provide additional, Africa-focused assessments of sovereigns, financial institutions and companies.

According to disclosures related to the agency, it aims to complement existing international rating firms by incorporating local economic conditions, institutional structures and data that may be inadequately reflected in conventional assessments.

The United Nations Development Programme (UNDP) has estimated that African countries lose about $74.5 billion annually in higher borrowing costs and foregone financing associated with credit-rating challenges. The estimate highlights the potential economic consequences of how lenders and investors assess risk, although ratings are only one factor influencing financing costs.

AfCRA’s launch comes as African governments contend with heavy debt-servicing obligations and competing demands for investment in infrastructure, energy, health and education. Africa’s external debt-service payments reached $163 billion in 2024, according to figures cited by the AU.

For businesses, the effects of sovereign risk assessments can extend beyond government bond markets.

“When Nigeria is priced as riskier than its fundamentals justify, a solar dealer in Kano pays for it, because every lender in the chain prices off that benchmark,” says Segun Allen, Co-Founder of Synafare, a Lagos-based company operating in the clean-energy financing ecosystem, to FORBES AFRICA.

Allen says the agency’s most important contribution could be improving the quality and availability of credit data, particularly for businesses whose repayment performance is not adequately captured by existing rating models.

At his firm, he says, dealers and retailers in clean-energy supply chains can demonstrate strong repayment performance when financing is structured around their operating patterns.

“The real prize for AfCRA is data,” Allen tells FORBES AFRICA, arguing that investor confidence would depend on rigorous analysis, regulatory recognition and the ability to issue assessments that challenge governments as readily as established international rating agencies.

For other industry executives, the central test for AfCRA will be whether investors regard its ratings as credible, comparable and independent, rather than as an effort to produce more favorable assessments of African borrowers.

The AU has said the agency is intended to provide an additional perspective on African credit risk, not shield governments from scrutiny or guarantee better ratings.

Dr Rejoice C. Azodo, Founder and CEO of Nigerian healthcare investment firm Vestitude Partners, says AfCRA could improve assessments by accounting for differences in African economies that may be inadequately represented in existing models.

Applying identical assumptions to structurally different economies risks overlooking distinctions in their institutions, economic systems and capacity to repay debt, she says.

But local expertise alone will not be enough, Azodo adds. The agency, according to her, must translate its understanding of African markets into objective, data-driven measures that international investors can compare with assessments of other regions.

“If the agency can create these standards that fairly reflect African realities while remaining globally comparable, it can earn investor trust and ultimately attract better borrowing costs for African countries,” she shares with FORBES AFRICA.

Experts believe lower sovereign borrowing costs could also benefit domestic financial institutions and businesses if cheaper government financing feeds through into wider credit markets. The extent of that effect, however, will depend on lenders’ funding costs, country risks and broader economic conditions.

Richard Kiplagat, Partner at pan-African strategic advisory firm Africa Practice and a member of the Financing Africa Forward steering committee, welcomes AfCRA’s launch but cautions that establishing the institution is only the first step in a longer process of building credibility.

He tells FORBES AFRICA the agency’s methodology would need to be validated over time and that high borrowing costs reflect a wider set of systemic problems, requiring improvements in risk data, sovereign capacity, domestic resource mobilization and investor perceptions.

In a February 2025 analysis, the AU said dissatisfaction with the approaches of the dominant international rating agencies had helped strengthen the case for an African alternative. The stated objective is to broaden the information available to investors, rather than eliminate the role of existing agencies.

In a public statement, the African Export-Import Bank (Afreximbank) said the new agency could broaden the availability of credible analysis of African sovereigns, sub-sovereigns and companies, helping investors make better-informed decisions and supporting the development of domestic and regional capital markets.

The bank said the agency’s success should be measured by the quality of its data, the transparency of its methodology and the credibility of its analysis, rather than by whether its ratings are more generous than those of international competitors.

Afreximbank also said African multilateral financial institutions should be assessed on their fundamentals, performance, legal frameworks, mandates and operating models.