Afreximbank dismisses debt restructuring claims, challenges Fitch’s Downgrade
BY MOTOLANI OSENI
The African Export-Import Bank (Afreximbank) has strongly rejected Fitch Ratings’ recent downgrade of its credit rating, dismissing the concerns raised as unfounded and inconsistent with its mandate and legal framework.
Fitch Ratings had lowered Afreximbank’s Long-Term Issuer Default Rating (IDR) from ‘BBB’ to ‘BBB-‘ with a negative outlook, citing concerns that the bank may be drawn into sovereign debt restructurings involving member states such as Ghana, South Sudan, and Zambia.
Fitch argued that possible exposure to these nations’ distressed debts could raise Afreximbank’s non-performing loan (NPL) ratio to 7.1 per cent by the end of 2024, surpassing the 6 per cent high-risk threshold, and undermine its policy role.
In a strongly worded response, Afreximbank insisted it is not engaged in any debt restructuring negotiations with member countries, describing Fitch’s conclusions as based on flawed assumptions that misrepresent the bank’s legal obligations.
READ ALSO: Tinubu’s Special Envoy rallies Gambia, Senegal leaders for West Africa economic summit
According to the bank, its establishment agreement, signed by 53 African nations, strictly governs its operations and loan arrangements, making any unilateral restructuring without adherence to this treaty impossible.
“The bank’s establishment agreement is a binding international treaty. Afreximbank would like to reaffirm that it is not participating in debt restructuring negotiations related to any of its member countries. To do so would be inconsistent with the bank’s founding treaty,” it stated.
Afreximbank further stressed its robust financial health, highlighting its strong capitalisation, sound governance, and disciplined risk management practices. The bank pointed out that Fitch itself acknowledged its financial resilience, strong equity-to-assets and guarantees ratio, excellent internal capital generation, and limited concentration risks.
“Fitch acknowledges that the bank operates with a high level of collateral and credit risk mitigants and has already taken significant provisions on some sovereign exposures, reducing potential further negative financial impacts,” Afreximbank noted.
The bank also emphasised that its financial reporting fully complies with International Financial Reporting Standards (IFRS), particularly IFRS 9, which governs the classification and treatment of non-performing loans. It criticised Fitch’s definition of NPLs as inconsistent with IFRS 9’s forward-looking provisions, which the bank strictly follows.
“The bank’s application of IFRS 9 is comprehensively detailed in its 2024 Financial Statements and further supported by its external auditors’ report. Fitch’s classification of NPLs diverges from the forward-looking approach embedded in IFRS 9,” the bank clarified.
Reaffirming its mission, Afreximbank maintained its commitment to supporting African nations through trade-led growth, economic development, and macroeconomic stability, while adhering to high standards of financial transparency and international best practices.
