Beyond the Africa risk premium and why Afreximbank just proved our point

Last week’s ratings rupture shows why data, governance, and narrative must all be fixed together.

For decades, we’ve worked alongside finance ministers, central bank governors, and institutional investors across Africa. We’ve watched brilliant strategies die on the vine—not because they lacked merit, but because the money cost too much. 

That grinding frustration when solid fundamentals get buried under assumptions that feel decades out of date. When “Africa risk” becomes shorthand for something no one’s bothered to measure properly.

That’s the Africa risk premium in practice. Every economy on the continent carries it. Every deal we structure accounts for it. And until recently, we accepted it as immutable—the price of doing business in a region that  has been labeled as “risky.”

Last Friday, something changed. The African Export-Import Bank (Afreximbank) terminated its relationship with Fitch Ratings—not because of a downgrade, but because the rating “no longer reflects a good understanding of the bank’s establishment agreement, its mission and its mandate.”

It was a remarkable moment. Not defiant. Not reactionary. Clinical. A multilateral financial institution with preferred creditor status, strong shareholder backing, and an AA rating from two other agencies simply said: this analysis doesn’t serve investors or borrowers, so we’re ending it.

This was about precision. And it crystallises exactly what Africa Practice has been documenting for years.

Why this rupture matters

The Afreximbank decision exposes a methodological failure at the heart of how Africa gets priced.

In June 2025, Fitch downgraded Afreximbank to BBB, citing concerns over non-performing sovereign loans in Ghana and Zambia. The bank argued it should benefit from preferred creditor status, consistent with typical MDB treatment. Fitch disagreed, treating those loans as commercial facilities and recording Afreximbank’s non-performing loan ratio at 7.1% rather than the 2.3% reported by the bank.

Here’s the technical issue: Afreximbank operates under an establishment agreement, ratified by member states, that confers preferred creditor status. This isn’t a gentleman’s agreement. It’s a binding treaty law. Fitch’s methodology assumed that a treaty could be “violated without consequences” and rated accordingly.

This wasn’t a difference of opinion about future risk. It was a disagreement about present legal standing. And when the methodology can’t accommodate the structure it’s rating, the rating stops being useful.

The response from the African Peer Review Mechanism (APRM) was even more pointed: when ratings rely on “speculative or prejudicial assumptions” rather than “verified, official information,” they undermine their core purpose. Any future unsolicited ratings from Fitch would “risk misinforming investors.”

The timing matters too. Afreximbank has since resolved its dispute with Ghana but Bloomberg reported the bank accepted restructuring terms and took losses on the loan—exactly what Fitch predicted would happen. So was Fitch right? Not quite. The question isn’t whether losses occurred. It’s whether the methodology that predicted them was sound, whether it properly accounted for institutional context, and whether it served investors trying to understand actual risk.

What this reveals about Africa’s cost of capital

This rupture isn’t an isolated incident. It’s a symptom of a larger structural problem.

In October 2024, Africa Practice published research showing that stereotypical media coverage costs Africa $4.2 billion annually in excess interest payments—this is termed the “prejudice premium.” During Kenya’s election period, 88% of international coverage was negative, compared to 48% for Malaysia, a country with similar risk fundamentals.

A July 2025 IMF working paper validated this, finding that once you control for governance and structural factors, the Africa risk premium is modest in normal times—around 50 basis points. But it spikes dramatically during stress, reaching 120 basis points or more. Markets become hypersensitive to perceived risk during shocks, exactly when biased narratives and flawed methodologies do the most damage.

The Afreximbank moment crystallises the problem: bias compounds structural data gaps, which compound governance deficits, which compound narrative failures. Each reinforces the other. And it’s costing the continent billions when it can least afford it.

What needs to happen now

We don’t need endless debates about whether narrative or governance matters more because everything in between is what is required. 

• Data infrastructure that closes the guesswork gap. Ratings agencies are working with incomplete information and outdated assumptions. This requires systems that make perception-based pricing impossible.
• Governance improvements that weaken narrative bias. Better institutions reduce borrowing costs more in Africa than anywhere else. This requires transparent governments producing credible data that enables fairer ratings.
• Coordinated innovation that makes change stick. Blended finance. Domestic capital mobilisation. Transparent debt restructuring frameworks. This requires these elements working together, not in isolation.

This is why we built the Financing Africa Forward Blueprint for Action. Now a B20 Legacy Initiative, it doesn’t pretend that the prejudice premium is the only driver of the Africa risk premium. It addresses the full architecture: the data gaps that force guesswork, the coordination failures that fragment markets, the governance deficits that erode credibility, and the narratives that shape perception before a single spreadsheet is opened.

Four pillars. Eleven initiatives. Designed to work as a system, not a shopping list.

These pillars reinforce each other. Transparent governments produce credible data. Credible data enables fairer ratings. Fairer ratings lower the Africa risk premium. Lower borrowing costs fund the infrastructure that proves the investment thesis. The system either spirals upward or stays stuck.

What this means going forward

“There is no global development without African growth. And there will be no African growth without a fundamental reset of how capital is priced for the continent.”— Sidi Ould Tah, President of the African Development Bank

The 2025 G20 Summit, held this past November in South Africa, marked a turning point. African leaders stopped asking for forgiveness and started demanding fairness – and offered a technical pathway to fix it. 

Africa doesn’t need more strategies. It needs to translate strategy into action, and fast. The intellectual foundations are laid. The G20 has endorsed the direction. The Blueprint’s initiatives are designed for delivery. 

What remains are the partnerships to execute.

We’ve watched brilliant strategies die on the vine because the money cost too much. This one doesn’t have to.

Join us

Financing Africa Forward is moving from blueprint to implementation. Over the coming year, two high-visibility initiatives will launch in parallel: the Risk-Return Data Hub, which closes the information gaps that let perception substitute for evidence, and the African Confidence Campaign, which shifts the global narrative from endemic risk to selective opportunity.

The coordination architecture is in place. The technical work is underway. 

What accelerates the timeline is who joins us.

You can explore the full Blueprint at www.financingforward.africa —and if you’d like to partner, email us at [email protected].