International credit standing company, Moody’s, has downgraded the long-term issuer and senior unsecured rankings of the African Export-Import Bank (Afreximbank) from Baa1 to Baa2 whereas revising the outlook from detrimental to secure.
The downgrade displays rising issues over the bank’s asset high quality, capital publicity to distressed sovereigns, and a narrowing vary of funding sources.
Moody’s additionally lowered Afreximbank’s senior unsecured Medium-Time period Be aware (MTN) program score to (P)Baa2 from (P)Baa1 and its long-term bank deposit score to Baa2 from Baa1. The bank’s short-term deposit score was affirmed at P-2.
“The score downgrade to Baa2 is pushed by weaker asset efficiency than beforehand anticipated, which negatively impacts capital regardless of some mitigating elements,” Moody’s acknowledged in its 2025 credit score evaluation.
Shift Towards Riskier Sovereign Lending Raises Pink Flags
Moody’s highlighted Afreximbank’s latest strategic pivot from conventional commerce finance to unsecured sovereign lending, significantly to distressed economies similar to Ghana and Zambia, as a key issue behind the downgrade.
“The bank’s shift to unsecured lending to sovereigns underneath stress has launched vital dangers, diverging from its typical concentrate on commerce finance,” the company famous.
The bank’s publicity to Ghana and Zambia, each present process debt restructuring underneath the G20 Widespread Framework, poses capital dangers. Moody’s estimates that these exposures signify 3% and 0.2% of Afreximbank’s complete belongings, and eight% and 0.4% of its fairness (web of provisions), respectively.
The Widespread Framework mandates that multilateral and personal collectors, together with Afreximbank, take up comparable losses. This creates authorized and operational challenges, significantly given the bank’s treaty-based construction, which historically shields it from sovereign debt restructuring.
Liquidity Sturdy however Funding Variety Weakens
Moody’s acknowledged Afreximbank’s efforts to bolster liquidity, noting that the bank elevated its money reserves from $4.6 billion on the finish of 2024 to $9.5 billion in early 2025, sufficient to cowl debt obligations and web mortgage disbursements for six quarters.
Nevertheless, the company warned that sustaining such excessive liquidity ranges is dear and unsustainable in the long run.
“Traditionally robust in diversified, low-cost funding, the bank has relied extra on bilateral and syndicated loans than market-based sources,” Moody’s stated.
The bank didn’t challenge any bonds in 2022 or 2023 as a consequence of unfavorable market situations. Whereas it returned to the market with a $520 million Samurai bond in late 2024 and a $303 million Panda bond in early 2025, Moody’s described these as modest relative to Afreximbank’s general funding wants.
Outlook Secure, However Dangers Stay
Regardless of the downgrade, Moody’s assigned a secure outlook to Afreximbank’s rankings, citing balanced dangers and resilience in its capital adequacy underneath numerous stress situations.
“This resilience is supported by robust profitability, shareholder capital injections, and present provisions, which collectively allow the bank to handle and take up potential losses,” the company stated.
Moody’s additionally famous that 41% of the bank’s sovereign publicity to Ghana and Zambia had already been provisioned by the tip of 2024. The bank’s constant earnings and capital technology, together with assist from member states, have helped preserve its monetary buffer.
Nevertheless, Moody’s cautioned that continued publicity to difficult markets similar to Egypt and Nigeria, regardless of some latest enhancements, nonetheless weighs on the bank’s threat profile.
Path to Ranking Improve
- Moody’s indicated {that a} future improve might be potential if Afreximbank demonstrates sustained enchancment in asset high quality, enhanced capital construction, and broader entry to market-based funding.
- A stronger credit score profile amongst its shareholder base and enhancements to its enterprise mannequin that scale back credit score threat whereas supporting sovereigns may additionally assist the next score.
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