Nigeria and other African nations are pushing for the establishment of a continental credit rating agency to counter perceived biases by Western credit rating institutions.
This was discussed during the launch of the Debt Management Forum for Africa (DeMFA) and the inaugural policy dialogue titled *”Making Debt Work for Africa: Policies, Practices, and Options”*, organized by the African Development Bank (AfDB) in Abuja.
Prof. Kevin Urama, Vice President and Chief Economist at AfDB, highlighted that Western agencies like Moody’s, S&P, and Fitch often underrate African nations due to asymmetrical data and subjective methodologies. He emphasized the need for an African credit rating agency to provide fair assessments while addressing information gaps about the continent.
“Africa faces biases in its credit ratings partly because of asymmetric information. While the methodologies used by the global rating agencies are consistent, they often lack access to reliable data about Africa,” Urama noted.
He explained that the establishment of a regional agency could act as a counterbalance and drive better transparency, engagement, and understanding of African economies.
Similarly, Nigeria’s Director-General of the Debt Management Office, Patience Oniha, criticized the short response windows provided by Western agencies for feedback on their ratings. She cited examples of inaccurate evaluations that overlooked critical domestic realities. Oniha called for a change in these practices and emphasized the importance of local rating agencies that reflect Africa’s unique financial dynamics.
Meanwhile, African finance ministers, including Nigeria’s Coordinating Minister of the Economy, discussed strategies to mitigate the continent’s growing debt burden. Africa’s public debt has surged by 170% since 2010, with debt service costs expected to hit $74 billion in 2024, according to AfDB data.
The DeMFA initiative, as noted by Oniha, aims to provide capacity-building tools for better debt management and reduce the reliance on Western credit systems, ultimately fostering economic resilience across the continent.
