The decision follows weeks of tension after Afreximbank publicly rejected Fitch’s recent negative assessment, arguing that the rating failed to reflect the bank’s unique multilateral status, legal protections and development mandate.

How the Rift Began

The breakdown in relations can be traced to Fitch’s earlier rating action, which Afreximbank described as based on “an incomplete understanding” of its Establishment Agreement and operating model.

In a strongly worded response at the time, the bank insisted that Fitch’s analysis overlooked the legal immunities, shareholder support and institutional safeguards that underpin its financial strength as a multilateral financial institution.

Afreximbank argued that its structure is fundamentally different from commercial banks and sovereign institutions typically assessed by rating agencies, making conventional risk metrics inadequate for evaluating its stability and resilience.

Why Afreximbank Pulled Out

Announcing the termination, Afreximbank said it reviewed its relationship with Fitch and concluded that the credit rating process no longer aligned with its mission, mandate and institutional reality.

According to the bank, its business profile remains robust, supported by strong shareholder relationships and the legal protections embedded in its Establishment Agreement, which has been signed and ratified by member states across Africa.

The bank’s leadership also maintained that continuing with a rating framework that misrepresents its institutional design could create misleading perceptions in the market.

A Question of Narrative and Power in Global Finance

Beyond the immediate dispute, the episode highlights a broader issue confronting African multilateral institutions: the challenge of being evaluated by global rating agencies using frameworks designed primarily for commercial and sovereign entities in developed economies.

For Afreximbank, the decision to disengage from Fitch appears to be both a strategic and symbolic move, asserting control over how its risk profile and mandate are interpreted in global financial markets.

Afreximbank’s Financial Strength and Role in Africa’s Trade Agenda

Despite the termination of ties with Fitch, Afreximbank retains investment-grade ratings from other global agencies, including GCR (A), Moody’s (Baa2), China Chengxin International Credit Rating Co. (AAA), and Japan Credit Rating Agency (A-).

As of December 2024, the bank’s total assets and contingencies exceeded US$40.1 billion, while shareholder funds stood at US$7.2 billion.

For more than three decades, Afreximbank has played a central role in financing intra- and extra-African trade, supporting industrialisation and strengthening regional integration.

It is also a key supporter of the African Continental Free Trade Agreement (AfCFTA) and the Pan-African Payment and Settlement System (PAPSS), adopted by the African Union as a continental payment platform.

Headquartered in Cairo, Egypt, Afreximbank has evolved into a group structure that includes the Fund for Export Development Africa (FEDA) and AfrexInsure, expanding its influence across trade finance, investment and risk management.

What This Means Going Forward

The termination of Afreximbank’s relationship with Fitch signals a shift in how African development finance institutions may engage with global rating agencies in the future.

It raises critical questions about whether traditional credit rating methodologies can adequately capture the realities of multilateral African institutions, and whether Africa’s financial institutions should increasingly define their own narratives in global capital markets.

The agency, Wednesday, said a potential acceleration in the spread of mpox in sub-Saharan Africa (SSA) could raise the risk that the virus and efforts to curb its impact hurt economic activity and weaken fiscal metrics in affected sover­eigns, in addition to the suffering of those affected.

Any fiscal impact under such a scenario would probably be partially offset by additional fi­nancing from donors and official and multilateral partners, it said.

The World Health Organ­isation declared the upsurge of mpox in the Democratic Republic of Congo (DRC) and a growing number of African countries a public health emer­gency of international concern on August 14 .

Several Fitch-rated SSA sovereigns reported confirmed mpox cases in July-August, in­cluding Cote d’Ivoire (BB-/Sta­ble), Kenya (B-/Stable), Rwanda (B+/Stable), South Africa (BB-/ Stable) and Uganda (B+/Nega­tive).

In most of these, the number of confirmed mpox cases is very low, often in the single digits.

However, there could be un­derreporting in some countries and the emergency declaration highlights the potential for case numbers to rise sharply, bring­ing the prospect of financial pressure for affected sovereigns.

Fitch said virus outbreaks can have significant economic and fiscal effects, as was demon­strated by the Covid-19 pandem­ic and the 2014-2015 Ebola epi­demic in West Africa.

The latter shock resulted in sharply lower economic growth and a widen­ing of budget deficits in the main affected countries, Liberia, Guin­ea and Sierra Leone, although it is difficult to disaggregate the ef­fects of Ebola from those of the concurrent fall in commodity prices.

It said past outbreaks are also an imperfect guide to future risks.

“For example, mpox has so far had a significantly lower fatality rate than Ebola, which means economic activity may be less directly affected. There are also vaccines that are available to be deployed against mpox, though at present access to these vaccines remains relatively lim­ited in SSA. A previous public health emergency of interna­tional concern over a global mpox outbreak, lasting from July 2022 to May 2023, did not significantly impact key credit metrics for affected sovereigns.

“In the event of a substantial increase in mpox case counts, the main impact on economies from the virus and the measures to counter it would likely be on consumption and production.

Tourism could be hit – a poten­tially significant factor in Kenya, Rwanda and Uganda – where UN Tourism data indicate tourism accounted for 11%, 20% and 19%, respectively, of total goods and services export earnings in 2022.

There could also be chal­lenges managing inflationary effects, especially if food produc­tion and/or logistics are signifi­cantly disrupted.

“Fiscal metrics would also be affected, with weaker economic activity depressing tax revenues, and higher government spend­ing on healthcare and epidem­ic-prevention measures. Interna­tional assistance could mitigate these effects, but its timing and size is uncertain. The World Bank has estimated that over 2014-2015 grants reached nearly 19% of GDP in Liberia, almost 10% of GDP in Sierra Leone and about 5% in Guinea. However, budget deficits in these countries were significantly wider on av­erage over the period, even in­cluding grants, than they were in 2013. Rating effects would depend on the severity and the longevity of the economic and fiscal impact of the virus and the availability and size of donor support”, it said.

Gaimin Nonyane, director, Sovereigns, at Fitch Ratings, hinted on this during a post-sovereign rating webinar on Tuesday focused on Nigeria and Egypt.

Earlier in May, Fitch Ratings revised the Outlook on Nigeria’s Long-Term Foreign-Currency Issuer Default Rating to Positive from Stable, and affirmed the IDR at ‘B-’, on the back of reforms in the foreign exchange market, oil industry and monetary policy over the past one year.

Speaking on the fate of the Naira which has struggled since its floating in June 2023, Nonyane said,

“The Naira is still finding its feet. It is still in price discovery mode. So we would expect a lot of volatility in the near term. However, as I just mentioned, there is the expectation of multilateral donor funding coming in Q3 this year in addition to improved oil receipts. So that should help to reduce volatility somewhat by Q3 this year.

“We project that will average about 1200/dollar this year and end the year round 1450/dollar. And in terms of next year, we see a gradual depreciation but it also depends largely on the foreign exchange reforms momentum. So, this is our baseline scenario on the basis that the momentum continues at the current pace.”

On the likelihood of Nigeria being upgraded further, Nonyane said:

“Currently, we see a path to a sustainable recovery in CBN foreign exchange position. And sustained current account surpluses. Currently, the current account surplus is low, below one per cent of the GDP, although they are experiencing some surpluses, it is still not significant in addition to that, if we see a sustained reduction in inflation and greater stability in the foreign exchange markets, and one key factor is the tax revenue. We need to see stronger mobilisation of domestic non-oil revenue. So all of these combined collectively, it’s not one or the other, which could potentially lead to an upgrade.

“Low tax revenue base has contributed to the government’s very high interest-to-revenue ratio which currently stands at 38 per cent and that is quite high. This is about four times more of the B rating median and forms a key rating consideration.”

Fitch Ratings, however, projected recovery in the oil sector.

“However, we do expect a recovery in the oil sector to support the current account over the short term. We also expect the oil refining capacity to increase over the short term as the Dangote plant ramps up capacity. We expect the PMS to come on stream later this year or early next year and this would help to reduce transport costs and lower refined oil imports which should help to ease foreign exchange demands,” the director at Fitch Ratings said.

Delving into the foreign reserves of Nigeria, Nonyane said that the gross foreign exchange reserves have fallen from its peak in March at about $34bn and it is currently standing around $32.7bn with recent gains from oil receipts eroded by repayment of existing debt obligations as the Central Bank of Nigeria repaid draw down on foreign exchange swaps and foreign exchange sales to Bureau De Change to support the Naira.

“In terms of the outlook, we project foreign exchange reserves to rise modestly by year-end and this would be as a result of a recovery in oil receipts, multilateral funding and potentially commercial borrowing.

“This would equate to about 4.2 months of current external payments which is still in line with our B-medium but following the CBN’s recent publication of its financial statement, we still estimate that more than 30 per cent of the gross reserves are from bank swaps, this highlights an external risk.

“Although we do expect the majority of the swaps to continue to be rolled over, providing space to navigate some challenges in external debt servicing.

“External debt servicing is expected to rise by about $4.8bn in 2024 and a further $5.2bn in 2025 and this includes amortisation and the $1.1bn Eurobond which would be due in November 2025. So sustaining the foreign exchange momentum is key,” she concluded.

[Source: Punch]

The Fitch Ratings is a multinational credit rating agency. Investors use Fitch Ratings to help determine which investments are less likely to default and yield a good return.

Techeconomy has complied 14 reasons Fitch Ratings affirms Nigeria’s credit outlook positive:

1. Significant Reform

The positive outlook partly reflects reforms over the last year to support the restoration of macroeconomic stability and enhance policy coherence and credibility.

Exchange rate and monetary policy frameworks have been adjusted, fuel subsidies reduced, coordination between the ministry of finance and the Central Bank of Nigeria (CBN) improved, central bank financing of the government scaled back and administrative efficiency measures are being taken to raise the currently low government revenue, as well as oil production.

2. Distortions Reduced

The reforms have reduced distortions stemming from previous unconventional monetary and exchange rate policies, resulting in the return of sizeable inflows to the official foreign exchange (FX) market.

Nevertheless, we see significant short-term challenges, notably, inflation is high and the FX market has yet to stabilise and the durability of the commitment to reform is to be tested.

3. Exchange Rate Liberalisation

The CBN has stepped up efforts to reform the monetary and exchange rate framework following last year’s unification of the multiple exchange rate windows, and the large differential between the official and parallel market rates has collapsed.

Average daily FX turnover, at the official FX window has risen sharply from 2H23, and there has been clearance of USD4.5 billion of the backlog of unpaid FX forwards (the validity of the outstanding USD2.2 billion is being assessed by CBN), and weekly sales of FC to bureaux de changes (BDCs) have resumed (having been suspended since 2021).

4. Return of Sizeable Non-Resident Inflows

Greater formalisation of FX activity and monetary policy tightening has contributed to a significant rise in foreign portfolio investment inflows, and a fast appreciation of the naira at the official FX window, following the 71% post-liberalisation depreciation between June 2023 and mid-March 2024, although the exchange rate remains volatile.

However, Fitch views continued lack of clarity in the size of net FX reserves as a constraint on the sovereign’s credit profile.

5. Further Monetary Policy Tightening Expected

Fitch anticipates further increases in the CBN monetary policy rate in 2H24 (following the 600bp hike to 24.75% since February 2024 alongside tightening of reserve requirements) and strengthening of monetary policy transmission, after the recent resumption of open market operations at rates closely aligned to the MPR.

The company projected inflation, which rose to 33.2% yoy in March due partly to exchange rate pass-through and rising food prices, to average 26.3% in 2024 and 18.2% in 2025, still well above our projected ‘B’ median of 4.5%.

6. Fiscal Revenue Improves

Fitch forecasts the budget deficit to widen 0.3pp in 2024 to 4.5% of GDP (but 0.5pp lower than it projected at the last review.

This is due to improving non-oil revenue and partial fuel subsidy removal being offset by underperformance in oil profits from Nigerian National Petroleum Corporation Limited (despite a potential improvement in oil production) and higher payments for debt servicing, personnel and capex.

Fitch Ratings projected a 2pp rise in general government (GG) revenue/GDP from 2023 to 2025 to 9.6%, helped by increased mobilisation of non-oil tax revenue, to narrow the budget deficit to 4.1% in 2025.

Nevertheless, the GG revenue/GDP ratio would remain one of the lowest of Fitch-rated sovereigns.

The government has sharply reduced recourse to its CBN ‘Ways and Means’ overdraft this year, and banks’ healthy foreign currency (FC) liquidity and strong demand for government securities support domestic financing capacity.

7. Improved Oil Production, Challenges Remain

Fitch Ratings expects oil refining capacity to increase in 2024-2025 as the Dangote plant ramps up, with an eventual 0.65mbpd capacity.

This will reduce transportation costs and lower refined oil imports, which should ease FX demand.

“We anticipate an increase in crude oil production (including condensates) in 2024-2025, averaging 1.75 mbpd, from 1.58 mbpd in 2023, helped by improved onshore surveillance, but this is still well below the 2019 level, reflecting underinvestment in the sector and production outages”.

8. Rating Fundamentals

Nigeria’s rating is supported by its large economy, developed and liquid domestic debt market, and large oil and gas reserves.

“It is constrained by weak governance indicators relative to peers’, high hydrocarbon dependence, limited crude oil production capacity, weak net FX reserves, high inflation, ongoing security challenges, and structurally low, albeit improving, non-oil revenue”, the report reads.

9. Extremely High Interest Expenditure:

Fitch expects GG debt/GDP to rise 2.6pp in 2024 to 44.8% (‘B’ median 53.2%), partly owing to currency depreciation, with the bulk of financing in 2024 domestically sourced.

Domestic borrowing costs have risen due to higher policy rates, and GG interest/revenue is one of the highest of Fitch-rated sovereigns at 38.2% in 2023 (‘B’ median 11.6%).

Nigeria’s public debt has a fairly long average maturity of 12.3 years, and nearly 61% is local-currency denominated, well above the current ‘B’ median of 35.9%.

10. Moderate Gross FX Reserves

Gross FX reserves fell to USD32.2 billion at end-April, from a peak of USD34.4 billion in mid-March, partly reflecting repayment of existing debt obligations, and FX sales to BDCs to support the currency.

Fitch projects a broadly flat current account surplus, averaging 0.5% of GDP in 2024-2025, supported by a modest rise in oil production and remittances.

“We forecast FX reserves to fall to 4.2 months of current external payments at end-2024 (‘B’ median 4.2), from 4.4 months at end-2023”.

11. Weak Net FX Reserves

Uncertainty continues over the net FX reserve position, with a particular lack of clarity on near USD32 billion of “FX forwards, OTC futures, and currency swaps” recorded as an off-balance sheet “commitment” in CBN’s last consolidated financial statement for 2022.

Fitch estimates around 30% of Nigeria’s reserves are made up of FX bank swaps, although we expect most of these to continue to be rolled over.

12. External Debt Service Rises in 2025

Government external debt service is moderate, expected at USD4.8 billion in 2024 and USD5.2 billion in 2025 (with USD2.9 billion of amortisations, including a USD1.1 billion Eurobond repayment due in November).

The government plans to meet its external financing obligations through a combination of multilateral lending, syndicated loans, and potentially from commercial borrowing 0

13. Banking Sector Resilience

The banking sector has been resilient to the impact of the sharp devaluation on the capital adequacy ratio (end-11M23: 12.3%) given balance sheet structures, including net long FC positions, which delivered large FX revaluation gains in 2023 and 1Q24.

While we expect the non-performing loan ratio (end-3Q23: 4.2%) to rise in 2024, loan books are small (end-2023: 35% of banking sector assets) and overall asset quality remains closely aligned with sovereign creditworthiness, given high fixed-income securities and cash reserves at the CBN.

Fitch anticipates a marked increase in equity issuance and M&A in the next two years, to comply with a significant increase in paid-in capital requirements.

14. ESG – Governance

Nigeria has an ESG Relevance Score (RS) of ‘5’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption.

“These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM).

Nigeria has a low WBGI ranking at the 17th percentile, reflecting weak institutional capacity, uneven application of the rule of law and a high level of corruption”, the company said.

The award ceremony, widely acknowledged as the ‘Oscars of the Banking Industry’, took place in London on Thursday, 30 November 2023.

The Banker Magazine’s acknowledgment of Stanbic IBTC Holdings for its exceptional achievements in banking excellence, adept navigation of industry challenges, and commitment to providing innovative financial services to clients reflects the trust bestowed upon the institution by key stakeholders in the industry.

Dr. Demola Sogunle, Chief Executive of Stanbic IBTC Holdings, expressed his gratitude during the ceremony as follows:

“Receiving the ‘Bank of the Year’ award from The Banker Magazine is a tremendous honour and a testament to our unwavering commitment to excellence. This achievement reflects the collective effort of our dedicated team and our strategic initiatives aimed at delivering superior financial performance and addressing the evolving needs of our clients.”

Mr. Wole Adeniyi, Chief Executive of its banking subsidiary; Stanbic IBTC Bank Limited also shared some insights on the achievement, he stated:

“This recognition is a validation of our continuous efforts to address industry challenges, develop new markets, and extend our financial services to a broader audience. The ‘Bank of the Year’ award is not only a celebration of our achievements but also a reminder of our responsibility to lead and innovate in the global banking landscape.”

Earlier this year, Fitch Ratings reaffirmed the National Long-Term Ratings of Stanbic IBTC Holdings and Stanbic IBTC Bank Limited at ‘AAA(nga).

Fitch also assigned stable outlooks to the ratings, which underscored the financial institution’s resilience in a challenging operating environment.

The rating recognised the institution’s  sound asset quality, the strength of its corporate and investment banking franchise, robust capitalisation and consistent profitability.

The rating also considered the strategic importance of Stanbic IBTC Holdings being a member of the Standard Bank Group and the integral role of the Group’s Nigerian operations.