Afreximbank downgrade: Diaspora Nigerian warns against unproductive borrowing, urges economic diplomacy

Zawya

3 days ago

THE recent downgrade of the African Export-Import Bank (Afreximbank) by global credit rating agency Fitch Ratings has raised alarms across financial and policy circles, prompting a strong caution from Collins Nweke, a diaspora Nigerian and former Green Councillor in Belgium.
Fitch Ratings downgraded Afreximbank to a BBB rating—just one notch above junk status. This move, while subtle in technical terms, carries significant implications for Africa's financial credibility and access to capital markets.
Nweke, in a statement made available to Nigerian Tribune, urged the Federal Government of Nigeria and other African governments to resist the temptation to borrow indiscriminately, particularly without directing funds toward productive, growth-driven investments.
'Fiscal discipline and debt sustainability must be seen as strategic national assets,' Nweke warned.
'The temptation to borrow without corresponding investments in production must be curbed through stronger legislative oversight and public transparency.'
Nweke stressed that economic diversification must be more than a buzzword.
'It must be a survival strategy,' he said, highlighting the dangers of overreliance on commodity exports and politically motivated infrastructure loans, which expose countries to global market volatility.
A Blow to Africa's Development Bank
Afreximbank serves as Africa's financial backbone for trade and infrastructure development, often stepping in when global lenders hesitate.
According to Nweke, its downgraded status could increase the cost of borrowing and reduce access to vital development financing, especially for small businesses and startups.
'Many of the bank's loans are to sovereign borrowers already burdened by high debt. The downgrade casts doubt on the bank's transparency and credit quality,' he explained.
'The consequences are Higher interest rates, reduced investor confidence, and delayed infrastructure projects—directly impacting jobs and livelihoods.'
He described the downgrade not just in financial terms but as a warning signal for Africa's broader economic diplomacy.
'We need to realise that global rating agencies and financial markets are not external judges but platforms where Africa must participate and perform,' he said.
Call for Economic Diplomacy
Nweke called for Africa to embrace economic diplomacy as a core foreign policy tool, asserting that the continent must 'show up and outperform' on global financial platforms.
'It is not enough to protest unfavourable ratings; we must counter them with performance and transparency.'
To regain investor trust and elevate its credit profile, Nweke recommended three urgent reforms for Afreximbank: The bank must adopt globally recognised disclosure and risk reporting standards to address the perception of opacity; Afreximbank must reduce its exposure to overleveraged governments and expand lending to well-structured private sector entities; African governments and private stakeholders must step up recapitalisation efforts to strengthen the bank's financial stability.
Beyond Afreximbank, the downgrade serves as a wake-up call for broader reforms across the continent. Nweke argued that Africa needs a resilient regional financial system built on transparency, capital strength, and governance.
Several African countries have already taken bold recapitalisation steps. Notably, Nigeria's Central Bank launched a phased recapitalisation plan in March 2024, requiring commercial banks to meet new minimum capital thresholds by March 2026. Major players like First Bank and Access Bank are actively raising funds through rights issues and private placements to meet these requirements.
Such initiatives, Nweke said, help bring African banks closer to global Basel III standards, improving shock absorption, credit growth, and investor confidence. 'Stronger capital positions make our institutions more competitive and more attractive to global markets.'
Nweke concluded by urging African leaders not to interpret the downgrade as a condemnation but as a cautionary signal. 'Africa can't survive on goodwill or slogans. We must build systems that work, institutions that deliver, and economies that grow.'
Calling this 'Africa's decisive moment,' he urged policymakers to recommit to reforms, transparency, and performance. 'Let us use this moment not as a setback but as an opportunity to earn credibility and build financial systems our citizens can trust.'