Professor Olabisi Delebayo Akinkugbe, Purdy Crawford Chair in Business Law at Dalhousie University, Canada, has sounded the alarm over the increasing risks posed to African Multilateral Financial Institutions (AMFIs) following recent sovereign debt downgrades by global rating agencies.
Speaking at a symposium on African Financial Architecture, Prof. Akinkugbe stressed that the downgrades, including Fitch Ratings’ recent reduction of the African Export-Import Bank’s (Afreximbank) long-term foreign currency rating from ‘BBB’ to ‘BBB-’ with a negative outlook, undermine the continent’s financial stability and development potential.
According to the law expert, these developments stem from a fundamental misunderstanding by rating agencies, which treat AMFIs as ordinary commercial lenders rather than recognising their historical Preferred Creditor Status (PCS). This misclassification risks subjecting AMFIs to debt restructuring processes that could severely restrict their ability to finance African countries.
“This misstep could jeopardize countries like Ghana, South Sudan, and Zambia in meeting their debt obligations to institutions such as Afreximbank and the Eastern and Southern African Trade and Development Bank (TDB),” Prof. Akinkugbe warned, describing the situation as a “dangerous precedent” for Africa’s development trajectory.
He called on the African Union and its member states to urgently safeguard AMFIs, advocating for reforms that would protect the unique status of these institutions and ensure they can continue to offer affordable and tailored financing solutions.
Unlike conventional international lenders, AMFIs have historically understood the unique economic challenges faced by African nations, offering financing options that reflect Africa’s realities and vulnerabilities. For some countries, such as Zimbabwe, AMFIs represent not only the most cost-effective financing alternative but sometimes the only viable source of capital due to the punitive risk premiums imposed by global markets.
“The weakening of AMFIs would deepen Africa’s reliance on an inequitable global financial order dominated by traditional Bretton Woods institutions,” Prof. Akinkugbe cautioned, emphasizing the need to strengthen the continent’s financial architecture to safeguard financial sovereignty and promote diversity in the global system.
He concluded by urging global recognition of AMFIs as co-equal partners in international finance, asserting that ongoing calls for global financial reform must include clear acknowledgment of the multilateral and preferred creditor status of these crucial African institutions.
The expert’s remarks highlight a critical juncture for Africa’s financial future and underscore the urgent need for coordinated continental and international action to protect and empower African development finance.
