The African Development Bank (AfDB) is launching a new initiative to help African governments strengthen sovereign credit ratings by improving economic data, transparency and market information, as the continent seeks to lower the cost of accessing international capital.
Sidi Ould Tah, president of the AfDB, disclosed the plan at the S and P Emerging Markets Conference in London, saying inadequate data and weak market infrastructure continue to distort perceptions of risk across African economies and contribute to higher borrowing costs.
Tah said the initiative would be implemented through the African Legal Support Facility (ALSF), with the objective of helping governments better prepare for sovereign credit assessments and improve the quality of information available to international rating agencies.
‘What is missed in Africa is the data and the infrastructure… the opacity in some markets creates this notion of high risk, which leads to high cost of borrowing,’ Tah said.
The initiative places data quality and transparency at the centre of the bank’s response to the continent’s longstanding challenge of expensive sovereign financing.
According to Tah, improving the availability and reliability of economic information would help address information gaps that influence how African economies are assessed by global rating agencies.
The AfDB president said improving sovereign credit ratings had become a shared objective across African countries, noting that only three of the continent’s 54 countries currently hold investment-grade ratings.
For governments that depend heavily on international debt markets, sovereign ratings can influence the interest rates demanded by investors and determine the terms under which countries can raise foreign currency financing.
The AfDB’s intervention comes as African governments and institutions increasingly seek to address what they regard as structural disadvantages in the continent’s access to global capital.
The initiative, however, is separate from efforts to establish an Africa-wide credit rating agency.
The African Peer Review Mechanism, an African Union-backed institution, is planning to launch a continent-wide ratings agency this month, reflecting growing efforts to develop African-led mechanisms for assessing sovereign risk.
Nigeria’s President Bola Tinubu had earlier advocated the establishment of an Africa-owned credit rating agency, arguing that borrowing costs for African economies do not always adequately reflect their underlying economic conditions.
Tinubu has also pointed to the influence of Fitch Ratings, Moody’s and S and P Global Ratings on African countries’ access to international capital markets and investor sentiment.
While the proposed AfDB initiative will work within the existing international rating architecture by improving the information available to rating agencies, the parallel push for an Africa-wide ratings agency seeks to create an alternative institutional framework for assessing African sovereigns.
Beyond sovereign ratings, the AfDB is also stepping up efforts to deepen domestic financing and capital markets as part of a broader strategy to mobilise more resources within Africa.
Tah said the bank had been engaging key stakeholders, including pension funds and banks, to identify barriers limiting the development of stronger domestic capital markets.
The objective is to increase the capacity of African economies to mobilise local savings and channel them into government and private-sector financing, reducing dependence on external capital.
The two approaches – improving sovereign data for international assessments and deepening domestic capital markets, form part of the AfDB’s broader effort to expand Africa’s financing options.
For African governments, stronger economic data could improve the information available to investors and rating agencies, while deeper domestic markets could provide additional avenues for raising capital locally.
The AfDB’s move therefore signals a shift beyond simply challenging sovereign ratings towards addressing some of the information and market infrastructure gaps that influence how African economies are priced by global investors.
With only a small number of African economies currently classified as investment grade, the success of the initiative could have implications for how governments across the continent access and price both international and domestic financing