The negative trend in African sovereign credit ratings continues, with five African economies lowered in 2023H1. This tendency, however, needs to reflect the African Development Bank’s (AfDB) 1 confidence about economic recovery in its 2023 Macroeconomic Performance and Outlook report.
There have also been a few contentious rating actions throughout the 2023H1 timeframe. According to a report by the United Nations Economic Commission for Africa, titled Africa Sovereign Credit Rating Review: 2023 mid-year outlook, Nigeria and Kenya disputed their ratings, claiming the rating organizations’ lack of grasp of the local situation, a concept that the rating agencies have often highlighted.
Furthermore, African policymakers are increasingly dissatisfied with the lack of response to the call to reform the approaches and methodologies of the ‘Big Three’ global rating agencies in assessing risk on the continent – which, in their opinion, is a critical component in reforming the Global Financial Architecture.
According to the report’s overall view on the ratings, unlike the first half of 2022 (2022H2), rating actions in 2023H1 were mostly negative, with no one African nation being upgraded during the time. A total of thirteen negative rating actions, including seven downgrades and six negative outlook adjustments were assigned to eleven countries.
This pattern has generated concerns about why Africa’s credit ratings do not match the current global “economic recovery phase.” These outcomes have shattered investors’ confidence in African nations’ ability to recover on international financial markets.
The Federal Government of Nigeria disputed with Moody’s Investors Service over the downgrading of the country’s credit rating, claiming that the government was already addressing the ratings agency’s concerns.
The Kenyan government also contested Moody’s downgrading on the premise of increased government liquidity concerns and deteriorating domestic funding circumstances, claiming that the country’s liquidity market is becoming more stable.
The International Monetary Fund (IMF) agreed with these findings, stating that Kenya’s debt is manageable and that the odds of default are virtually negligible. The IMF also stated that the Kenyan government is working hard to improve its budgetary condition.
