UN Reports $74.5B Loss for Africa Due to Credit Ratings

The United Nations has stated that inaccurate and context-poor sovereign credit ratings are costing African countries about $74.5 billion annually due to higher borrowing costs and lost financing opportunities. This information was disclosed by the UN Office of the Special Adviser on Africa prior to the launch of the Africa Credit Rating Agency (AfCRA) in Port Louis, Mauritius.

AfCRA is designed to provide independent, Africa-focused credit assessments for sovereigns, sub-sovereigns, companies, and institutions. The UN highlighted that the cost reflects a significant development penalty for Africa, where actual sovereign default rates are lower than perceived risks.

Nigeria has expressed concerns at the UN regarding the disproportionate risk premium affecting African sovereign borrowing, noting that its debt-to-GDP ratio is lower than that of a highly indebted European economy, yet it faces yields of 8.6% to 9.1% on dollar-denominated bonds. The AfCRA aims to enhance transparency and credibility in credit assessments by utilizing African data and expertise, operating independently and self-funded, with government ownership prohibited.