Nigeria: African Financial Institutions Moves Against Subjective Credit Ratings

2 August 2024
Daily Trust (Abuja)
By Sunday Michael Ogwu

The Alliance of African Multilateral Financial Institutions (AAMFI) held the third meeting of its Governing Council on the margins of the African Union Mid-Year Coordination Meeting, held in Accra, Ghana, during which it welcomed the endorsement of the Alliance by the African Union (AU) Ministers of Finance and Central Bank Governors at their 7th Ordinary Session of the African Union Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning, and Integration, in Tunis, Tunisia.

The STC Ministerial declaration and decisions reflected the pivotal role of African Multilateral Financial Institutions (AMFIs) in the continent's financial architecture.

AAMFI received strong support from the meeting and was recognised by the Specialised Technical Committee as crucial for strengthening the continental financial framework and advancing the African Union's Agenda 2063.

The Ministers and Central Bank Governors reaffirmed the vital role of African Multilateral Financial Institutions in continental development and committed to enhancing the capital and credit ratings of AMFIs to mobilize essential funding for Africa's growth.

The Ministers and Central Bank Governors expressed concerns over recent reports questioning the Preferred Creditor Status (PCS) of AMFIs, emphasizing its importance in engaging with Credit Rating Agencies and securing development financing.

The Ministerial declaration affirms the importance of the rights conferred on AMFIs by African Governments, including Preferred Creditor Status (PCS), crucial for reducing borrowing costs and deepening capital markets.

The Ministers and Central Bank Governors urged the AU Member States to uphold their commitments to AMFIs and respect their treaty obligations and further recommended that the AU Assembly mandate the African Union Commission (AUC) to work with AAMFI in engaging key stakeholders, including the G20. The Ministers reaffirmed their commitment to swiftly establish the African Union Financial Institutions, including the African Monetary Institute (AMI) and the African Financial Stability Mechanism (AFSM).

The AAMFI Governing Council noted that the Alliance exemplifies Africa's innovative approach to addressing financing gaps and ensuring sustainable development.

The AMFIs, established by African States under a treaty, have proven to be responsive to Member States in times of crisis, and are commercially sustainable, generating profits and investment returns for shareholders while fulfilling their important development mandates.

The African Union's rejection of recent attempts to weaken the preferred creditor status of African-owned and controlled multilateral financial institutions, and the AU's commitment to strengthen AMFIs underscores these institutions' pivotal role in Africa's financial architecture. This ensures that AMFIs can continue supporting African sovereigns' development and drive economic growth.

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