Amid concerns over seeming bias in global credit rating systems, the African Development Bank (AfDB) and the Nigerian government have called for a more equitable approach to evaluating African economies.
Director General of the Debt Management Office (DMO), Patience Oniha, and AfDB Vice President and Chief Economist, Prof. Kevin Chika Urama, made this call at the recently concluded inaugural 'Policy Dialogue on Making Debt Work for Africa: Policies, Practices and Options' in Abuja.
The hybrid event, which brought together debt management officers, finance ministers, and multilateral organisations from across Africa, echoed a common call for the establishment of an African credit rating agency to address systemic inequalities in the global financial landscape.
At the same forum, the International Monetary Fund (IMF) urged Nigeria to adopt more conservative and realistic budgetary planning to avoid exacerbating its debt burden amid growing economic challenges.
IMF's Resident Representative in Nigeria, Christian Ebeke, emphasised the need for an integrated approach to debt management, pointing out inefficiencies in budget processes and overly optimistic forecasts as key issues undermining fiscal sustainability.
Speaking on the need for a credit agency tailored to African realities, Onihastressed that while creating such an institution was crucial, it must align with global standards to gain recognition from international investors.
"The credit agency that we should create for Africa, I think is a good idea. The international lending and investor committees are used to their rating agencies. That's what their law requires. Many fund managers have ratings below which they can't go, and those ratings have to be from one of the big three," she said.
She added: "If we're creating one for Africa, we have to ensure it aligns with those standards. It may take a while for them to be accepted, but I think we should start that journey anyway.
"It shouldn't just be branded as an African thing let it be global. It should be as good as Fitch, S&P, and Moody's. I think that should be our aspiration."
Oniha emphasised that while establishing such an agency would take time, African nations must begin the process and simultaneously hold existing agencies accountable for fair assessments.
For his part, Urama highlighted the deeper challenges African nations face due to limited local footprints of global credit rating agencies. This lack of on-the-ground presence often leads to assessments that fail to capture the full economic realities of the continent.
"So, dealing with bias is not just about credit rating agencies; it's a human phenomenon that we need to address," Urama said.
Agreeing with Oniha, Urama explained: "It is for us to push for a footprint for credit rating agencies in Africa. If they have to get data and create ratings that affect the cost of capital, they actually need to have footprints on the ground and at the moment, this is not the case.
"We also need to build credibility and confidence in our systems, our macroeconomic governance, political stability, and the data we provide. The reason why some of our data might be questioned is that its robustness and credibility can sometimes be in doubt.
"Investing in statistics departments is crucial to ensure we have credible data that cannot be easily questioned," Urama added.
Urama further elaborated on the rationale for the Africa Credit Rating Agency (AfCRA), noting its potential to act as a counterbalance to global agencies.
"The main reason for the African Credit Rating Agency is to create a counterfactual," he said.
"It can provide opportunities to support African countries in areas such as capacity building, data systems, methodology, and other relevant areas.
"This initiative is not about complaining but about identifying gaps and finding solutions to address them," Urama concluded.
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Meanwhile, in his remarks, IMF's Ebeke warned Nigeria to exercise caution in budget planning to avoid an increased debt burden.
He highlighted the risks of overly optimistic forecasts, which often lead to fiscal surprises and cuts in public investment, harming long-term development.
Ebeke said: "Many countries, including this particular country, budgetary processes are just not efficient. The forecast that you will see from some of the authorities in Africa, sometimes those forecasts are excessively optimistic, and that leads exposes forecast errors that then increase the debt burden of the country, because you just have surprises down the road, but also tremendous cuts into a public investment, which also is detrimental to long term goals.
"The entire budgetary process, including budgetary forecasts, making sure that those are more conservative at times, but also just more credible."
