Afreximbank has suffered its second credit rating downgrade in just four weeks, with Moody’s Investors Service cutting the bank’s rating from Baa1 to Baa2 and warning that its asset quality and funding resilience are weakening, according to Reuters.
The move places the pan-African trade finance institution two notches above sub-investment grade, commonly referred to as “junk” status, and intensifies pressure on the bank following Fitch’s earlier downgrade in June. While Moody’s revised the outlook to stable, indicating no immediate further downgrade, it flagged structural concerns that could weigh on the bank’s long-term credibility.
In its statement published late on Tuesday, obtained by Reuters, Moody’s said the downgrade reflected weaker-than-expected asset performance, a less extensive range of funding sources, and the bank’s growing sensitivity to challenging economic conditions across the continent.
“The bank’s recent shift to unsecured lending to sovereigns under stress has introduced significant risks, diverging from its typical focus on trade finance and heightening its sensitivity to its difficult operating environment,” the agency noted.
The downgrade comes as Afreximbank battles to shield its exposure to debt-distressed countries such as Ghana, Zambia, and Malawi, where restructuring processes under the G20 Common Framework threaten to treat the bank on par with private creditors.
Moody’s expressed concern that sovereign lending to Ghana and Zambia poses material risks to the bank’s capital position, particularly because the Common Framework “mandates restructuring comparable to private-sector creditor losses.”
This is a particularly sensitive point for Afreximbank, which has long argued that its multilateral status and treaty backing grant it preferred creditor status. But with global rating agencies growing wary of the financial implications of sovereign restructurings, that legal argument may carry limited weight with markets.
In addition to asset risks, Moody’s pointed to a more constrained funding environment for the bank. Afreximbank has historically benefited from low-cost, diversified funding through bilateral and syndicated lending channels, but Moody’s said this model has weakened in recent years and described it as “a trend unlikely to fully reverse.”
While the bank did tap markets through a $520 million Samurai bond in late 2024 and a $303 million Panda bond in early 2025, these transactions were seen as modest relative to its total financing needs. The implication is that Afreximbank may be forced to rely more on costlier, market-based borrowing at a time when its credit profile is under strain.
To offset funding volatility, the bank has significantly increased its liquidity buffer, more than doubling its cash reserves to $9.5 billion since the end of 2024. However, Moody’s cautioned that this may not be a sustainable strategy.
“Maintaining such high levels of cash is costly and therefore unlikely,” the agency stated. High liquidity can offer short-term reassurance to markets, but if maintained over the long term, it could erode profitability or signal deeper challenges in mobilising affordable capital.
Despite the downgrade, Moody’s acknowledged certain stabilising factors. These included strong internal earnings, capital generation, and visible support from the bank’s shareholder base. At the end of 2024, the bank had already provisioned for 41 percent of its sovereign exposures to Zambia and Ghana, reducing immediate credit risks.
“In addition to consistently strong organic earnings and capital generation, the bank has received consistent support from member shareholders, with both capital raising exercises and retained profit contributing significantly to grow equity,” the agency noted.
This latest downgrade builds on pressure first triggered by Fitch Ratings’ move, which similarly downgraded Afreximbank by one notch and shifted its outlook to negative. In the weeks that followed, the Fitch action stirred strong reactions from African political and institutional leaders.
While The High Street Journal reported that bodies like the African Peer Review Mechanism (APRM) and the African Continental Free Trade Area (AfCFTA) Secretariat mounted coordinated rebuttals, those responses have not swayed the global ratings firms.
For the credit agencies, the fundamental concern remains unchanged: that Afreximbank has moved away from its traditional trade finance remit and exposed itself too deeply to high-risk sovereign lending without sufficient insulation.
Market reactions have so far remained cautious but calm. Although the Fitch downgrade led to a slide in Afreximbank’s bond prices, they have since recovered. As of Wednesday, the bank’s 2029 maturity bond was trading at 91.4 cents on the dollar, while the 2031 bond stood at 86.14 cents, both broadly unchanged on the day according to Tradeweb data.
This suggests that for now, investors are processing the Moody’s downgrade as a risk adjustment rather than a crisis signal.
Still, the back-to-back downgrades represent a pivotal moment for Afreximbank, whether to recalibrate its strategy to meet rating agency expectations or double down on its countercyclical lending role with even stronger shareholder backing.
