Afreximbank Economist Blames High African Borrowing Costs on Flawed Credit Ratings

Dr. Yemi Kale, Group Chief Economist and Managing Director of Research and Trade Intelligence at the African Export-Import Bank, has attributed Africa’s steep borrowing costs to skewed international credit rating systems that fail to reflect the continent’s true economic conditions.

Speaking during a Q&A with journalists after the launch of Afreximbank’s African Trade Report 2025 in Abuja, themed “African Trade in a Changing Global Financial Architecture”, Dr. Kale argued that major credit rating models are based on frameworks unsuitable for African economies. These models exaggerate risk, he said, driving up the cost of capital across the continent.

“When African banks are charged more to raise capital, and then have to lend that capital back to governments, it creates a cycle of pressure,” Kale noted.

He called for the establishment of a regional rating agency tailored to Africa’s unique economic landscape—citing Asia as a model for regional alternatives. “We need metrics that reflect our realities. The world may resist at first, but as more African nations adopt this system, global acceptance will follow, just as it did with today’s dominant agencies.”

Kale also emphasized the importance of exploring alternative funding sources, pointing to stronger ties with China and other friendly nations as ways to avoid inflated Eurobond rates driven by poor credit scores.

“There are multiple routes to capital. If the Eurobond market pegs us as high-risk, we can turn to partners like China. We can also strengthen our own multilateral banks by increasing member countries’ capital contributions.”

He added that Africa’s relatively low exposure to global financial systems has proven to be an unexpected asset in today’s turbulent economy. “Geopolitical shocks and trade wars haven’t hit us as hard—what once seemed a weakness is now a source of resilience,” he explained.

Highlighting a positive trend, Kale revealed that Nigeria recently traded more with African partners than with any other global region—proof that intra-African trade is gaining momentum.

The African Trade Report 2025 provides insights into continent-wide macroeconomic trends, recommends strategies for navigating global uncertainty, and underscores the rising importance of regional trade as a buffer against external instability.