UN says inaccurate credit ratings cost Africa $74.5 billion annually
Inaccurate and context-poor sovereign credit ratings are estimated to cost African countries about $74.5 billion annually through higher borrowing costs and lost financing, the United Nations has said. The post UN says inaccurate credit ratings cost Africa $74.5 billion annually appeared first on Nairametrics .
The United Nations has stated that inaccurate and context-poor sovereign credit ratings cost African countries approximately $74.5 billion each year. This finding was disclosed by the UN Office of the Special Adviser on Africa just prior to the official inauguration of the Africa Credit Rating Agency (AfCRA) in Mauritius. AfCRA aims to deliver independent credit evaluations specifically tailored for Africa, covering sovereigns, sub-sovereigns, companies, and institutions.
The UN emphasized that this cost represents a significant development penalty for the continent, given that the actual rate of sovereign defaults in Africa is lower than what prevailing risk assessments typically indicate. Inaccurate ratings that fail to accurately reflect African economic conditions are estimated to result in $74.5 billion in annual losses for the continent.
The issue is especially pertinent for Nigeria, which has repeatedly expressed concerns to the UN regarding the disproportionately high risk premiums attached to its sovereign borrowing. At a March ECOSOC meeting on credit ratings, Nigeria compared its debt-to-GDP ratio with that of an unnamed European economy with higher debt levels but lower default rates.
Despite Nigeria's stronger foreign reserves and lower debt burden, it currently pays higher yields on its sovereign bonds compared to the European country. Nigeria also questioned why profitable domestic entities could thrive while its sovereign debt remained below investment grade, arguing that credit rating agencies should engage more closely with local stakeholders rather than relying solely on external data.
The UN believes that AfCRA will address these issues by providing assessments based on African economic data, expertise, and context. The agency will operate independently, be privately funded, and have no government ownership to ensure its credibility. The launch of AfCRA comes following years of African governments' concerns that conventional sovereign ratings can inflate borrowing costs and limit fiscal space for development.
Earlier, Nairametrics reported that the African Union officially launched AfCRA on October 7, 2026, as an Africa-focused alternative to the dominant global rating agencies. The agency is designed to operate independently, complement existing international rating agencies, and provide credit assessments based on African economic realities and local market conditions.
Additionally, the African Development Bank is launching an initiative to enhance African countries' credit ratings by improving economic data transparency, with the goal of reducing perceived risks and borrowing costs.
Written by urgent.news from Nairametrics's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
