Afreximbank Bonds Sustain Investor Confidence Amid Moody's Downgrade

In a notable shift within the African financial landscape, bonds issued by the African Export-Import Bank (Afreximbank) continue to demonstrate resilience despite a recent downgrade by Moody’s Investors Service. Following the downgrade on July 1, 2025, investors have remained focused on the attractive yields offered by these bonds, which stand at an impressive 6.04%, as reported on July 4, 2025. This focus on yield is underscored by the bonds trading at 95.39% of their face value, a significant improvement from a low of 81.6% in October 2022, although below the peak of 102.8% in September 2021.

The downgrade stems from Moody’s concerns regarding the bank’s shift towards unsecured sovereign lending, which diverges from its traditional role in trade finance and heightens exposure to operational risks. Moody’s specifically flagged loans to Ghana and Zambia as potential threats to Afreximbank's equity base, with both nations currently undergoing debt restructuring processes under the G20 Common Framework, which mandates that losses be shared with private creditors. According to Moody’s report, "The bank’s recent move into unsecured sovereign lending has introduced significant risks," indicating a cautious outlook on its financial stability.

Despite these concerns, Dr. Georges Elombi, who was appointed President of Afreximbank on June 30, 2025, contests the ratings agencies' assessments, questioning the likelihood of default among African sovereigns. He stated, "Why wouldn’t they honor their commitments as stakeholders in the bank?" This viewpoint highlights a growing sentiment among some financial analysts who believe that the ratings may not accurately reflect the realities of African economies.

Moreover, the methodology used by credit rating agencies has been criticized for being overly conservative, potentially inflating the perceived risk of default. Afreximbank’s outstanding loans to Ghana and Zambia account for just 3.02% of the bank’s total loans and 8.04% of its equity, suggesting that the bank is not overly reliant on these nations. Moody’s did acknowledge that Afreximbank’s liquidity position is robust enough to meet its obligations for the next 18 months, providing a buffer against potential financial strain.

In light of the challenges posed by the recent downgrade, Afreximbank has taken proactive steps to enhance its financial standing. The bank successfully raised $823 million through Panda and Samurai bonds during late 2024 and early 2025, bolstering its liquidity reserves to $9.5 billion. This capital increase is seen as a vital confidence signal for investors navigating a complex market.

Furthermore, the upcoming maturity of a $600 million Eurobond on May 17, 2026, presents an opportunity for Afreximbank to gauge investor sentiment directly. Analysts anticipate that the refinancing of this bond could set the stage for favorable terms, especially as global yields have risen significantly since the bond was originally issued at a 2.63% coupon rate. Current yields for 10-year Eurozone government bonds average around 3.17%, while U.S. Treasuries are hovering near 4%.

In summary, while Moody’s downgrade raises valid concerns regarding Afreximbank's exposure to sovereign risks, the bank's strong liquidity position, strategic leadership changes, and attractive yields suggest that investor confidence remains intact. As the financial landscape in Africa evolves, calls for the establishment of a dedicated African credit rating agency are gaining traction, reflecting a broader desire for more nuanced assessments of creditworthiness across the continent. The implications of these developments will be crucial for the future of African finance, as untapped liquidity estimated at $4 trillion awaits mobilization towards sustainable economic growth.