Ahunna Eziakonwa speaks quietly but enunciates clearly. The United Nations under-secretary general and special adviser on Africa says the continent pays more because the world perceives it as high risk. This perception carries a heavy price tag.
Africa loses an estimated $74.5bn in additional debt service costs due to exaggerated risk perceptions and biased credit ratings. Eziakonwa calls this the Africa risk premium. She explains that this figure represents the difference between progress and paralysis for developing nations.
If borrowing costs were lowered by just 2% over a three-year period across an $18.6bn portfolio, the continent could save about $1.12bn. That amount is sufficient to provide electricity to 50 million people or hire 900,000 teachers. What is lost through biased credit ratings is not just revenue; it is future potential.
The argument is moral as well as economic. African countries are not serial defaulters. Eziakonwa points to data showing the default rate is relatively low.
A recent study by Moody’s Analytics revealed that default rates for infrastructure loans in Africa averaged 1.9%. In comparison, figures for Asia, Latin America, and Eastern Europe were 4.6%, 10.1%, and 12.4%, respectively.
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Despite this repayment discipline, borrowers face higher interest rates than peers with similar risk profiles elsewhere. The disparity fuels a vicious cycle. Inflated borrowing costs drain fiscal space, forcing governments to divert funds from social investment to debt repayment.
“The more money spent on repaying this debt,” Eziakonwa says, “the less is available for addressing social needs.”
Eziakonwa identifies a persistent “narrative premium” that frames the continent as fragile, volatile, and risk-prone. By playing up the risk, the world plays down Africa’s measurable strengths. The region has demonstrated extraordinary resilience, bouncing back from multiple shocks including the 2008 global financial crisis, the Covid-19 pandemic, and the Middle East crisis. Furthermore, African economies have undertaken a wave of macro- and micro-economic reforms under IMF programmes and domestic restructuring. No other region in the world has responded to reforms with such vigor. Despite these achievements, global rating agencies often fail to highlight them or factor in the continent’s high growth projections and abundant resources.
Building an African ratings agency
One of the most tangible steps toward correcting that imbalance is the proposed African Credit Rating Agency, a home-grown institution designed to broaden the data and methodology behind sovereign ratings. Currently, global raters often rely on narrow datasets and fly-in analysts who produce assessments based on brief visits without sufficient qualitative depth. The new agency intends to introduce broader and alternative data sources. It will be professional, credible, and transparent, providing other perspectives and dimensions that may have been missing.
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