President Bola Tinubu has expressed strong support for the establishment of an Africa-led Credit Rating Agency (ACRA), saying it will provide fairer and more transparent assessments of African economies......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
He made this statement during the 38th Ordinary Session of the African Union (AU) Heads of State and Government held in Addis Ababa, Ethiopia, on Sunday.
What is a credit rating agency, and why does Africa need one?
A credit rating agency evaluates the financial health of countries and businesses, helping investors determine whether it’s safe to lend them money. Currently, global credit rating agencies like Moody’s, Fitch, and Standard & Poor’s dominate the industry. However, African leaders argue that these agencies often unfairly rate African countries lower than they deserve, making it harder for them to access loans at reasonable interest rates.
Tinubu believes that an Africa-led rating agency will solve this problem by providing a more balanced and accurate assessment of African economies.
Support from the African Union and AfDB
President Tinubu commended the African Union (AU), the African Development Bank (AfDB), and the Specialised Technical Committee (STC) on Finance for their efforts in pushing for an African-led financing system. He emphasized the need for Africa to have more control over its financial future, especially in dealing with:
High borrowing costs: Many African countries struggle to secure loans at reasonable rates.
Debt burden: Some nations are heavily in debt, making it difficult for them to develop.
Low domestic revenue: Many African governments do not generate enough money from taxes and other sources.
Limited long-term financing options: African countries need access to stable and affordable funding for development projects.
Introducing the African Financing Stability Mechanism (AFSM)
President Tinubu also highlighted the importance of the African Financing Stability Mechanism (AFSM), which is being developed to help African countries manage their financial risks and stabilize their economies.
“The establishment of the AFSM shows the collective commitment of African nations to solving financial challenges and building stronger economies,” he said.
What This Means for Africa’s Future
At a key meeting held in Abuja, Nigeria, in November 2024, African leaders agreed to adopt the AFSM, a move that is expected to:
Strengthen financial stability
Improve resilience against economic shocks
Create a more coordinated approach to managing financial risks
If successfully implemented, these initiatives could boost investor confidence in Africa and help countries secure better financing for their development projects. With President Tinubu’s backing, African nations are now one step closer to financial independence and a more equitable global financial system.