Africa’s Credit Trap: Research Uncovers How Biased Ratings Are Costing the Continent Billions

A bold new academic paper is sparking urgent calls for Africa to reclaim its economic narrative by establishing its own credit rating agency. In her revealing study titled “A New Dawn in Credit Rating for Africa? A Review of the Africa Credit Rating Agency,” legal scholar Gertrude Amorkor Amarh exposes how the global credit rating system—dominated by Western agencies like Moody’s, S&P, and Fitch—is structurally biased against African nations, exacerbating borrowing costs and undercutting sovereign development.

Published as part of the Symposium on the African Financial Architecture and the African Multilateral Financial Institutions in Context, Amarh’s paper offers a meticulous legal and institutional analysis of the proposed Africa Credit Rating Agency (AfCRA), a flagship initiative by the African Union aimed at restoring fairness, transparency, and self-determination in the continent’s credit rating architecture.

Credit Ratings—or Colonial Relics?

Amarh’s paper argues that current global credit rating practices are shaped by geopolitical and commercial interests that perpetuate systemic disadvantage for African economies. These ratings, often opaque and based on inconsistent methodologies, lead to inflated interest rates for African governments—even when economic fundamentals are relatively stable.

The researcher presents empirical findings showing that countries like Ghana, Nigeria, and Kenya have often received lower ratings than their economic peers in Asia or Latin America, not because of actual fiscal risk, but due to subjective assumptions about political stability or institutional strength.

The AfCRA Solution: An African Voice in a Global System

The African Credit Rating Agency (ACRA), proposed by the African Union in 2021, is designed to break this vicious cycle by providing context-sensitive, fair, and empirically grounded sovereign credit assessments. Amarh’s research goes beyond advocacy—it provides a comprehensive framework for the AfCRA’s operational legitimacy, drawing on African legal instruments such as the AU Constitutive Act and the African Charter on Democracy, Elections and Governance.

The paper emphasizes that AfCRA must be independent from both political interference and the donor-driven development finance model. Amarh recommends that its legal architecture be rooted in pan-African treaty law and supported by AU protocols to protect its credibility and ensure enforceability.

Ghana’s Role—and Missed Opportunities

While Ghana has championed financial innovation on the continent, Amarh’s findings suggest that the country, like many of its peers, has failed to challenge the dominance of external rating bodies—despite being one of the most impacted by speculative downgrades. The paper highlights how Ghana’s 2022 debt crisis was worsened by rapid and unjustified rating downgrades that spooked investors and constrained the government’s access to global capital markets.

Amarh calls on countries like Ghana to take a leadership role in shaping AfCRA’s governance, staffing, and technical policies, warning that delay or lukewarm political commitment could doom the agency to irrelevance.

A Call to Continental Action

The implications of this research are profound. If African governments fail to support and institutionalize the AfCRA, they risk remaining hostage to a credit rating order that systematically undervalues their economies. Amarh’s paper makes it clear: the time for rhetoric is over. What Africa needs is a legally robust, operationally sound, and politically independent credit rating agency that can command global respect and investor confidence.

Amarh makes recommendations that includes:

• Establishing the AfCRA under a binding AU legal instrument;
• Increased and consistent education on the objects of the Agency;
• Grounding the Agency as a viable alternative to the internationally recognized agencies;
• The Agency adopting methodologies that consider the peculiarities of the African context.

The Verdict: Change or Continue Paying the Price

Gertrude Amorkor Amarh’s work is a wake-up call, a compelling blend of legal scholarship and policy critique that makes one thing painfully clear: Africa cannot continue outsourcing its economic reputation. If the continent is serious about achieving Agenda 2063 and breaking the debt dependency cycle, then building a homegrown credit rating agency is not optional—it’s urgent.

The ball is now in the court of the African Union and its member states. Will they rise to the occasion, or allow another opportunity for economic sovereignty to slip away?

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Source: “A New Dawn in Credit Rating for Africa? A Review of the Africa Credit Rating Agency” by Gertrude Amorkor Amarh, presented as part of the Symposium on the African Financial Architecture and the African Multilateral Financial Institutions in Context and published in the Cambridge Yearbook of Legal Studies, 2024. https://www.researchgate.net/publication/392216237_SYMPOSIUM_ON_THE_AFRICAN_FINANCIAL_ARCHITECTURE_AND_THE_AFRICAN_MULTILATERAL_FINANCIAL_INSTITUTIONS_IN_CONTEXT