The agency cited deteriorating asset quality and funding vulnerabilities despite revising the outlook to stable.

Moody’s highlighted heightened risks from the bank’s strategic pivot toward unsecured sovereign lending, particularly to debt-distressed nations like Ghana and Zambia. This shift contradicts Afreximbank’s traditional trade finance focus and exposes it to potential losses under the G20 Common Framework restructuring process. The bank’s claim to preferred creditor status remains contested by rating agencies.

Funding constraints compound these challenges. While Afreximbank doubled liquidity buffers to $9.5 billion since late 2024, Moody’s deemed this strategy unsustainable due to high carrying costs. The agency noted diminished access to low-cost capital despite recent $520 million Samurai and $303 million Panda bond issuances.

Offsetting factors include strong internal capital generation and shareholder support, with 41% provisions already covering sovereign exposures to Ghana and Zambia. Market reaction remained muted post-downgrade, with bond prices steadying after initial dips following June’s Fitch downgrade.

The back-to-back downgrades signal intensified scrutiny of Afreximbank’s countercyclical lending approach amid Africa’s debt challenges.