The African Development Bank (AfDB) is set to launch an initiative to help African countries improve their sovereign credit ratings by strengthening economic data, transparency and market information, a move aimed at reducing borrowing costs across the continent.

AfDB President, Sidi Ould Tah, disclosed this yesterday at the S&P Emerging Markets Conference in London, saying gaps in data and weak market infrastructure contribute to perceptions of higher risk in African economies and ultimately make it more expensive for them to access capital.

Tah said the initiative would be implemented through the African Legal Support Facility (ALSF) to help governments prepare for sovereign credit assessments and improve the quality of information available to international credit rating agencies.

“What is missed in Africa is the data and the infrastructure… the opacity in some markets creates this notion of high risk, which leads to high cost of borrowing,” Tah said.

He said improving the quality and availability of economic data would help address information gaps that influence how African economies are assessed by international rating agencies.

Tah noted that improving credit ratings had become a common objective across the continent, pointing out that only three of Africa’s 54 countries currently have investment-grade ratings.

The AfDB initiative comes amid longstanding concerns among African leaders about the high cost of accessing international capital and the factors that shape sovereign risk assessments.

The bank’s move is separate from efforts by African institutions to establish a continent-wide credit rating agency. The African Peer Review Mechanism, an African Union-backed initiative, plans to launch an Africa-wide ratings agency this month, partly in response to concerns over the cost of borrowing.

Earlier in the year, President Bola Tinubu advocated the creation of an Africa-owned credit rating agency, arguing that borrowing costs for African economies often do not adequately reflect their economic conditions.

He also argued that ratings by Fitch Ratings, Moody’s and S&P Global Ratings have significant influence on African countries’ access to international capital markets and investor sentiment.

Beyond credit ratings, the AfDB is also working to strengthen domestic financing and capital markets as part of efforts to increase resource mobilisation within Africa.

Tah said the bank had engaged stakeholders, including pension funds and banks, to identify and address obstacles limiting the development of stronger domestic capital markets.

The effort is expected to strengthen the ability of African economies to mobilise local funding while addressing constraints holding back domestic financial markets.

While the new credit-rating initiative will focus on better data and transparency to support sovereign assessments, the AfDB’s broader financing efforts are aimed at developing stronger domestic capital markets and expanding access to local funding.