Moody’s affirms AFC A3 rating from negative to stable outlook

Benjamin Orisemeke

Africa Finance Corporation (AFC), the continent’s leading infrastructure solutions provider, Thursday announced it received uplift to its credit ratings outlook from Moody’s Investors Service, with the assignment of a “stable” outlook.

This decision further solidifies AFC’s position as one of the highest investment-grade African institutions, with Moody’s affirming the Corporation’s long-term issuer and senior unsecured ratings at A3, as well as AFC’s short-term issuer rating at P-2.

“Notwithstanding increased country risk in several of AFC’s countries of operation over the past year, asset performance has proven resilient amid effective credit protections. The stable outlook also reflects management’s governance track record and early intervention capacity to mitigate materializing risks at an early stage,”Moody’s analysts stated in its latest report.

Moody’s A3 rating affirmation reflects AFC’s adherence to its prudential guidelines to safeguard the Corporation’s intrinsic financial strength based on solid capital adequacy and high-quality liquidity buffers.

In FY2023, the Corporation recorded outstanding financial performance with Capital Adequacy Ratio increased to 34.5% from 34.3% in 2022 and Cost-to-Income Ratio improved to 19.6%, from 22.7% in 2022. Additionally, the Corporation recorded Liquidity Coverage Ratios (LCR) of 161% and 143% under normal circumstances and a stress scenario respectively, significantly higher than the Corporation’s LCR requirement of greater than 100% in both scenarios.

The decision by Moody’s is crucial for AFC to continue leveraging its top-tier credit ratings to achieve among the lowest borrowing costs of any institution in Africa, for transformational infrastructure projects in power, natural resources, transport, and technology that drive rapid industrialisation and job creation on the continent.

Landmark initiatives include Djibouti’s first wind farm, with AFC as lead developer advancing plans to become the first African country wholly reliant on renewable sources for energy, and the Lobito Corridor rail project, with AFC again as lead developer working alongside the US, European Union and governments of Angola, DRC and Zambia to mobilise industry and connect the Atlantic and Indian oceans.

Samaila Zubairu, President and CEO of AFC, said that “Amidst the current challenging global macroeconomic and financial conditions, we are pleased to receive such strong endorsement from Moody’s, a key lever in our access to global capital markets. It reinforces our position as the resilient and reliable partner for a more prosperous African future and an indispensable ally in mobilising urgently needed capital to build the infrastructure that integrates Africa and enables its industrialisation.”

“The change in outlook to stable from negative is driven by our expectation that AFC will be able to maintain a stable, if not improving leverage ratio and that the asset performance track record will be preserved.” Moody’s analysts said, commending AFC.

“The improved leverage outlook reflects the Corporation’s continued equity raising strategy. The Corporation exceeded its $1 billion target in 2019-23 and aims to raise a similar amount during 2024-28. Moreover, the corporation lowered its dividend payout ratio starting 2023 which will help retain a higher share of earnings and grow the capital base organically in the future,” they reported.

In the face of uncertainty in the global financial landscape, AFC successfully maintains access to the global capital markets, a testament to the confidence that investors place in the Corporation’s robust credit risk profile and its growing global appeal. This year, AFC has completed several pivotal funding transactions including its largest ever debt facility, a $1.16 billion syndicated loan, attracting new lenders from the Middle East, Europe, and Asia.