The African Development Bank (AfDB) announced the establishment of a continental credit rating agency to challenge the perceived bias of Western agencies against African nations. Kevin Urama, the AfDB's vice-president and chief economist, emphasized the need to address information asymmetry and historical perceptions that negatively impact Africa's credit ratings.
The African Development Bank (AfDB) says African countries, including Nigeria, have collaborated to establish a continental credit rating agency to counterbalance Western credit rating agencies’ bias against Africa. Kevin Urama, vice-president and chief economist, economic governance and knowledge management, AfDB Group, spoke on Tuesday at the launch of the Debt Management Forum for Africa, organised by the bank in Abuja.
Speaking at the event, Urama, said the proposed African credit rating agency would address the prejudice against the continent.“Now, as you have already heard here, the credit ratings of Africa, not credit rating agencies, but the credit ratings of Africa seem to have some bias,” he said.Urama said it is also because rating agencies use a methodology that also looks at the physical data and perceptions of data in terms of the discretionary way of human beings.“So, if you have a committee to rate Mr. A, B, C, or D, it is going to look at historical path dependence. It’s like if you go to the US and there’s a crime that happens in a black neighbourhood, who do you think the police are going to look for? People commit crimes frequently because there is a pattern,” he said. “So, if there’s a pattern of political upheavals in Africa, when there’s an election coming, investors will get jittery. “If there’s a pattern of corruption, then investors get jittery. If I’m going to invest and there is no guarantee of exit, when I want to take my money out, of course, people are going to get jittery. So, some of those information asymmetries are founded on the continent.” Urama said Africa needs to address information asymmetry, leading to the floating of an African credit rating agency, adding that the agency aims to educate Africans to stop blaming the big three credit rating firms for similar ratings.“But perchance, they can provide what I call a counterfactua
FINANCE AFRICA CREDIT RATING AGENCY BIAS INVESTMENT
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