In a call for financial independence and development, Professor Elikplim Komla Agbloyor, an Associate Professor in Finance at the University of Ghana Business School (UGBS), has urged under-developing African countries to establish their own credit rating agencies.

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This, he argues, will empower more companies to issue bonds, thereby bolstering local financial markets, reducing borrowing costs, and increasing access to capital markets for African nations.

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Speaking at an inter-college lecture during the 2024 Day of Scientific Renaissance of Africa (DSRA) celebrations, organized by the College of Humanities of UGBS in Accra, Professor Agbloyor emphasized the importance of developing local financial infrastructures. "We cannot always be going to the Eurobond market to borrow," he said.

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"We need to develop our own financial markets where African countries can issue bonds and ensure that investors will be able to buy these bonds."The lecture, titled “A $75 Billion Question: Do African Countries Suffer a Systematic Sovereign Credit Ratings Bias?” highlighted the biases faced by African countries in the global credit rating system.

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Professor Agbloyor pointed out that credit ratings are crucial indicators of a borrower's quality. However, recent downgrades in Ghana’s credit rating have had significant repercussions, increasing borrowing costs and limiting access to international capital markets."The downgrades mean that the quality of borrowers has been reduced," he explained.

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"If you are downgraded, your credit quality reduces, cost of borrowing increases, making borrowing very expensive. In the case of Ghana, Egypt, and Zambia, you can no longer access international capital markets, meaning you cannot issue Eurobonds."These downgrades lead to capital flow reversals, currency depreciation, imported inflation, banking crises, and eventually full-blown economic crises.

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Professor Agbloyor noted that Ghana might regain access to the global capital market by 2028. Currently, Standards and Poor’s (S&P) has rated Ghana as Selective Default, complicating its ability to issue bonds in the near future.The professor's research was inspired by an article from the Economist, which suggested that African countries might suffer from a credit rating bias.

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Further motivation came from a United Nations Development Programme (UNDP) study, which posited that fair credit ratings for African countries could save the continent an average of $75 billion annually—funds that could be redirected towards development."Credit rating agencies have argued that there is no rating bias and that the ratings are fair and reflect the risks of Africa," Professor Agbloyor said.

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However, his findings indicate otherwise. A random sampling of African countries compared with non-African countries revealed a bias, with Africa being a significant predictor of lower credit ratings. He stressed that a country's location should not determine its credit ratings, whether it is in Africa, the United States, Canada, or Asia.

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To mitigate these biases, Professor Agbloyor advocates for the establishment of African credit rating agencies, run by the private sector to avoid potential credibility issues associated with government-run agencies. "People may not trust the ratings from the onset due to credibility issues, but credibility starts from somewhere, so let us support our own," he concluded.

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The DSRA celebration also featured an exhibition of scholarly works by various departments, institutes, and centres of the University of Ghana, including the Centre for Migration Studies, School of Performing Arts, Centre for Social Policy Studies, and Department of Geography.

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