Ahunna Eziakonwa: Time to dismantle Africa's risk premium

Speaking quietly but enunciating clearly, Ahunna Eziakonwa, under-secretary general and special adviser on Africa to the United Nations secretary-general, distils a truth that has long haunted the continent’s development story: Africa pays more because the world perceives it as high risk. “Africa loses an estimated $74.5bn in additional debt service costs due to exaggerated risk perceptions and biased credit ratings,” she says. “It’s what has been called the Africa risk premium.” This figure, she explains, is not just a line item in a budget spreadsheet. It is the difference between progress and paralysis. “If the borrowing cost is lowered by just 2% over a three‑year period across a $18.6bn portfolio, Africa could save about $1.12bn, which will be enough to provide electricity to 50 million people or hire 900,000 teachers. What Africa loses through biased credit rating is not just revenue; it loses future prospects and potential for the continent’s youthful and vibrant people.” A costly risk premium Eziakonwa’s argument is as moral as it is economic. African countries are not serial defaulters. “The default rate is relatively low on the continent,” she says. “A recent study by Moody’s Analytics showed that default rates for infrastructure loans in Africa averaged 1.9%, while comparable figures for Asia, Latin America and Eastern Europe were 4.6%, 10.1% and 12.4%, respectively.” This discipline, however, is rarely rewarded. Consequently, borrowers across the continent face higher interest rates than peers with similar risk profiles elsewhere. “We’ve examined countries that have similar risks,” she says. “They get better deals.” This disparity fuels a vicious cycle: inflated borrowing costs drain fiscal space, forcing governments to divert funds from social investment to debt repayment. “The more money spent on repaying this debt,” she says, “the less is available for addressing social needs.” If she could change three things, Eziakonwa says, she would begin with what she calls the ‘narrative premium’ – the persistent framing of Africa as fragile and volatile and risk prone. “When you play up the risk, you play down the strengths,” she says. Those strengths are measurable. “Africa’s resilience is extraordinary. Despite multiple shocks, including the 2008 global financial crisis, Covid‑19 and the Middle East crisis, the continent has always bounced back.” She points to the wave of macro‑ and micro‑economic reforms undertaken across African economies under IMF programmes and domestic restructuring. “There is no region in the world that has responded to reforms like Africa,” she says. Yet the global rating agencies rarely highlight these achievements. “Africa has high growth projections, abundant resources from minerals for people but all of that is not adequately factored in. Skewed credit ratings exaggerate Africa’s risk and undermine development financing prospects.” Building an African ratings agency One of the most tangible steps toward correcting that imbalance is the proposed African Credit Rating Agency, a home‑grown institution designed to broaden the data and methodology behind sovereign ratings. “It’s not just for foreign lenders,” she explains. “It’s also for the rating agencies themselves. Sometimes they work from narrow datasets because the players in the system are few. The new agency will introduce broader and alternative data sources. The goal, she says, is not to make Africa look good but to make the picture complete. “It’s going to be professional, credible, and transparent,” she insists. “It will provide other perspectives and dimensions that may have been missing.” Currently, global raters often fly in analysts for brief visits, producing assessments without sufficient qualitative depth. “They often rate countries on the basis of brief visits,” she says. “The African rating agency will be home‑grown. It will prioritise credibility and transparency.” Beyond sovereigns, Eziakonwa sees the agency as a catalyst for strengthening domestic rating networks, the local institutions that currently assess African businesses and financial entities. “They exist now, but that network is not really elevated,” she says. “They are a very important part of the ecosystem.” Preparation, she adds, is key. “We now have a council of advisors that go out before ratings, a kind of pre‑audit, so governments can put their things in order. Sometimes African governments just need support to prepare better.” Reimagining the global financial architecture Eziakonwa’s critique extends beyond ratings to the structure of global finance itself. The Africa Finance Corporation’s State of African Infrastructure Report 2025 estimated that the continent holds $4.5 trillion in domestic capital – pension funds, reserves, and sovereign wealth – much of it domiciled abroad. “That money could be capital for Africans,” she says, “instead the global financial architecture holds the continent hostage.” Multilateral lenders, she notes, are bound by the same system that penalises risk. “If you lend with high risk, you get downgraded,” she says. “So the architecture doesn’t allow Africa to unlock its capital for use where it matters.” The African Development Bank, alongside UNDP and other institutions, is now leading efforts to design a new African financial architecture. The New African Financial Architecture for Development (NAFAD formerly NAFA) was adopted by a broad coalition of public and private sector leaders on April 9 2026 through the Abidjan Consensus. The NAFAD model is tailored to the continent’s development journey and focuses on mobilising domestic capital by unlocking billions in local African institutional savings and pension funds rather than relying on external aid; lowering the cost of capital by reversing the prevalent risk premium narrative; and promoting financial sovereignty by strengthening Africa’s role in global financial governance and pushing for economic independence. Responding to the development Eziakonwa says: “I’m hopeful that when that model is built, it will start to free up the continent’s financial infrastructure from this trap.” But reforming the global system is slow. “We’ve raised this issue for years and nothing has really shifted,” she admits. “The shareholders of those systems are not responding.” Meanwhile, Africa faces mounting external shocks, from the Iran conflict to the lingering effects of Covid‑19 and the war in Ukraine. “We are very dependent on global supply chains,” she says, explaining why Africa remains exposed to geopolitical tectonic shifts. “We haven’t yet really gotten our independence from those supply chains.” The fallout is that the pressure on the fiscal space is immense. “Governments must boost investment in energy, infrastructure, agriculture, and digitalisation, all pillars of development, and it all needs investment,” she says. “We cannot wait for the international system to take its time to change.” Mobilising domestic resources That urgency is driving UNDP’s focus on domestic resource mobilisation. “We have a programme called Tax Inspectors Without Borders,” she explains, “bringing technical support to governments to see how to generate revenue domestically.” The goal is not to tax the poor more but to expand the base. “The tax ratio is very narrow,” she says. “We need to look at potential areas that have not been touched for example where you have tax holidays that are not really deserved.” Reclaiming idle capital is another priority. “A lot of our sovereign wealth funds and reserves are sitting idle or boosting other economies,” she says. “We’re looking at how to call back some of that money from institutional investors.” Toward a collective African voice Eziakonwa’s vision of reform is continental, not national. “Africa needs to come together and negotiate together and build together,” she says. “The way the world is going, it’s going to be difficult for individual countries.” She cites Zambia’s experience during debt negotiations as a cautionary tale. “They had to go it alone, and it was painful because there was no support system,” she says. The newly launched Borrowers’ Platform, launched by developing countries, offers a forum for nations in distress to share experiences and negotiate collectively. “Here you’ll have a borrowers’ network where they can support each other, sometimes even go together to the creditors,” she says. “It’s also a space where ideas like debt swaps and restructuring can be born and advanced.” The instinct to act alone is understandable, she concedes. “Countries feel like they’re in survival mode,” she says. “But long‑term, this is the way to go.” The African Union, she believes, provides the scaffolding for that unity. “The structure exists,” she says. “It’s now a matter of seeing how, issue by issue, you build a coalition and make a determination that you will.” Ultimately, she frames it as a political choice. “It’s a political decision,” she says. “I don’t think we’re there yet, not on all issues, but we will be.” Owning the story For Eziakonwa, the success of each reform – from credit ratings to tax policy and collective bargaining – is contingent upon Africa’s ownership of its own narrative. “Africa has not owned its own story,” she says. “It still allows others to tell it. And when you do that, you lose your leverage.” Data, she insists, is central to reclaiming that story. “A lot of the credit rating agencies often have no choice but to make assumptions based on whatever data they have.” UNDP’s work, she explains, is about building that intelligence layer from econometric data to digital governance. AI accountability will help to underpin Africa’s financial sovereignty, she says. But Eziakonwa reminds us that, at its core, development financing is about people. Every dollar lost to excessive financing costs is a dollar diverted from vital services: the teachers not hired, the clinics not built, and the families left without electricity. “We deal with human development and human security,” she says. “The more money spent on repaying debt, the less is available for social needs.”