The multilateral development financial institution was assigned an A3 (long term)/P2 (Short term) foreign currency debt rating by Moody’s investor service, making the corporation the second highest investment grade rated corporation on the African continent.
“The investment grade rating awarded by Moody’s to AFC is of utmost strategic importance to us because at the end of the day, we are a financial institution and credit ratings still remain one of the best benchmark by which financial institutions are assessed,” Adesola Adedutan, the Chief Finance Officer, AFC told CNBC Africa.
The ratings were based on sound capital adequacy position, high asset quality, strong prudential framework that supports a high degree of liquidity, supported profit margin and profit retention amongst other things.
“Most importantly for us is that going out to obtain the rating was out of our deliberate strategic objective of leveraging our balance sheets and obtaining this investment grade ratings helps in the attainment of that strategic growth,” he said.
AFC is headquartered in Lagos and was established with an initial base 1.1 billion US dollars, as a private sector-led Pan African multilateral and sought to be a catalyst for private sector infrastructure investment across Africa.
“Potentially, there are some transactions that we may not have been able to do before on account of the fact that maybe they were not profitable, with this kind of rating and if it works out the way it was expected, we should be able to do more,” he explained.
According to Adeduntan, the grade rating also helps the establishment widen their source of financing and it is also expected that their cost of borrowing should go down which invariably means that the cost of lending also goes down.
“For us, we are not risk averse but we are a very measured institution, we do transactions that we are capable of managing the downside risk. That for us is the most important thing,” he added.
Companies with high ratings are typically very risk averse and tend to only invest in high quality projects and whilst many believe that Africa does not offer enough quality projects, AFC doesn’t believe that this the biggest challenge.