FDI: Why reforms must balance ratings and reality — by Testimony Akinkunmi

On January 23, 2026, the African Export-Import Bank did something unprecedented in development finance: it fired its credit rating agency. Afreximbank’s termination of Fitch Ratings followed a bitter dispute where Fitch downgraded the Cairo-based institution to junk status (BB+) before withdrawing coverage entirely. The bank’s statement was blunt—Fitch’s methodology was “analytically and legally flawed,” failing to recognise Afreximbank’s treaty-based preferred creditor status that should shield it from sovereign debt restructurings.

For Nigeria, it means a lot. It is a regulatory time bomb ticking inside the pension system that funds the country’s infrastructure ambitions.

Afreximbank has invested over $36 billion in Nigeria’s economy, most recently securing a $750 million financing partnership with Heirs Energies days before the Fitch termination. Nigerian pension funds hold approximately ₦19.70 billion in supranational bonds, with Afreximbank among the primary multilateral institutions in that portfolio. Under PenCom’s Revised Regulation on Investment of Pension Fund Assets, those bonds face a lethal constraint: any instrument must carry ratings from at least two SEC-recognised agencies, and if ratings differ, the lowest rating determines whether it qualifies as “investment grade.”

Fitch’s BB+ junk rating—even after termination—creates a floor trap. Moody’s still rates Afreximbank at Baa2, investment grade. But PenCom’s floor principle forces pension administrators to use Fitch’s lower assessment, potentially triggering automatic sell-offs of bonds financing Nigerian industrialisation. A rule designed for prudent risk management has collided with a rating agency feud, threatening to accidentally defund the nation’s development infrastructure.

This collision exposes Nigeria’s broader foreign direct investment crisis: credit ratings are moving in the right direction, but the financial architecture translates them perversely. The country won back-to-back sovereign upgrades in 2025—Moody’s to B3 from Caa1 in May, Fitch to B stable in April—yet FDI in Q1 collapsed to just $126 million, a 70% plunge. Portfolio inflows claimed 92% of Nigeria’s $5.64 billion in total capital imports. FDI? Just 2.24%, a paltry amount that can’t do much significance.

The pension trap illustrates a pathology extending across Nigeria’s investment landscape. Afreximbank’s dispute with Fitch centres on non-performing loan calculations when multilateral development banks hold sovereign debt in restructuring. Fitch assessed Afreximbank’s NPL ratio at 7.1%, citing Ghana’s $750 million and Zambia’s $45 million debt workouts. Afreximbank rejected this entirely, arguing its treaty-based preferred creditor status—identical to IMF and World Bank treatment—should exclude sovereign exposures from NPL calculations during restructurings.

The dispute matters because pension funds require BBB minimum ratings for infrastructure investments. When one rating agency downgrades to junk while another maintains investment grade, the floor principle creates paralysis. Pension administrators can’t ignore Fitch’s assessment even after termination—fiduciary duty requires conservative dual-rating interpretation.

Nigeria’s ₦27.45 trillion pension system has become the infrastructure financing backstop as FDI evaporates. PenCom guidelines allow up to 25% allocation in infrastructure bonds worth at least ₦10-20 billion. Infrastructure investments grew 54% to ₦243.35 billion by September 2025, barely 1% of total assets.