The answer is intelligence. Integrated, forward-looking macro-financial analysis can identify whether the system is functioning and where risks are building before unexpected shocks bring vulnerabilities to the surface. More importantly, it can provide the analytical foundation needed to price emerging financial instruments accurately, track contingent liabilities in real time, and guide the coordinated allocation of capital required to build resilient and functional African capital markets.
Africa currently lacks three key elements of financial intelligence, starting with a clear view of contingent liabilities. This is most evident not in distressed economies, where some form of oversight exists, but in countries that are not subject to close macro-financial monitoring. Ironically, these are often the countries where new financial instruments are spreading most rapidly.
A second vulnerability lies in the nature of macroeconomic discussions between development-finance institutions and governments. These interactions tend to be strictly transactional. While they often reassure policymakers that the country’s fiscal position is stable, new liabilities are rarely incorporated into macroeconomic risk assessments, allowing pressures to build.
Lastly, there is no pan-African analytical benchmark for pricing new financial instruments. Without a common framework to evaluate a credit-enhanced bond in Nairobi, a blended-finance vehicle in Abidjan, and a guaranteed infrastructure bond in Lagos on comparable terms, risk is bound to be systematically mispriced. When the first default arrives, investors will not retreat selectively; they will exit the asset class altogether. Consequently, the track record needed for these markets to mature will not develop.
This is a structural problem, not an institutional failure. Global macro-surveillance institutions focus on systemically important markets by design, leaving most African capital markets outside their purview. Meanwhile, regional development banks have the necessary macroeconomic expertise, but their analytical work is oriented toward stability rather than tracking capital flows and contingent liabilities.
National regulators, for their part, operate within narrow jurisdictions, and credit rating agencies mostly cover sovereign debt rather than the local and blended instruments on which the new credit architecture depends. The result is a fragmented analytical landscape in which no institution is capable of integrating available information into a system-wide assessment of risk.
That said, creating a new institution is neither necessary nor practical. In advanced economies, the market itself integrates pricing and risk assessment through a mature buy-side and sell-side ecosystem that guides capital allocation. While Africa’s ecosystem remains less developed, with limited investment-banking capacity and sparse buy-side research, this is merely a transitional condition.
Transitions, however, do not manage themselves. Until markets become deep enough to sustain their own intelligence infrastructure, a larger institution must fill the gap. The African Development Bank (AfDB) is uniquely positioned to fill that role. Working closely with the governments of its 54 regional member countries, it has direct knowledge of fiscal positions, debt structures, and domestic policy constraints.
The AfDB also structures transactions across a growing range of new instruments, in cooperation with domestic pension funds, global asset managers, and development-finance institutions. No other body has that kind of sovereign reach, transaction visibility, and investor access. Yet this role is not fully reflected in the AfDB’s mandate. As the financial system evolves, the Bank’s mandate must evolve with it.
Closing Africa’s intelligence gap requires tracking contingent liabilities as guarantees are approved, not after financing has already been structured. Each guarantee adds to a government’s balance sheet and, therefore, should be tracked as it is created, taking into account the country’s debt trajectory and the conditions under which the government would have to honor the liability.
Another priority is developing common analytical standards for emerging asset classes, as markets cannot mature without shared frameworks for pricing, monitoring, and stress-testing. Few institutions are better suited to establish such standards than the AfDB: its transaction volume, continental reach, and investor relationships give it the credibility needed to ensure they are widely adopted.
Building the necessary analytical capacity also demands a profound cultural shift. Inside development banks, economic analysis and project financing have long worked in parallel, with economists producing reports while deal teams structure transactions. For the system to work, economic intelligence cannot remain merely a research product. It must inform decision-making in real time, guiding capital allocation and risk assessment. Crucially, that shift cannot be imposed from outside; it has to be led from within.
Most importantly, financial intelligence cannot be separated from the creation of coordination platforms and domestic savings reform. The three are mutually reinforcing parts of the same system. Platforms without intelligence allow risks to accumulate unnoticed, and without platforms, new instruments never scale beyond one-off transactions, leaving risk analysts with nothing to price.
Africa has the savings and the ambition to build a world-class development-finance system. What it needs now is the analytical infrastructure that can translate coordinated initiatives into functioning capital markets, along with the institutional and political support required to sustain them.
Gomez Agou, former resident representative of the International Monetary Fund in Gabon from 2021 to 2025, is a fellow at Harvard Kennedy School.
Article first appeared in African Newspage.
Photo by U.S.EmbassyBF via Iwaria.
