Niger’s economy plunges into junk status: summary

What we know

• Global rating agency Moody's has announced a further downgrade of Niger's sovereign rating, citing, amongst others, the accumulation of unpaid debts. Reuters reports that the long-term foreign and local currency ratings of the Government of Niger have been revised from Caa2 to Caa3. This decision comes as a response to Niger's failure to meet financial obligations, with data from the West African regional debt management agency revealing that the country missed payments on interest and capital amounting to 187.136 billion CFA francs (approximately $307 million) in November.
• The downgrade into deeper junk territory reflects growing concerns about Niger's fiscal health and its ability to manage its debt obligations. International investors and financial institutions may scrutinize the rating change, potentially impacting Niger's access to global capital markets and the cost of borrowing.
• Moody's revised the local currency (LC) ceiling downward from Ba3 to B2 and adjusted the foreign currency ceiling from B1 to B3.
• The rationale behind the downgrade, as stated by Moody's, is attributed to the economic and financial sanctions implemented by both the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU) on July 30. Moody's specified that the sanctions involve the suspension of all commercial and financial transactions between ECOWAS member states and Niger. Additionally, it includes the freezing of assets belonging to the Republic of Niger in ECOWAS central banks and commercial banks.
• The rating agency expressed concern that if these sanctions persist, they are likely to hinder Niger's ability to fulfil upcoming principal or interest payments to creditors outside the country. Such an outcome would meet the criteria for a default under Moody's definition.
• Moody's warns that the accumulation of debt service payment arrears in Niger, attributed to sanctions imposed by regional bodies following a military takeover, may lead to more substantial losses for private sector creditors than initially anticipated.

What they said

Further, it said, “A key driver of the downgrade is also the deterioration in Niger’s institutions and governance strength, reflected in the suspension of the constitutional order, with immediate repercussions on the government’s access to international donor support and security cooperation, which otherwise provide key support to Niger’s credit profile.” In addition, “the longer sanctions, including border closures and freezes of service transactions, remain in place, the greater the adverse economic repercussions within the landlocked country.”