Moody's expects Niger sanctions to be lifted by early 2024
Moody's Investor Service has maintained Niger's long-term and foreign currency rating at Caa2, a category considered extremely speculative and situated three notches above payment default. This decision seems unexpected given that the agency acknowledges that Niger has accumulated significant arrears on its debt, which technically qualifies as a payment default according to Moody's own definition.
The agency's rationale, however, is linked to Niger's inability to meet its obligations to creditors, which it attributes to economic and financial sanctions imposed by regional economic organizations. These sanctions include the suspension of commercial and financial transactions and the freezing of Niger State assets at the Central Bank. Moody's anticipates that ongoing discussions involving Niger, ECOWAS, and UEMOA will result in an agreement that could lead to the removal of sanctions, likely no later than the beginning of 2024.
The agency's decision to confirm the Caa2 rating is based on its expectations that an agreement on a transition to civilian rule, following the military coup in July, will be reached between the involved parties by the end of 2023 or, at the latest, early 2024. Moody's also suggests that if sanctions are lifted in early 2024 and debt payments resume, any losses incurred by investors would be relatively limited.
Key Takeaways
In response to the July 26 coup, Niger's regional and Western allies initiated a series of sanctions against the country in early August. Niger is globally recognized as the seventh-largest producer of uranium, a radioactive material extensively utilized for nuclear energy and cancer treatment. Paradoxically, it also ranks as one of the world's most economically disadvantaged nations, receiving approximately $2 billion in annual development aid. Niger's 2023 budget projections shed light on its financial reliance on external partners. Out of the country's total budget of 3,245 billion CFA francs (equivalent to $5.53 billion), approximately 342.44 billion francs were anticipated to come from external budget support and loans. An additional 978.47 billion francs were earmarked to be sourced from project grants and loans provided by external partners. In sum, over $2.2 billion, which makes up roughly 40% of Niger's budget, was expected to be contributed by external partners.
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