Fitch Ratings-Paris/London-12 September 2023: Fitch Ratings does not expect any negative impact on supranationals’ ratings because of the military coups in Niger and Gabon (B-/Rating Watch Negative). Political risk is already considered in the ratings of multilateral development banks (MDBs) operating in western and central Africa, and exposure to these two countries is limited. Banque Ouest Africaine de Développement (BOAD, BBB/Stable) has the highest exposure, with 12% of its loans to the Niger sovereign at end-2022, but the support-driven nature of its rating means it would be resilient to a marked deterioration in loan performance.

Most MDBs rated by Fitch have limited exposure to Niger and Gabon. Niger is one of Africa’s poorest countries (income per capita is among the continent’s lowest) and lacks market access, meaning it can only borrow from the concessional windows of the World Bank and the African Development Bank Group. By contrast, Gabon does not heavily rely on multilateral development funding and gets a high share of funding from the capital markets relative to regional peers.

The exception is BOAD, the regional MDB of the eight-country West African Economic Monetary Union (WAEMU), with lending operations concentrated in WAEMU countries, including Niger.

The sanctions imposed by the Economic Community of West African States (ECOWAS) countries on Niger include a freeze of its sovereign assets at the regional central bank. Niger is therefore unable to repay any foreign creditor, including BOAD. Comparable financial sanctions were imposed on Mali in January 2022 and the sovereign was unable to service debt to MDBs until the sanctions were lifted in July 2022. If the ECOWAS sanctions on Niger led to payment delays by more than six months, we would consider an MDB’s exposure to Niger non-performing (consistent with our default criteria).

BOAD’s rating is driven by support from its shareholders and its standalone credit profile (SCP), both assessed at ‘bbb’. The rating would be resilient to a potential significant increase in non-performing loans (NPLs) if we considered the exposure to Niger non-performing. In this scenario, BOAD’s SCP would be likely to be revised downwards. This would not lead to changes in BOAD’s Issuer Default Rating because our support assessment would be unchanged. But its vulnerability to future shocks would increase as under Fitch’s criteria the uplift from the support is capped at three notches above the SCP.

Banque d'investissement et de developpement de la CEDEAO (EBID, B/Stable) has the second-largest exposure to Niger (1.7% of loans). Its rating is much lower than BOAD’s and already factors in a high level of NPLs (7.5% at end-2022). It would not be affected by an NPL increase of this size.

The experience of Mali in 2022 suggests that once the sanctions are lifted, and a sovereign regains access to its assets, it may resume payment to MDBs, in line with their preferred creditor status. Many countries in sub-Saharan Africa have limited access to financing and therefore strong incentives to remain current with MDBs as this is a condition for obtaining financial inflows. Burkina Faso is another country where loan repayments to MDBs were not interrupted following a military coup (although no financial sanctions were imposed due to the coup).

The military coup in Gabon (not part of ECOWAS) has not led to financial sanctions and Fitch expects the sovereign to continue to service its debt to MDBs as long as this remains the case. Gabon is part of the Economic and Monetary Community of Central Africa and the Economic Community of Central African States, which have no recent record of imposing sanctions that could affect debt payments. African Development Bank (AAA/Stable) has the highest exposure to the Gabonese sovereign (2.1% of its loans).