• BCEAO has ended its special accounting treatment for Niger’s government bonds, effective April 15, 2025.

• This move threatens banks in the West African Monetary Union (WAMU), many of which are heavily exposed to Niger's debt, which represented 9% of debt issued in the region.

• The end of the exemption could force several banks to adjust their capital buffers and provisions.

The Central Bank of West African States (BCEAO) has ended the special accounting treatment applied to Nigerien government securities, effective today April 15, 2025. The move could significantly affect banks in the West African Monetary Union (WAMU), many of which are heavily exposed to Nigerien debt. According to UMOA-Titres, Niger accounts for 9% of the region’s outstanding debt issued by auction.

The derogation was introduced in January 2024, following the coup and regional sanctions. It allowed banks to treat Nigerien bonds as performing assets, even in the event of payment delays.

With the end of this regime, banks must now apply prudential instruction no. 026-11-2016 to Nigerien sovereign bonds. Under this rule, any payment overdue by more than 180 days must be reclassified as a non-performing loan, with full depreciation of unpaid interest. Although capital depreciation remains optional for WAMU member states, the risk is real. Several banks will have to increase provisions and, in some cases, adjust their capital, a financial consultant said.

Once an exposure to Niger is reclassified as doubtful, all related positions—bonds, loans, and off-balance-sheet commitments—must also be downgraded.

The numbers highlight the scale of the issue. As of December 31, 2024, Niger’s outstanding auctioned debt stood at CFA1,577 billion ($2.71 billion). By the end of March 2025, it had reached CFA1,668.29 billion. More than CFA1,200 billion is held by banks and investors based in other WAMU countries. These bonds have an average maturity of about two years.

The most exposed countries are Burkina Faso (CFA277 billion), Senegal (CFA294 billion), and Côte d’Ivoire (CFA264 billion). Benin and Togo also hold CFA160 billion and CFA166 billion, respectively. With nearly 80% of Nigerien debt held outside the country, the end of the special treatment increases the prudential risk for banks in Abidjan, Dakar, Ouagadougou, and Cotonou.

The return to normal accounting rules could weigh on banks’ 2025 earnings in the sub-region. With risk costs expected to rise and solvency ratios under pressure, many lenders may struggle to keep up with future government fundraising on the regional market. Several sources told Ecofin Agency that Niger has yet to settle all its arrears.

Nigerien banks, already under strain, are the most exposed. Local banks hold around CFA327 billion in Treasury securities—20.75% of the country’s auctioned debt. According to the IMF, four out of fourteen banks in the country no longer meet minimum capital requirements, and the non-performing loan ratio has climbed above 24%, more than twice the WAMU average. The environment remains tight: liquidity is limited, country risk is high, and reliance on sovereign debt is growing.

The most recent auction, held on April 10, confirms investor wariness. The Nigerien Treasury raised just CFA37.3 billion out of a CFA50 billion target. The 364-day bills cleared at 10.28%, up from 9.66% the previous week. This spike in short-term rates shows investors want higher compensation for immediate risk—reflecting growing doubts about Niger’s liquidity. For comparison, Côte d’Ivoire raised CFA154 billion just two days earlier, with a 364-day yield of 6.60%—a 368 basis-point spread.

Another red flag is the shift in investor base. In 2023, about 66.65% of Nigerien debt was held by investors outside the country. That figure rose to 67.26% in 2024. But the April 10 auction marks a break. This time, Nigerien investors—mainly local banks—took up 77.4% of the CFA37.28 billion raised, or about CFA28.8 billion. That’s unusual for a country that has long benefited from the regional nature of the market and the strong demand from Ivorian, Beninese, Burkinabe, and Senegalese investors.

While the IMF remains optimistic with a growth forecast of 7.9% in 2025, driven by oil production and a recovery in trade with Benin, disruptions in the pipeline, geopolitical tensions, and a debt service exceeding CFA272 billion in April continue to threaten the country’s fiscal stability.

Another concern is the average maturity of Niger’s debt, estimated at just 2.03 years, which increases the country’s vulnerability in the current environment. This short- and medium-term debt structure requires frequent refinancing at a time when investor confidence is declining and interest rates on short-term bonds exceed 10%.

In a tight liquidity environment, this setup increases pressure on already fragile local banks and limits the Treasury’s ability to manage potential debt spikes. Niger, which raised CFA278 billion in the first quarter, plans to raise CFA285 billion in the second quarter, but it also faces significant repayments: CFA272 billion in April, CFA33 billion in May, and nearly CFA112 billion in June. With a small investor base and weak local banks, Niger’s Treasury has very little room to maneuver.

Fiacre E. Kakpo