(Bloomberg) -- Niger has missed a growing number of bond payments due to sanctions triggered by its military coup in July, potentially threatening the financial stability of banking in West Africa.

Niger was forced to forgo a $38.7 million payment on a commercial bond, bringing the total missed principal and interest payments since the putsch to $485 million, Moody’s Investor Service said in a note, citing a Jan. 16 statement by the regional market regulator UMOA-Titres.

“The missed payments pose significant tail risks for regional banks’ asset quality, profitability and capital,” Moody’s wrote. “If the payment arrears, which began 31 July, persist for more than six months, regional banks would likely have to classify their exposure to Nigerien government securities as nonperforming.”

Days after the July 26 coup, West Africa’s economic bloc suspended all commercial and financial transactions between member states and Niger, effectively preventing transfers to creditors outside the country. A similar situation arose in neighboring Mali, after sanctions imposed on it because of a coup led it to miss debt payments in 2022.  

Read More: West Africa Bloc Threatens More Sanctions, Force Over Niger Coup

Moody’s estimates that Niger-based banks held around $543 million in Nigerien sovereign debt, or about 14% of their assets, by November. The banks it rates with operations in Niger include Ecobank Transnational Inc., Oragroup SA, Attijariwafa Bank, Groupe Banque Centrale Populaire and Bank of Africa, it said.

While the risk exists that Nigerian holdings will have to be classified as non-performing, Moody’s saw that situation being avoided.

“We would expect regulatory forbearance to preclude the need for regional banks to book elevated provisioning against those exposures,” it said. “Still, there is a tail risk that they would have to book provisioning charges, which would materially weigh on their asset quality, profitability and capitalization.”

Nigerien securities may also cease to be eligible as collateral at the regional central bank, though so far it’s been accepting the bonds and “would likely provide some liquidity to Nigerien banks by accepting other regional sovereign debt instruments,” it said.

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