Niger is a large landlocked country of 1.27 million square kilometers and a population (around 16 million) that is growing at one of the fastest rates in the world (3.4 % per year). Niger is prone to political instability and natural crises - notably droughts, floods and locust infestation - all contributing to chronic food insecurity. The poverty rate, at 56% of the population, makes Niger one of the world’s poorest countries; its per capita income, US$360, puts it nearly at the bottom of the United Nations Development Program (UNDP) Human Development Index (167th out of 169 countries in the 2010 HDI). Niger’s social indicators have improved significantly over the past two decades but remain low. HIV/AIDS prevalence has remained at 0.7%, one of the lowest in sub-Saharan Africa. Progress toward the Millennium Development Goals (MDGs) is a main priority of the government, though most of them remain out of reach.
Niger returned to political stability in April 2011 after 13 months of military transition. After the country experienced a decade of relative equilibrium under Mamadou Tandja (president of Niger from 1999 to 2010), his efforts to seek constitutional changes allowing him to run for a third term led to a political crisis. The turmoil ended in a coup in February 2010. Subsequently, Niger was ruled for 13 months by a transitional government that adopted a new constitution by referendum. A series of local, legislative and presidential elections, generally considered fair and transparent, paved the way for a return to democracy. Mahamadou Issoufou of the Socialist Party was elected president, and a new government was formed in April 2011. In accordance with the constitution, the Economic, Social and Cultural Council and the High Court of Justice were established.
Macro Economic Context
In 2013, economic growth decelerated to 3.6%, on account of poor rains, following an exceptional agricultural harvest and the inception of oil production in 2012. Mining activities and services also continued to expand in 2013. Consumer price inflation, which reached a record-low 0.5% in December 2012, with abundant food supply, started to rebound in 2013 as food prices started to increase, but remained contained overall below 3%.
Being part of a monetary union with fixed peg to the Euro, Niger’s economic policy is anchored around the maintenance of a moderate fiscal deficit of around 3% of GDP, to be financed through non concessional external borrowing and restrained domestic and regional financing. Strict cash based management also allow authorities to promptly respond to shocks. In 2013, higher than anticipated expenditures (wage arrears clearance, health and education goods and services, and security expenditures) and lower than anticipated non tax revenue were offset with cuts in investment expenditures (including co-financed projects with donors) to maintain overall balance at 3% on commitment basis. Nonetheless, external debt sustainability, rated at moderate risk in 2013, should be soon re-assessed in light of two important transactions: the full inscription in 2014 in government’s books of the US$880 million previously borrowed in 2012 under partial guarantee by the SORAZ refinery to cover its equity share, and the US$1.0 billion borrowed by the government from the EXIM bank to finance development projects. The careful assessment of returns to these projects (power, irrigation) and related disbursements profiles will influentially determine future debt sustainability assessments.
In 2013, the current account deficit narrowed (from 15.4% of GDP in 2012 to 14.7%) as imports of equipment goods (and related foreign direct investments) declined with the completion of several mining investments initiated around 2010. But exports also suffered from security threats disrupting production and declining world prices. Coverage of imports of goods by foreign exchange reserves increased in 2013 (5.2 against 4.7 times in 2012). In forthcoming years, current account dynamics will continue to be mostly driven by large scale mining investments, projected to expand again in 2014-16, before tapering-off afterwards.
Outlook for 2014 foresees a rebound in GDP growth to long term trends, fiscal revenues and exports, and continued containment in overall fiscal deficit, once excluded the US$880 million on-lending to the SORAZ refinery. Security at borders (Mali, Libya, Nigeria), climatic and commodity-price shocks will nonetheless continue to expose Niger to significant macroeconomic risks. The pursuit of the Extended Credit Facility (ECF) program with the IMF (following the successful conclusion of second and third reviews in March 2014), as well as efforts from the government and its partners to strengthen security, diversify the economy (mining, electricity, irrigation) and reinforce social resilience will partially mitigate these risks.
Last Updated: Mar 27, 2014