Niger, which is located in the heart of the Sahel, has a poorly diversified economy, with agriculture accounting for 40% of its GDP. More than 10 million people (41.8% of the population) were living in extreme poverty in 2021.
Niger is grappling with an influx of refugees fleeing conflicts, particularly in Nigeria and Mali. In March 2022, the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) identified approximately 250,000 refugees and more than 276,000 displaced persons in the country.
Political Context
Mohamed Bazoum, the candidate of the party in power, was elected president in elections held in December 2020 and February 2021, marking the first democratic transfer of power in the country’s history.
Niger is facing a security crisis in the areas bordering Nigeria, Burkina Faso and Mali, where armed groups carry out repeated attacks against the security forces and civilians. A state of emergency was declared in the Diffa, Tahoua, and Tillaberi regions.
Economic Overview
A combination of health, climate, and security shocks and crises has hampered the growth of Niger’s economy which, after growing by 5.8% in 2019, slowed to 3.6% in 2020 and could fall back below 1.5% in 2021, a significant deterioration compared to the initial projection of 5.5%. This poor performance is due to the slowdown in cereal production. Despite the high degree of uncertainty, growth could reach 10% by 2024 thanks to the boom in oil production.
Inflationary pressures persisted in 2021 with rising food prices, especially of cereals, the result of the decline in local production and in yields due to rainfall deficits of more than 78% and to the insecure environment and the suspension of cereal exports by neighboring countries. Average annual inflation reached 3.8% in 2021, compared to 2.9% in 2020, well above the 3% limit set by the WAEMU Commission. In the medium term, inflation is expected to fall back below the 3% target as food and energy prices normalize.
Covid-19 and security spending has reduced fiscal space and increased debt vulnerability. Countercyclical fiscal policy to mitigate health and security shocks has led to an increase in public spending and a fiscal deficit above the WAEMU norm of 3% of GDP. This deficit, financed mainly by grants and loans, has implications for the country’s debt level, which was more than 50% of GDP in 2021. As financing of the State budget is highly dependent on non-domestic resources (grants and loans), which may be subject to uncertainties due to shocks, the government must pursue fiscal consolidation measures. There is also an urgent need for the government to work with development partners to develop a strategy for the optimal management of the oil windfall.
Niger must address a number of the negative constraints if it hopes to reduce its structural fragility and achieve the sustained pace of economic growth needed to reduce development gaps. The pace and trajectory of recovery will depend on climate shocks, resilience to health shocks, and security-related developments at the domestic and regional levels. The country’s economy is vulnerable to climate change and its population, more than 70% of whom work in subsistence agriculture, is affected by volatile weather conditions. Growing domestic insecurity and regional political instability have a direct or indirect impact on overall economic performance, public finances, access to markets and basic services, as well as with respect to missed educational opportunities and growing social tensions.
Last Updated: Apr 13, 2022
