Journal Issue


International Monetary Fund
Published Date:
December 2011
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1. Niger’s three-year program supported by the Extended Credit Facility (ECF) expired in June 2011. Program implementation had initially been satisfactory, but was interrupted by the military coup in February 2010. Following the recognition of the transitional government in September 2010, staff resumed normal engagement with the authorities; but efforts to complete further reviews under the ECF were constrained by the complex political situation. Relations with donors began to normalize in late 2010.

2. A democratically elected government took office in April 2011. The new government’s priorities include a strong commitment to face rising security threats in the region, accelerate economic development, reduce corruption, and improve governance in the mining sector. The authorities have expressed a strong interest in entering a new ECF-supported arrangement.

3. The last Article IV Consultation was conducted in December 2008. The follow-up on recommendations is summarized in Box 1.

Box 1.Status of Selected 2008 Article IV Recommendations

In the Article IV Consultation conducted in December 2008, policy discussions focused on medium-term growth prospects, the impact of a possible scaling up of aid, and the fallout of the financial crisis. Concerning the specific recommendations:

  • • The authorities made progress in improving public financial management. In line with staff’s recommendation, they started preparing the budget in the context of a medium-term fiscal framework, aligned with PRSP priorities. They also improved the budget preparation and implementation process,

  • • Some measures to improve the business climate were introduced, including the reduction of fees for registering a new enterprise. They also reduced the corporate profit tax rate from 35 percent to 30 percent.

  • • Debt management was strengthened, with the preparation of periodic analyses of recent borrowing and prospects.

  • • Staff advised the authorities to be ready to raise petroleum product retail prices if needed, to protect revenues. The government followed up in 2010 and 2011, but price adjustments were discontinued in September 2011.

  • • At the time, the authorities committed to ensuring that the sale of petroleum to the new refinery (Soraz) and of refined products would be done on commercial terms.


A. Developments in 2010 and 2011

4. Following a year of serious food shortages and stagnating growth, economic activity recovered quickly in the second half of 2010, thanks to an excellent harvest and the expansion of trade and transport related to agriculture. For the year as a whole, GDP growth reached 8 percent, following a contraction of almost 1 percent in 2009. The recovery in economic activity was also supported by investments in an oil project and new uranium mines (Figure 1 and Table 1).

Figure 1.Niger: Main Economic Developments, 2008–11

Sources: Nigerien authorities, and IMF staff estimates.

Table 1.Niger: Selected Economic and Financial Indicators, 2009-16
(Annual percentage change, unless otherwise indicated)
National income and prices
GDP at constant prices-
Non-agricultural GDP at constant prices5.50.77.617.
Non-oil and mineral GDP5.
GDP deflator4.
Consumer price index
Annual average1.
End of period-
External sector
Exports, f.o.b. (CFA francs)
Of which: non-uranium exports31.0-3.315.454.821.
Imports, f.o.b (CFA francs)40.24.719.617.0-0.3-
Export volume13.60.012.534.413.111.912.88.9
Import volume35.3-10.323.726.2-3.0-
Terms of trade (deterioration -)3.9-3.68.712.4-
Government finances
Total revenue-
Total expenditure and net lending11.3-
Of which: current expenditure0.021.814.8-1.921.514.112.36.3
Of which: capital expenditure25.1-29.543.186.711.
(Annual change as percent of beginning-of-period)
Money and credit
Domestic credit41.09.111.413.610.413.110.09.2
Credit to the government (net)28.91.4-0.4-
Credit to the economy12.17.711.818.29.412.011.513.8
Net domestic assets41.21.611.413.610.413.110.09.2
Broad money18.322.
Velocity of broad money (in percent)
(Percent of GDP, unless otherwise indicated)
Government finances
Total revenue14.714.215.117.618.518.819.519.8
Total expenditure and net lending24.621.526.228.930.831.231.230.5
Current expenditure12.113.514.312.013.414.014.414.1
Capital expenditure12.58.010.616.917.417.216.816.6
Basic balance (excluding grants)1-4.1-3.0-4.0-0.7-1.5-1.5-0.8-0.1
Overall balance (commitment basis, including grants)-5.5-2.5-3.5-3.5-4.7-5.0-4.5-3.8
Gross investment33.045.938.934.929.126.726.426.3
Of which: non-government investment25.241.132.625.419.016.416.416.4
Change in stocks-
Gross national savings7.924.911.48.58.613.214.015.9
Of which: non-government1.619.
Domestic savings5.717.
External current account balance (including grants)-25.0-21.0-27.5-26.3-20.5-13.4-12.4-10.4
Debt-service ratio as percent of:
Exports of goods and services2.
Government revenue3.
NPV of external debt10.911.825.523.623.423.423.523.8
Foreign aid6.
(Billions of CFA francs)
GDP at current market prices2,4812,7222,9463,4343,7254,0784,4474,852
Overall balance of payments-89.899.1-19.417.9-14.8-11.134.2-2.2
Sources: Nigerien authorities; and IMF staff estimates and projections.

Revenue minus expenditure net of externally financed capital expenditure.

Sources: Nigerien authorities; and IMF staff estimates and projections.

Revenue minus expenditure net of externally financed capital expenditure.

5. Despite the fallout from the Libyan crisis, growth remained strong in the first half of 2011. The expansion of mining, trade, and services offset the impact of declining remittances following the return of tens of thousands of Nigerien workers from Libya. Although agricultural production in 2011 is projected to be well below the 2010 bumper crop, GDP growth could still reach almost 4 percent in 2011. Notwithstanding the disappointing harvests in some parts of the country in recent months, the impact of rising global food prices on inflation has remained modest (Figure 1).

6. Fiscal performance was broadly on track in 2010, with the basic fiscal deficit reaching 3 percent of GDP.1 Revenue growth was supported by the widening of the tax base and efforts to improve taxpayers’ compliance, while total expenditure was kept in line with program objectives. However, the composition of expenditure was negatively affected by rising outlays on ill-targeted fuel subsidies (Figure 2 and Tables 2a and 2b).

Figure 2.Niger: Fiscal Developments, 2009–11

Source: Nigerien authorities; and IMF staff estimates

Table 2a.Niger: Financial Operations of the Central Government, 2009-16
(Billions of CFA francs)
Total revenue363.6385.6438.9445.0606.0687.7765.0865.8958.6
Tax revenue343.0361.8403.8423.6571.8650.9725.2824.8915.6
Nontax revenue20.623.835.021.434.236.839.841.043.1
Total expenditure and net lending609.9584.1764.7770.9994.21146.91270.61387.21482.2
Of which: domestically financed464.5466.4557.9564.1629.1744.7824.5903.2964.1
Total current expenditure300.8366.4414.2420.4412.2500.9571.4641.9682.5
Budgetary expenditure276.5346.3384.3390.5381.9466.5532.1597.1633.6
Wages and salaries93.6103.2126.7126.7141.1160.1183.3209.0228.1
Materials and supplies83.994.399.299.2110.0121.0133.1150.1153.0
Subsidies and transfers97.2135.5147.7147.7119.5170.7199.2219.6232.2
Of which: fuel subsidies13.530.333.033.00.0
Of which: external debt4.
Adjustments and fiscal expenditures-
Special accounts expenditure124.320.129.929.930.434.339.344.848.9
Capital expenditure and net lending309.1217.7350.5350.5581.9646.1699.2745.3799.7
Capital expenditure309.1217.7311.7311.7581.9646.5699.6747.6803.9
Domestically financed163.7100.0104.8104.8216.9244.2253.4263.6285.8
Externally financed145.4117.7206.8206.8365.0402.2446.2484.0518.2
Of which:grants105.083.0145.8145.8199.3214.1232.2251.9271.0
Net lending0.00.038.938.90.0-0.4-0.4-2.3-4.2
Overall balance (commitment)-246.3-198.5-325.9-325.9-388.2-459.2-505.7-521.4-523.6
Basic balance2-100.9-80.8-119.0-119.1-23.2-57.0-59.5-37.4-5.4
Change in payments arrears and float-13.9-12.4-10.0-8.0-10.0-15.0-15.0-15.0-15.0
Overall balance (cash)-260.2-210.9-335.9-333.9-398.2-474.2-520.7-536.4-538.6
External financing146.2157.4340.8340.8430.1467.2511.6549.5585.1
Budget financing5.947.
Project financing105.083.0145.8145.8199.3214.1232.2251.9271.0
Of which: Budget financing0.00.034.534.510.
Debt relief (incl. debt under discussion)
Domestic financing114.053.5-4.8-6.8-
Banking sector115.224.8-9.3-9.3-
Statutory advances-0.5-4.2-1.8-1.8-5.4-9.1-6.8-6.9-5.2
Deposits with BCEAO113.318.1-7.9-7.9-
Government securities net8.
Nonbanking sector-1.328.84.52.5-
Financing gap (+)
Memorandum items:
Natural resources revenue43.645.555.455.4129.5162.6188.4237.3257.7
Of which: Oil revenue0.059.071.572.573.682.5
Of which: Uranium revenue43.645.555.455.470.491.1115.8163.7175.3
Non-natural resources revenue320.0340.1383.4389.6476.5525.1576.6628.5700.9
Deposits with BCEAO (months of domestically financed expenditure)
Sources: Nigerien authorities; and IMF staff estimates.

The special accounts include the financing of the National Retirement Fund, Priority Investments Fund, Fund for Continuous Professional Development, and maintenance of aircrafts.

Revenues minus expenditure net of externally financed capital expenditure.

Sources: Nigerien authorities; and IMF staff estimates.

The special accounts include the financing of the National Retirement Fund, Priority Investments Fund, Fund for Continuous Professional Development, and maintenance of aircrafts.

Revenues minus expenditure net of externally financed capital expenditure.

Table 2b.Niger: Financial Operations of the Central Government, 2009-16
(In percent of GDP)
Total revenue14.714.214.915.117.618.518.819.519.8
Tax revenue13.813.313.714.416.617.517.818.518.9
Nontax revenue0.
Total expenditure and net lending24.621.526.026.228.930.831.231.230.5
Of which: domestically financed18.717.118.919.118.320.020.220.319.9
Total current expenditure12.113.514.114.312.013.414.014.414.1
Budgetary expenditure11.112.713.013.311.112.513.113.413.1
Wages and salaries3.
Materials and supplies3.
Subsidies and transfers3.
Of which: fuel subsidies0.
Interest, scheduled0.
Of which: external debt0.
Adjustments and fiscal expenditures-
Special accounts expenditure1.
Capital expenditure and net lending12.58.011.911.916.917.317.116.816.5
Capital expenditure12.58.010.610.616.917.417.216.816.6
Domestically financed6.
Externally financed5.
Of which: grants4.
Net lending0.
Overall balance (commitment)-9.9-7.3-11.1-11.1-11.3-12.3-12.4-11.7-10.8
Basic balance-4.1-3.0-4.0-4.0-0.7-1.5-1.5-0.8-0.1
Change in payments arrears and float-0.6-0.5-0.3-0.3-0.3-0.4-0.4-0.3-0.3
Overall balance (cash)-10.5-7.8-11.4-11.3-11.6-12.7-12.8-12.1-11.1
External financing5.95.811.611.612.512.512.512.412.1
Budget financing0.
Project financing4.
Of which: budget financing0.
Debt relief (incl. debt under discussion)
Domestic financing4.62.0-0.2-0.2-
Banking sector4.60.9-0.3-0.3-
Statutory advances0.0-0.2-0.1-0.1-0.2-0.2-0.2-0.2-0.1
Deposits with BCEAO4.60.7-0.3-0.3-
Government securities net0.
Nonbanking sector-
Financing gap (+)
Memorandum items:
Natural resources revenue1.
Of which: Oil revenue1.
Of which: Uranium revenue1.
Non-natural resources revenue12.912.513.013.213.914.
Deposits with BCEAO (months of domestically financed expenditure)
Sources: Nigerien authorities; and IMF staff estimates.
Sources: Nigerien authorities; and IMF staff estimates.

7. Budget implementation remained satisfactory through August 2011, with revenues exceeding targets and expenditure in line with projections. In May 2011, the newly-elected government adopted a revised budget, aiming for a basic fiscal deficit of 4 percent of GDP. On current trends, it is expected that this objective will be achieved. In the revised budget, the government also committed to phasing out the fuel subsidies by 2012. Since June 2011, substantial progress has been made in reducing outlays on the subsidy.

8. Staff’s estimates, based on the methodologies of the Consultative Group on Exchange Rate Issues (CGER) approach, indicate that the real effective exchange rate (REER) is in line with fundamentals (Appendix I). The REER depreciated by about 7 percent in 2010 (annual average), mainly driven by a depreciation of the nominal effective exchange rate. The country’s external competitiveness is, however, largely hampered by non-price factors, especially a weak business environment.

9. Niger meets most of the convergence criteria of the WAEMU. It does not meet the targets on the current account deficit and the basic fiscal balance, although both balances are sustainable given the volume of foreign aid and, for the current account, also FDI inflows. It also does not meet the tax revenue target (Text Table 1).

Text Table 1.Niger: WAEMU Convergence Criteria, 2010–12
Primary criteria(Ratios in percent)
Basic fiscal balance/GDP>=0-3.0-4.0-0.7
Inflation (annual average percentage change)<=30.93.72
Total nominal debt/GDP<=7024.532.132.3
Domestic arrears accumulation (CFAF billions)<=0-12.4-10-10
External arrears accumulation (CFAF billions)<=
Secondary criteria
Wages/tax revenue< = 3528.530.424.7
Domestically financed investment/tax revenue>=2027.620.837.9
Current acct. deficit, exc. current official transfers/GDP<=5-26.9-27-29.7
Tax revenue/GDP> = 1713.314.416.6
Sources: Nigerien authorities; and IMF staff estimates and projections.
Sources: Nigerien authorities; and IMF staff estimates and projections.

10. The authorities have made important progress with their reform agenda since mid-2010. Following initial delays, the authorities have moved to strengthen public financial management, budget planning, and debt management; and to enhance transparency in natural resources management.

B. The Medium-Term Outlook

11. Thanks to investments in the oil and mining sectors, medium-term prospects are favorable. A new, relatively small uranium mine began operating in 2011. Two large projects are expected to come onstream in the next few years: an integrated oil project (including an oil field and a refinery) in 2012; and a new uranium mine, in 2014 (Box 2). As a result, oil and mining exports are projected to triple between 2011 and 2016, while total government revenue from natural resources is expected to increase by about 3½ percent of GDP (Figure 3 and Tables 2a and 2b).

Figure 3.Niger: Medium Term, 2011–16

Source: Nigerien authorities; and IMF staff estimates

Box 2.Large Projects in Niger

Uranium: The new Azelik uranium mine, developed with a Chinese investor, began operating in 2011. It is expected to reach a maximum capacity of 700 tons per year in 2012. The new Imouraren mine, developed with a French investor, will reach its maximum capacity of 5,000 tons per year in 2016, doubling current total production.

Agadem integrated oil project: Niger will start producing oil in 2012. The project, developed in collaboration with a Chinese investor, includes the Agadem oil field, a refinery in Zinder, and a 460 kilometer pipeline linking the two sites. The field’s output capacity is estimated at 20,000 barrels a day, to be sold exclusively to the refinery. One third of the refinery’s output will be domestically marketed by the public oil company (SONIDEP), and the remainder will be exported. The field is likely to yield more crude oil, which would be exported.

12. Given the coming onstream of the oil project, real GDP growth could reach 14 percent in 2012. Assuming a normal harvest, economic activity in sectors other than natural resources is projected to expand by about 6 percent in 2012 and to remain at elevated levels over the medium term (Table 1). With the expansion of natural resource exports, the current account deficit of the balance of payments is projected to decline in the coming years, from about 27½ percent of GDP in 2011 to 10½ percent in 2016. Inflation is expected to remain well under control.

13. Niger’s prospects are subject to various risks. The country is very vulnerable to exogenous shocks, including weather-related recurrent food crises and fluctuations in commodity prices. The deteriorating security situation in the region is another risk factor.


The policy discussions with the authorities focused on the following main themes: (i) promoting inclusive economic growth, diversification, and job creation; (ii) creating a fiscal strategy to deal with exogenous shocks; (iii) managing natural resources, including pricing policy in the oil sector; (iv) developing a budgetary framework for 2012 and beyond; (v) strengthening budget execution and revenue performance; (vi) maintaining debt sustainability; and (vii) strengthening the financial sector.

A. Promoting Inclusive Economic Growth, Diversification, and Job Creation

14. Niger faces daunting development challenges (Table 5). With per capita GDP at US$381, more than 40 percent of its population lives on less than $1.25 a day. The primary sector, the main engine of the economy, is subject to frequent climatic shocks, especially drought, which cause food insecurity. Rapid population growth and increased instability in Northern Africa complicate the pursuance of a long-term development strategy.

Table 3.Niger: Balance of Payments, 2009-16
(Billions of CFA Francs; unless otherwise indicated)
Current account balance-621.3-570.9-810.9-903.9-763.7-546.7-552.3-504.5
Balance on goods, services and income-692.6-796.9-965.9-1059.9-927.2-719.0-734.0-696.5
Balance on goods-376.5-378.6-452.1-405.1-300.6-151.8-88.2-37.4
Exports, f.o.b470.7508.7608.9836.6936.91070.11248.51364.2
Other products275.6266.4307.6318.3339.3372.4410.7486.4
Imports, f.o.b847.2887.31061.01241.61237.51221.91336.71401.5
Food products206.4243.5229.4236.0238.5238.9240.2249.0
Petroleum products126.5143.5143.016.715.515.715.615.6
Capital goods301.5335.1355.6460.0435.6410.6467.3477.0
Other products212.7165.2332.9528.9547.9556.8613.6659.9
Services and income (net)-316.1-418.3-513.8-654.9-626.6-567.3-645.8-659.1
Services (net)-299.7-397.1-487.2-560.1-486.1-422.6-446.1-422.0
Income (net)-16.3-21.2-26.6-94.8-140.5-144.6-199.7-237.1
Of which: interest on external public debt-4.8-3.8-6.4-6.9-7.3-8.1-9.0-10.0
Unrequited current transfers (net)71.2226.1155.0156.1163.4172.3181.7191.9
Private (net)53.972.937.538.842.
Public (net)17.3153.2117.4117.3121.4126.3131.5137.1
Of which: grants for budgetary assistance5.947.
Capital and financial account538.6670.0791.5921.7748.9535.6586.5502.3
Capital account120.395.8162.8218.4234.6254.4275.8296.8
Private capital transfers11.112.813.916.217.519.220.922.8
Project grants105.583.0145.8199.3214.1232.2251.9271.0
Nonproduced, nonfinancial assets0.
Debt cancellation3.
Financial account418.3574.2628.6703.3514.3281.2310.7205.6
Direct investment345.4495.3478.3509.1306.547.155.4-71.7
Portfolio investment7.417.
Other investment65.561.0149.1189.8203.3229.7250.9272.4
Public sector (net)32.626.9115.6157.3180.8207.2225.4241.9
Loans for budgetary assistance3.30.034.510.
Project loans40.434.799.9165.8188.1214.0232.2247.2
Other (net)32.934.133.532.522.522.525.530.5
Errors and omissions-
Overall balance-89.899.1-19.417.9-14.8-11.134.2-2.2
Net foreign assets (BCEAO)186.4-102.816.2-20.511.88.1-37.2-0.8
Net use of Fund resources2.47.30.3-3.2-4.1-
Financing gap0.
Memorandum items:
Current Account (in percent of GDP)-25.0-21.0-27.5-26.3-20.5-13.4-12.4-10.4
Current Account (excluding grants; in percent of GDP-25.7-26.9-31.5-29.7-23.8-16.5-15.4-13.2
Trade balance (in percent of GDP)-15.2-13.9-15.3-11.8-8.1-3.7-2.0-0.8
Overall balance (in percent of GDP)-3.63.6-0.70.5-0.4-
Net Foreign Assets (months of imports)
GDP (in CFAF billions)2,481.12,721.52,945.93,434.33,725.24,077.64,446.74,852.1
Sources: Nigerien authorities; and IMF staff estimates and projections.

Includes net use of the CFA F counterpart of the general SDR allocation on-lent by the BCEAO in September 2009.

Sources: Nigerien authorities; and IMF staff estimates and projections.

Includes net use of the CFA F counterpart of the general SDR allocation on-lent by the BCEAO in September 2009.

Table 4.Niger: Monetary Survey, 2009-16
(Billions of CFA Francs; end-of-period)
Net foreign assets193.8292.9274.7293.1279.3269.2304.4303.2
Commercial banks-30.40.3-1.7-3.7-5.7-7.7-9.7-11.7
Net domestic assets278.5286.2352.2437.7513.4617.3706.3799.7
Domestic credit311.4354.3420.3505.8581.5685.4774.4867.8
Net bank claims on government0.57.25.1-23.5-16.4-7.3-20.3-66.8
Of which: statutory advances31.327.025.323.317.814.50.00.0
Commercial banks-20.3-33.3-30.8-30.8-30.8-30.8-30.8-30.8
Credit to the economy310.9347.2415.2529.3597.9692.7794.7934.6
Other items, net-32.9-68.1-68.1-68.1-68.1-68.1-68.1-68.1
Money and quasi-money472.3579.1626.9730.8792.7886.61010.81102.9
Currency outside banks187.0234.9263.7296.6333.7382.1437.5501.0
Deposits with banks285.3298.6358.1530.6614.2723.7772.3888.2
(Annual change, in percent of beginning-of-period broad money, unless otherwise indicated)
Net foreign assets-22.821.0-3.12.9-1.9-1.34.0-0.1
Commercial banks-4.56.5-0.3-0.3-0.3-0.3-0.2-0.2
Net domestic assets41.21.611.413.610.413.110.09.2
Domestic credit41.09.111.413.610.413.110.09.2
Net bank claims on the government28.91.4-0.4-
Of which: statutory advances-0.5-0.9-0.3-0.3-0.8-0.4-1.60.0
Commercial banks0.0-
Credit to the economy12.17.711.818.29.412.011.513.8
Other items, net0.2-
Broad money18.322.
Memorandum items:
Velocity of broad money
(in percent)
Credit to the economy
(Change, in percent)18.411.719.627.513.015.914.717.6
(in percent of GDP)12.512.814.115.416.117.017.919.3
(in percent of non-agricultural GDP)17.318.919.720.821.422.423.324.9
Sources: BCEAO; and IMF staff estimates and projections.
Sources: BCEAO; and IMF staff estimates and projections.
Table 5.Niger: Millennium Development Goals
Goal 1: Eradicate extreme poverty and hunger
Employment to population ratio, 15+, total (%)5959606060
Employment to population ratio, ages 15-24, total (%)5051515152
GDP per person employed (constant 1990 PPP $)1,2861,0119791,0841,170
Income share held by lowest 20%76..68
Malnutrition prevalence, weight for age (% of children under 5)41..4440..
Poverty gap at $1.25 a day (PPP) (%)3039..2812
Poverty headcount ratio at $1.25 a day (PPP) (% of population)7378..6643
Goal 2: Achieve universal primary education
Literacy rate, youth female (% of females ages 15-24)....1423..
Literacy rate, youth male (% of males ages 15-24)....1452..
Persistence to last grade of primary, total (% of cohort)....697062
Primary completion rate, total (% of relevant age group)1613182940
Total enrollment, primary (% net)2324274254
Goal 3: Promote gender equality and empower women
Proportion of seats held by women in national parliaments (%)5..11212
Ratio of female to male primary enrollment (%)6063697280
Ratio of female to male secondary enrollment (%)3750606260
Ratio of female to male tertiary enrollment (%)13....3334
Share of women employed in the nonagricultural sector (% of total nonagr.employment)......25.436.1
Goal 4: Reduce child mortality
Immunization, measles (% of children ages 12-23 months)2540374773
Mortality rate, infant (per 1,000 live births)1441291078876
Mortality rate, under-5 (per 1,000)305274227187160
Goal 5: Improve maternal health
Adolescent fertility rate (births per 1,000 women ages 15-19)....219187152
Births attended by skilled health staff (% of total)15..1633..
Contraceptive prevalence (% of women ages 15-49)4..1411..
Maternal mortality ratio (modeled estimate, per 100,000 live births)1,4001,3001,100910820
Pregnant women receiving prenatal care (%)30..4146..
Unmet need for contraception (% of married women ages 15-49)19..1716..
Goal 6: Combat HIV/AIDS, malaria, and other diseases
Children with fever receiving antimalarial drugs (% of children under age 5 with fever)....4833..
Incidence of tuberculosis (per 100,000 people)125138152168181
Prevalence of HIV, total (% of population ages 15-49)
Tuberculosis case detection rate (%, all forms)5315283636
Goal 7: Ensure environmental sustainability
Forest area (% of land area)1.5..
Improved sanitation facilities (% of population with access)55799
Improved water source (% of population with access)3539424548
Net ODA received per capita (current US$)4929194031
Goal 8: Develop a global partnership for development
Debt service (PPG and IMF only, % of exports, excluding workers’ remittances)78863
Internet users (per 100 people)
Mobile cellular subscriptions (per 100 people)000217
Fertility rate, total (births per woman)88777
GNI per capita, Atlas method (current US$)300190170260340
GNI, Atlas method (current US$) (billions)
Gross capital formation (% of GDP)8.17.311.422.6..
Life expectancy at birth, total (years)4243465052
Literacy rate, adult total (% of people ages 15 and above)....929..
Trade (% of GDP)37.041.543.539.3..
Source: UN-stats 2011
Source: UN-stats 2011

15. The increase in oil and mining revenue will be critical for Niger’s development. If properly used, these resources could help promote inclusive and sustainable growth. The government adopted in 2011 an ambitious medium-term development plan, encompassing substantial increases in public investment in infrastructure, agriculture, health, and education, intending to increase Niger’s growth rate to at least 7 percent a year. Acknowledging that public security is crucial for economic development, the authorities are also stepping up measures to face rising security threats in the region.

16. Staff welcomed the growth strategy outlined in the government’s development program, but underlined the need to give more attention to policies aimed at improving the business climate. Private investment in the non-natural resource sector is very low. The World Bank’s 2011 Doing Business report for Niger has identified several areas where fundamental reforms are needed to make Niger a more attractive place to invest, including strengthening the judiciary system and fighting corruption, simplifying business regulations and procedures for international trade, and improving the efficiency of the tax and customs administrations (Appendixes I and II).

17. The authorities concurred with the need to step up efforts to improve the business climate. They pointed out that many elements of the government’s development plan would help improve the business climate, such as infrastructure investment, but acknowledged that this issue should receive more emphasis.

B. Fiscal Strategy to Deal with Exogenous Shocks

18. To deal with Niger’s vulnerabilities, staff suggested that the authorities consider creation of a fiscal buffer when the mining investments have been completed. A buffer would help the authorities to stabilize public expenditure and economic activity over the medium term, mitigating the negative effects shocks can have on employment, poverty, and other social indicators.

19. Staff discussed several possible options for a buffer. One option would be to estimate the cost of addressing a serious food crisis and build a buffer that would cover part of the financing needs. On the basis of the financing needs during the 2010 famine, preliminarily estimated at CFAF 100 billion, the authorities could consider accumulating a reserve of CFAF 20 billion a year (about ½ percent of GDP), steadily working toward a target. The buffer would be used during adverse shocks—primarily food crises, but also other shocks. Once the country has recovered from the shock, the buffer would be steadily replenished with additional resources at a pace of accumulation dependent on the initial level of the buffer. A second option would be to formulate the budget taking into account a moving average of past revenues from the petroleum and uranium sectors. When the actual revenue from natural resources is above the reference level, the extra amount of revenue would be saved. Withdrawals would be allowed when actual revenue falls below the reference level. A specific rule for accumulation and withdrawals could be supported by targeting the non natural resource balance.

20. Although the authorities concurred with the need to enhance their ability to respond to unforeseen events, they pointed to high financing needs related to their development plan. They argued that the creation of a fiscal buffer could be difficult to achieve, given the need to step up public investment and outlays for social programs. Staff took the view that in light of the rapid growth in natural resource revenue in the coming years, the creation of a fiscal buffer should not be incompatible with substantial increases in public investment and social spending.

C. Strengthening the Management of Petroleum and Mining Projects

21. Niger has made important progress in enhancing the transparency of the natural resource sector. The new Constitution, adopted in 2010, requires publication of all contracts for the exploration and exploitation of natural resources and payments to the state. Niger was recently declared compliant with the Extractive Industries Transparency Initiative (EITI).

22. The development of the petroleum and mining sector presents opportunities but also risks, especially because the state is involved directly in all projects. In addition to direct exposure as a shareholder, the state also carries risks as a result of the recent guarantee of 40 percent of a US$880 million loan (about 5 percent of GDP) to the oil refinery (Soraz), proportionate to the state’s participation in the company. The state has also assumed liability for a 650 million yuan (1½ percent of GDP) loan for the uranium mine that came onstream in 2011 (Box 3).

23. Staff urged the authorities to strengthen government oversight of the petroleum and mining sectors. In particular, staff recommended strengthening the functioning of the Interministerial Steering and Assessment Committee for the petroleum and mining sectors, which was set up in 2010 to deepen the analysis of the projects and ensure consistency of the government’s actions in this area. The authorities agreed that there was a need to enhance the monitoring and supervision of the mining sector. They requested more technical assistance to strengthen their capacity. This could be provided under the Managing Natural Resources Topical Trust Fund, for which Niger is eligible.

24. Staff advised the authorities to carefully consider the role of government equity in future projects. Equity ownership is not required for effective project monitoring, which could also be achieved through exercise of regulatory powers, such as a strong oversight by the Interministeral Steering and Assessment Committee and sufficient reporting requirements. An appropriate fiscal regime would allow the state to get an equitable share of revenue without the risks associated with participation in the projects.

25. In October 2011, the authorities concluded an agreement with the foreign investor in the petroleum sector on the pricing of crude oil for the refinery and refined products. To pass on part of the benefits of the new oil production to domestic consumers in the form of lower prices at the pump, the agreement plans ex-refinery prices of about 14 to 17 percent below import prices. The financial viability of the refinery is ensured because of a similar discount on the transfer price of crude oil. Staff noted that the agreed price structure would reduce revenue from the oil project for the state, and entail risks of informal exports of petroleum products to neighboring countries with higher pump prices. Regarding export production exceeding domestic consumption, staff encouraged the government to finalize export contracts as soon as possible.

Box 3.New Projects: Fiscal Terms and Financing Arrangements


Government revenue: The state will collect royalties, corporate income tax, a mining fee, and dividends as a shareholder in the new mines.

Financing: China’s Exim Bank has provided to the state a loan of 650 million yuan for the financing of the state’s 33 percent participation in the capital costs of the Azelik mine. The loan carries an interest rate of 1 percent, has a grace period of 5 years, and a maturity of 15 years.

The Imouraren mine is expected to get 1.4 billion euro in financing from an Areva affiliated company, covering the total capital investment in the mine. The loan is expected to carry an interest rate of Euribor+4.5 percent.


Government revenue: The state will receive from the upstream and pipeline royalties, a share of profit oil (which is deemed to meet income tax obligations) and an additional share of cost and profit oil as a 15 percent shareholder. The state is entitled to 40 percent of the Zinder refinery’s dividends. The state also received a US$300 million signature bonus in 2008. The Zinder refinery has a ten- year tax exemption in line with Niger’s fiscal regime for large projects.

Financing: The share of the state in the total capital cost of the oil field and pipeline has been financed by the Chinese partner. As of 2012, the government will forego its share of cost oil to repay the financing of its share. This “carried interest” arrangement is subject to an interest rate of Libor+3.5 percent a year.

Regarding the Zinder refinery, the first US$100 million was disbursed in 2009, of which the state provided US$40 million from its budgetary resources, and the Chinese partner the remaining US$60 million. In addition, the Chinese partner granted a US$880 million loan to the refinery, of which 40 percent (US$352 million) was guaranteed by the state.

Kandaji Dam

Government revenue: no direct revenue is expected

Financing: Several multilateral lending agencies participate in the concessional financing of the Kandaji Dam, together with the government. The government has so far provided 27 percent of the financing needs initially identified for the first phase of the project (US$367 million).

D. Budgetary Framework for the Medium Term and 2012

26. Staff proposed during the August mission a medium-term fiscal framework that would create room for increased development spending while maintaining debt sustainability. The rise in natural resources revenue in the coming years would allow the government to keep the basic fiscal deficit below 1½ percent of GDP in 2012–15, and move to small surpluses after 2016, when the new Imouraren uranium mine will have come fully onstream. At the same time, the framework expects a steady rise in public investment and social expenditure, taking into account the constraints to Niger’s administrative implementation capacity.

27. In early October, the government submitted a 2012 budget proposal to parliament that was substantially more expansionary than the discussed budgetary framework. The budget proposal planned a 61 percent spending increase compared with 2011, and a widening of the basic fiscal balance to 5½ percent of GDP. The authorities argued that the sharp expansion in expenditure and deficits were justified by Niger’s development needs. Staff pointed out that the revenue projections underlying the expenditure increase were overly optimistic, and that projected external financing would not be sufficient to cover the deficit.

28. During a new round of discussions in late October, the authorities agreed with staff advice on a revised budget proposal for 2012 broadly in line with the framework proposed in August. The revised budget proposal was subsequently presented to parliament to replace the earlier proposal. A key objective for 2012 is to build up the government’s cash balances to enhance resilience to exogenous shocks and help ensure a smooth execution of the budget. To achieve an increase in cash balances by CFAF 20 billion, the basic fiscal deficit will be kept below ¾ percent of GDP in 2012.

29. Government revenue is projected to rise by about 2½ percentage points of GDP, to about 17½ percent in 2012. This improvement is supported by higher revenue from natural resources, increases in various tax rates, the expiration of some exemptions, and the continued strengthening of the tax and customs administrations.

30. The favorable outlook for revenue growth creates significant space for increased development spending. In order to provide additional resources for development spending, the government intends to discontinue the fuel subsidy in January 2012. The budget plans a doubling of domestically financed capital expenditure compared with 2011.

E. Strengthening the Budget Process and the Revenue Effort

Budget Preparation and Execution

31. Staff welcomed progress made in strengthening budget processes in recent years. Staff discussed with the authorities the following priority reforms:

  • Medium-term planning: To better align the budget on development priorities, a medium-term fiscal framework for 2011-13 was used to guide the 2011 budget preparation. The methods used for revenue projections and the identification of projects financed from external resources could be improved, and the cost of programs should be better aligned to the medium-term expenditure framework.

  • Budget implementation: The authorities have made substantial progress in recent years in reducing delays in the release of budget allocations. Staff encouraged the authorities to avoid delays in 2012 by establishing a quarterly commitment plan for 2012, taking into account the seasonality of outlays as well as specific procurement plans of line ministries. In the course of the year, the quarterly projections should be adjusted on a monthly basis, and closely aligned with quarterly cash plans. In addition, it is important to simplify the expenditure chain and limit the use of exceptional procedures. The distinction between administrative and accounting phases of the expenditure chain could be further strengthened, and staff encouraged the authorities to continue to enhance the monitoring of expenditure flows, to reduce the time needed for the preparation of a monthly table of financial operations (TOFE). Staff pointed to the need to make further progress in the sharing of real time information on budget execution between the budget and treasury departments.

  • Cash Management: Staff encouraged the authorities to establish a quarterly cash plan for 2012 and to update the plan on a monthly basis. In addition, to facilitate tighter cash management, it will be important to reduce the large number of government accounts at commercial banks and begin the process of establishing a single treasury account.

32. The authorities concurred with the need to make further progress in these areas. They confirmed their intention to continue to strengthen medium-term budget planning, and had taken steps to ensure that the budget for 2012 would be executed on the basis of realistic quarterly commitment and cash plans. Also, they are well advanced in improving the monitoring of expenditure flows.

Tax Reforms and Strengthening Revenue Administration

33. Niger has made important progress in recent years in strengthening domestic revenue. Further strengthening of the tax and customs administrations remains a high priority for the authorities, as shown by the strengthening in 2011 of collaboration between the collection agencies and the introduction of modern technology by customs. Staff discussed with the authorities several other measures aimed at enhancing revenue collection, including better auditing of enterprises (including in natural resources); stricter controls on statutory exemptions and VAT refunds; and modernization of risk management in the tax and customs administrations. Staff encouraged the authorities to strictly enforce legislation that makes any exemption subject to prior approval by the minister of finance.

34. Staff welcomed the submission to parliament of a new Tax Code, which is an important step forward. In the short term, staff discussed with the authorities several possible measures to enhance the tax system:

  • Limit the scope of exemptions under the Investment Code. The total amount of tax exemptions granted in 2011 is projected at CFAF 149 billion (5 percent of GDP), most of which are related to the Investment Code. A recent FAD analysis of current beneficiaries under the code, including investors in the telecommunications sector, suggests that the code in its present form has only limited effectiveness in generating additional investment.

  • Review current regulations allowing foreign companies to give their Nigerian subsidiaries virtually all financing as debt. The very high share of debt financing in new petroleum and mining projects will reduce future tax liabilities for the investors.

  • Alternatively, introduce a limitation on the deductibility of interest expenses. In line with good practice in many advanced economies, interest deductions could be limited to a certain percentage of taxable income or linked to limitations for tax purposes on the capital structure and interest rates.

F. Maintaining Debt Sustainability

35. Debt ratios improved significantly after debt relief under the HIPC Initiative and the MDRI. At end-2010, public debt levels were moderate: total public debt (domestic and external) was about 24½ percent of GDP. The authorities made considerable efforts to establish a complete inventory of domestic debt. In addition, the signing in July 2010 of an agreement between Niger and the Central Bank of West African States (BCEAO) on the repayment of advances has clarified the financial position of the state vis-à-vis the central bank.

36. Debt exposure increased in 2011. The updated debt sustainability analysis shows a deterioration of debt ratios as a result of the government guarantee on the loan to the oil refinery (Soraz) and the contracting of a loan to finance the state’s share in the new uranium mine. As a result, Niger’s risk of debt distress has deteriorated.

37. In light of the increased vulnerabilities, staff underlined the need to continue to seek grant aid and concessional loans to finance public investment. Staff also encouraged the authorities to minimize the granting of state guarantees for new natural resource investment projects. It noted that funding of the new uranium mining project, expected to come onstream in 2014, will not benefit from such a guarantee.

38. While the monitoring of public debt has improved, further measures to strengthen debt management are warranted. In the medium term, consideration could be given to establishing a unit at the Ministry of Finance responsible for managing all internal and external debt. Also, the authorities should submit to the National Debt Management Committee all proposals for new borrowing and guarantees, including in natural resources, to ensure proper analysis of new financing proposals.

39. The authorities noted that the government borrowing projected in the updated debt sustainability analysis might be insufficient to finance the government’s development plans. Also, concessional financing from donors in the coming years might not fully meet financing needs. For this reason, they would not exclude the possibility of borrowing more on nonconcessional terms.

G. Strengthening the Financial Sector

40. Niger’s banking system in general is sound. Nonetheless, four relatively small banks, out of a total of eleven banks, do not respect the minimum liquidity ratio (in one case by a wide margin), and one is not in compliance with the regulatory minimum capital requirement of CFAF 5 billion. Staff encouraged the authorities to collaborate with the regional supervisor to accelerate compliance with prudential ratios and to ensure that governance arrangements conducive to sound lending behavior are in place for the recently established state-owned agricultural bank (BAGRI).

41. Significant progress was made in addressing weaknesses in the microfinance sector. A new regulatory framework for microfinance was put in place in 2010, and many weak institutions were restructured or closed.

42. The financial system is still very shallow. In spite of recent progress in credit expansion, financial intermediation remains lower than WAEMU averages in 2010. The authorities are formulating a comprehensive strategy for the development of the financial sector, in collaboration with external consultants.

43. For a sustained deepening of the financial system, staff pointed to the need to improve access to credit to small and medium-sized enterprises and to the agricultural sector in existing banking institutions (rather than in new specialized state-owned banks) by accelerating structural reforms, such as establishing a credit registry, streamlining procedures for obtaining land titles, and strengthening the judicial system.


44. Staff welcomes the government’s ambitious medium-term development strategy to raise GDP growth to 7 percent a year. If well managed, the implementation of the strategy—including measures to increase investment in infrastructure, agriculture, health, and education—could make crucial contributions to raising the living standards and improving the social conditions of the Nigerien people.

45. Niger’s economic prospects are affected positively by the large investments in the petroleum and mining sectors. Large investment projects in natural resources are expected to have positive effects on other sectors of the economy and are expected to contribute importantly to government revenue.

46. The government’s growth strategy, however, should not focus exclusively on the development of natural resources and public investment. Niger is facing high unemployment and the need to create jobs for a rapidly increasing labor pool. Because the employment effects of new projects in natural resources are limited, it will be important to improve the business climate to make Niger a more attractive place for job-creating private investment outside natural resources.

47. Staff encourages the authorities to consider adopting a medium-term fiscal strategy to create a buffer to help manage adverse shocks. There is a strong case for adopting a fiscal rule to stabilize expenditure over the medium term and create space for social emergency spending.

48. The favorable outlook for revenue growth provides significant space for growth in development spending in 2012 and beyond. It will be important, however, that spending growth be carefully prioritized and that it leaves space for a buildup of the government’s cash reserves.

49. Staff urges the authorities to base its public investment program on careful medium-term planning. The plan should identify available financing, administrative implementation constraints, and, importantly, future current expenditure associated with new investment projects. At the same time, further progress should be made in bolstering the domestic revenue effort, including by limiting tax exemptions.

50. Reflecting new borrowing and loan guarantees, Niger has moved from the category of countries with low risk of debt distress to moderate risk. This underlines the need to minimize borrowing on commercial terms for public investment projects, and limit as much as possible the government’s involvement in the financing of natural resources projects.

51. Finally, it will be important to continue to strengthen debt management capacity. Staff recommends that the functioning of the National Committee for the Management of Public Debt be strengthened.

52. Staff recommends that the next Article IV consultation be held under the 12 month consultation cycle.

Appendix I—Assessing Competitiveness in Niger

1. This note analyzes Niger’s external competitiveness, through an assessment of the country’s real exchange rate in 2010 and an examination of selected indicators from survey studies. While the real exchange rate assessment finds Niger’s exchange rate broadly in line with the fundamentals, a finding consistent with the exchange rate assessment conducted for the 2011 WAEMU Article IV consultation, survey indicators reveal a substantial gap between indicators of competitiveness in Niger and in the rest of sub-Saharan Africa (SSA).

I. Real Exchange Rate Assessment

2. The real exchange rate assessment for Niger is here conducted using the three approaches advocated by the IMF’s Consultative Group on Exchange Rate Issues (CGER): the macroeconomic balance (MB) approach, the external sustainability (ES) approach, and the equilibrium real effective exchange rate (EREER) approach.

3. In 2010, Niger’s nominal effective exchange rate (NEER) depreciated by 6.3 percent while the real effective exchange rate (REER), based on the Consumer Price Index (CPI), depreciated by 7.3 percent. These movements in the exchange rates resulted primarily from the depreciation of the Euro (to which the CFAF is pegged) vis-à-vis the currencies of Niger’s major trading partners, most notably the U.S. dollar (Figure 1).

Figure 1:Evolution of Niger’s NEER and REER (2004-10)

Source: Institute, International Monetary Fund.

4. The MB approach estimates a current account norm using some of the fundamental determinants of the current account balance to GDP ratio (CAB). In this exercise, the determinants considered are the fiscal balance, the old-age dependency ratio, population growth, the oil balance, relative GDP per capita growth, and output growth. The current account norm is obtained by combining these variables with coefficients from the Unrestricted Estimation for Africa provided in Aydin (2010). Given an elasticity of the CAB to the REER of 0.63,1 the REER adjustment required to close the gap between the norm and the underlying CAB in 2017 is estimated to be 2.3 percent (Table 2).2

5. The external sustainability approach estimates the CAB to GDP ratio needed to stabilize the net foreign asset (NFA) position of the country.3 In this case, it is assumed that Niger’s NFA position in 2007, which amounted to -18 percent of GDP, corresponds to its approximate equilibrium level.4 The approach then calculates the corresponding NFA-stabilizing current account, estimated here at -1.2 percent. Using the elasticity of the current account balance with respect to the REER, the results suggest an exchange rate misalignment of 5.5 percent (Table 1).

Table 1:Exchange Rate Assessments for Niger 2010
CA NormNFA*NFA-stabilizing CAUnderlying CAGapElasticityMisalignment
Macroeconomic Balance 1/-3.2%-4.7%-1.5%-0.632.3%
External Sustainability 2/-18%-1.2%-4.7%3.5%-0.635.5%
Equilibrium Exchange Rate-6.0%

Current account norm calculated on 2017

Underlying CA calculated on 2017

Source: Staff estimates.

Current account norm calculated on 2017

Underlying CA calculated on 2017

Source: Staff estimates.

6. In the equilibrium exchange rate approach the degree of misalignment of the real effective exchange rate is calculated as the deviation of the actual rate from its equilibrium value. To obtain the equilibrium real exchange rate, the REER is modeled with its fundamentals through an error correction model so as to capture long run equilibrium relationships. The fundamentals included are the terms of trade, public consumption to GDP, investment to GDP ratio, trade openness, and the relative real GDP per capita as proxy for the productivity differential between Niger and its major trading partners.5 To obtain the equilibrium rate the long term cointegrating coefficients are subsequently multiplied to the fundamentals filtered by the Hodrick-Prescott filter. Based on this approach, the estimates suggest that Niger’s REER is slightly below the equilibrium level, by 6 percent (Table 1)

7. These findings are broadly in line with the results obtained for the WAEMU region. The exchange rate assessment conducted in the context of the 2011 Article IV regional consultation concluded that the WAEMU REER is broadly in line with macroeconomic fundamentals in 2010. No evidence of misalignment is found under the equilibrium real exchange rate approach, and the other two approaches point to some modest overvaluation of up to 7 percent.

Figure 2:Actual vs. Estimated Equilibrium REER (1980-2010)

Source: World Economic Outlook, International Monetary Fund and staff estimates.

Survey Data Analysis

8. Traditional methods for the exchange rate assessment have been here complemented with a range of survey data that can better illustrate structural constraints to competitiveness.

9. According to the 2011 World Bank Doing Business Indicators, Niger’s ranking slightly deteriorated, from 171 in 2010 to 173 out of 183 countries. More specifically, the country’s business environment worsened due to difficulties in trading across borders and dealing with construction permits (Table 2). According to the World Bank Enterprise Survey (2009), most Nigerien firms surveyed identify corruption, access to finance and crime and instability as major constraints to business, to a much higher extent than in the rest of the region (Table 3).

Table 2.Doing Business Indicators 2011 (Ranking out of 183)
Ease of Doing Business173137
Starting a Business159126
Dealing with Construction Permits162117
Registering Property84121
Getting Credit152120
Protecting Investors154113
Paying Taxes144116
Trading Across Borders174136
Enforcing Contracts138118
Closing a Business136128
Source: World Bank, Doing Business Indicators, 2011
Source: World Bank, Doing Business Indicators, 2011
Table 3.Enterprise Survey (2009). Percentage of firms....
…identifying corruption as a major constraint8435
…identifying access to finance as a major constraint6245
…identifying crime, theft and disorder as major constraints4429
…identifying tax administration as major constraint3027
…identifying customs and trade regulation as a major constraint3222
Source: World Bank Enterprise Survey (2009)
Source: World Bank Enterprise Survey (2009)

10. Access to infrastructure is hampered by limited endowment and high costs. The country’s road density is lower than the SSA average (Figure 3) and Niger lies well below the average SSA for telephone lines (both mobile and landline), and for internet access, with fares for internet and telephone much higher than in the SSA region (Table 4).

Figure 3.Road density (km per 100 square km)

Source: World Bank, WDI (2010)

Table 4:Infrastructure Access and Costs
Internet subscribers (per 100 people)0.84.5
Internet subscription (US$ per month)84.542.3
Mobile subscribers 2009 (per 100 people)1732
Mobile subscription (US$ per month)7.69.7
Telephone landlines 2009 (per 100 people)0.40.9
Telephone subscription (US$ per month)7.56.3
Source: World Bank, World Development Indicators & African Development Indicators 2011
Source: World Bank, World Development Indicators & African Development Indicators 2011

11. Data from the 2009 World Governance Indicators report weaknesses in the country for voice and accountability and for political stability. In both cases, Niger ranks below SSA and WAEMU; however, the country performs better than the two benchmarks for regulatory quality and rule of law (Figure 4).

Figure 4.Governance Indicators 2009. Ranking over 1001

1 0=worst performer; 100=best performer

Source: World Bank, World Governance Indicators, 2009

12. Overall, most of these survey data show that Niger’s business environment is holding back its competitiveness more than the exchange rate performance.


    AydinBurcu (2010) “Exchange Rate Assessment for Sub-Saharan Economies””IMF Working Paper n. 162Washington D.C.

    International Monetary Fund (2010) “Updated and Extended Version of the Lane and Milesi Ferretti (2007) Dataset,”Research DepartmentWashington D.C.

    LeeJaewooGian MariaMilesi-FerrettiJohnOstry and LucaRicci (2008) “Exchange Rate Assessments: CGER Methodologies” IMF Occasional Paper n. 261Washington D.C.

    LanePhillip R. and Gian MariaMilesi-Ferretti (2007) “The External Wealth of Nations: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004,”Journal of International EconomicsVol. 73November2007 pp. 223-250.

    TokarickStephen (2010) “A Method for Calculating Export Supply and Import Demand Elasticities,”IMF Working Paper n. 180Washington D.C.

    VitekFrancis (2011) “Exchange Rate Assessment tools for Advanced, Emerging, and Developing Economies,”mimeoInternational Monetary FundApril2011.

APPENDIX II—Factors for sustained diversification: where does Niger stand?

1. This note investigates the factors underlying sustained diversification processes for developing and emerging economies, and then examines Niger’s situation with respect to these factors.

2. As a measure for diversification, this study uses the Herfindahl-Hirschmann concentration index (HH), which captures the degree of concentration of exports on several products.1 For a diversification episode to be sustained over time, we set the two following conditions: i) an increase in the level of diversification should take place over four consecutive years, and ii) in the year following the end of the episode, the level of diversification should be higher than the one in the initial year of the episode.

3. Within a panel of 114 developing and emerging economies examined over the period 1996-2009, 34 countries experienced episodes of sustained diversification (Table 1). Diversification episodes have been more common in Africa (13 episodes), in the Asia- Pacific region (12), and less common in America (8) and Europe (3). Overall, diversification has been more common in the mid 2000s than in the late 90s. Seven Episodes of sustained diversification took place in landlocked economies, while nine involved commodity dependent economies.2

Table 1.Sustained Diversification Episodes
Number of episodes per region and starting year
Asia -Pac.334212
Sources: Staff estimates; and UNCTAD data.
Sources: Staff estimates; and UNCTAD data.

4. Drawing on the methodology adopted in studies on growth acceleration, we identify the factors that could increase the probability for sustained diversification through a probit panel, where the diversification episodes are expressed by dummy variables that take value 1, for the timing of the episodes, and 0 when the episodes do not take place. These dummies are regressed on the following exogenous variables:

  • Credit to the private sector as percentage of GDP,

  • Total trade (export plus imports) as a share of GDP,

  • Gross capital formation in constant 2000 US$,

  • The nominal effective exchange rate, where a positive increase is an appreciation,

  • The year-on-year period average inflation index,

  • Landlocked and resource dependent countries, expressed through dummy variables.

5. All variables, except inflation, are expressed in logarithms and to avoid endogeneity, the independent variables are included in the model with a lag of two years.3 The probit has been estimated with a random effects and a population average model (Table 2).

Table 2:Panel Probit Estimation Results
Random EffectsPopulation AverageMg. effectsMeans 1
Prob chi20.0000.000
*Indicates significance at the 90%, ** 95% and 99%.

Means are for logarithms of the variables, except for inflation.

*Indicates significance at the 90%, ** 95% and 99%.

Means are for logarithms of the variables, except for inflation.

6. In both estimations, the probability of the Likelihood Ratio test on the overall significance of the model is zero, indicating that the hypothesis that the variables are all jointly equal to zero can be rejected. In the two models, the probability of a diversification event is positively and significantly associated with expansion of trade and increases in gross capital formation; and, it is negatively associated with currency appreciations, resource dependency and being a landlocked country. Inflation has a negative impact on the probability of a diversification event in the population average model, while it has a statistically insignificant impact in the random effects model. The coefficient for credit is insignificant in both models. Marginal effects at variables’ means, derived from the population average model, show the same significance and signs.

7. For Niger, the predicted probability of diversification, calculated on the means of Niger’s specific variables’ values, amounts to 0.6 percent, far below the average estimate for those economies that experienced a diversification episode (diversifiers), and for the SSA average, (Table 3). The lower predicted probability for Niger stems partly from its conditions of being a landlocked country and a resource dependent economy, and partly from low levels of gross capital formation and trade. By contrast, the country performs better than the other countries, even the diversifiers, for inflation and for the nominal effective exchange rate.

Table 3:Means and Predicted Probabilities

8. While exchange rate instability and inflation pose no challenges in Niger, more could be done for trade and investment. To enhance trade, advancements in trade openness should be continued on a regional level and specific non-tariff barriers should be reduced. Data from the World Bank 2011 Doing Business Report show that the number of days for imported and exported merchandise to leave and enter the country is higher than in other SSA countries. Furthermore, the costs associated with the administrative procedures, transport and handling of cargo are extremely high, for both exports and imports (Table 4).

Table 4:Constraints to Trade
Time to export (days)5926231924
Time to import (days)6431262931
Costs for exports
(US$ per cargo container)3,5452,2021,3791,2031,262
Costs for imports
(US$ per cargo container)3,5453,0671,9781,0131,475
Source: World Bank, Doing Business Report 2011.
Source: World Bank, Doing Business Report 2011.

9. With respect to investment, efforts should be directed towards both public and private capital mobilization. A successful public investment strategy should be primarily oriented towards the removal of those bottlenecks that limit private sector initiative.

10. It is also important to improve the environment for private sector activity. According to the 2011 World Bank Doing Business Indicators, Niger scores very poorly, ranking 173rd out of 183 countries. In particular, the country lags behind for trading across borders and dealing with construction permits. Costs to obtain building permits from the municipality and costs to re-assess the property value are much higher than in other countries. Similarly, the costs of starting a business are high, especially for registration fees and the publishing of the company formation notice (Table 5). According to the World Bank Enterprise Survey, most Nigerien firms surveyed identify corruption (83.7 percent of firms), and access to finance (61.98 percent of firms) as key problems. More than 32 percent of firms are expected to give gifts for an operating license, while 43 percent to secure a government contract.

Table 5.Starting a new business
Time (days)178191229
Costs (% of income per capita)11880512031
Capital minimum (% income per capita)613307192110
Source: World Bank, Doing Business Report 2011
Source: World Bank, Doing Business Report 2011
APPENDIX III—New Medium and Long-Term Projection


1. The staff’s medium- and long-term projections have been updated in light of new information on the financing of the oil and mining projects (Box 3 of the Article IV Staff report).1 This note presents the key features of a Niger-specific natural resources revenue model and discusses the updated medium- and long-term projections.


The Natural Resources Model

2. The financial impact of oil production is estimated using a model developed by the IMF’s Fiscal Affairs Department. The model is based on the FARI model (Fiscal Analysis of Resource Industries), a standard cash-flow model that has been used in several countries, tailored to Niger’s specific requirements. The model takes into account the various components of projects in resource industries (prices, expected production, costs, financing arrangements) and the expected fiscal regime provisions. It provides carefully calibrated estimates of fiscal revenue projections, and it also feeds into GDP and external accounts projections. It evaluates the profitability of each project component, of the overall industry, and the benefits for each investor.

3. Model projections indicate that the integrated oil project would generate rising revenue for Niger, particularly its upstream component. Assuming a price structure aligned with the currently agreed (below market) prices, annual fiscal revenue from the whole integrated project could reach some US$500 million by 2026 (Figure 1). The bulk of this revenue stems from the profit oil the state will receive in lieu of corporate income tax, while the benefits it is expected to receive as a shareholder would be less significant. The refinery would significantly increase its positive contribution to fiscal revenue from 2023, once the investment loan contracted to finance its investment costs would have been fully repaid.2

Figure 1.Niger: Government Expected Revenues from oil Production

Uranium Revenue

4. A uranium version of the FARI model has been prepared to examine the impact on government revenue of the new large Imouraren uranium mine. Total budgetary revenue for all the mines is expected to reach some US$600 million annually by 2031. Corporate taxes account for about fifty percent of mining revenue, with dividends and royalties as the other main components.


5. Three periods can be distinguished in the medium- and long-term projections: (i) 2012-2016, when oil production starts, uranium production expands, and public expenditure starts to rise; (ii) 2017-2024, a period in which the economy diversifies; and (iii) 2025-2031, when the steady state is reached (Figure 2, Tables 1, 2 and 3).

Figure 2.Niger: Evolution of Key Variables in the Medium Term

Table 1.Niger: Selected Economic and Financial Indicators, 2011-31
(Annual percentage change, unless otherwise indicated)
National income and prices
GDP at constant prices3.814.
Non-agricultural GDP at constant prices7.617.
Non-oil and mineral GDP5.
GDP deflator4.
Consumer price index
Annual average3.
End of period3.
External sector
Exports, f.o.b. (CFA francs)19.737.412.
Of which: non-uranium exports15.454.821.
Imports, f.o.b (CFA francs)19.617.0-0.3-
Export volume12.534.413.111.912.88.922.512.
Import volume23.726.2-3.0-
Terms of trade (deterioration -)8.712.4-
Government finances
Total revenue15.436.213.511.
Total expenditure and net lending32.029.015.410.
Of which: current expenditure14.8-1.921.514.
Of which: capital expenditure43.186.711.
(Annual change as percent of beginning-of-period)
Money and credit
Domestic credit11.413.610.413.
Credit to the government (net)-0.4-
Credit to the economy11.818.29.412.011.513.815.010.410.19.410.
Net domestic assets11.413.610.413.
Broad Money8.216.68.511.814.
Velocity of broad money (in percent)
(Percent of GDP, unless otherwise indicated)
Government finances
Total revenue15.117.618.518.819.519.819.419.519.919.920.320.821.122.021.921.921.821.721.821.721.8
Total expenditure and net lending26.228.930.831.231.230.530.130.130.430.630.730.931.331.731.831.731.431.030.830.730.6
Current expenditure14.312.013.414.014.414.113.813.713.713.713.713.713.814.013.913.813.713.613.513.513.4
Capital expenditure10.616.917.417.216.816.616.416.516.716.917.117.317.617.817.917.817.617.417.317.217.1
Basic balance (excluding grants)1-4.0-0.7-1.5-1.5-0.8-
Overall balance (commitment basis, including grants)-3.5-3.5-4.7-5.0-4.5-3.8-4.3-4.2-4.2-4.4-4.2-4.0-4.3-3.9-4.3-4.3-4.2-4.1-3.9-3.90.0
Gross investment38.934.929.126.726.426.326.226.226.426.526.726.927.628.328.428.328.
Of which: non-government investment32.625.419.016.416.416.416.416.416.416.416.516.617.117.617.617.617.617.617.617.617.6
Change in stocks0.
Gross national savings11.48.58.613.214.015.915.516.416.416.215.815.715.715.315.115.515.516.015.716.016.3
Of which: non-government5.
Domestic savings7.
External current account balance (including grants)-27.5-26.3-20.5-13.4-12.4-10.4-10.7-9.8-10.0-10.4-10.9-11.2-11.9-12.9-13.2-12.8-12.7-12.1-12.3-11.9-11.6
Debt-service ratio as percent of:
Exports of goods and services4.
Government revenue6.
NPV of external debt25.523.623.423.423.523.824.425.125.927.028.029.330.431.432.232.933.534.134.534.835.1
Foreign Aid12.112.912.912.912.712.311.911.911.811.711.611.511.210.910.610.410.
(Billions of CFA francs)
GDP at current market prices2,9463,4343,7254,0784,4474,8525,2335,6566,1276,6087,1397,7258,3629,0539,80510,62111,50912,47013,51214,64915,882
Overall balance of payments-19.417.9-14.8-11.134.2-
Sources: Nigerien authorities; and IMF staff estimates and projections.

Revenue minus expenditure net of externally financed capital expenditure.

Sources: Nigerien authorities; and IMF staff estimates and projections.

Revenue minus expenditure net of externally financed capital expenditure.

Table 2.Niger: Financial Operations of the Central Government, 2011-31
(In percent of GDP)
Total revenue14.917.618.518.819.519.819.419.519.919.920.320.821.122.021.921.921.821.721.821.721.8
Tax revenue13.716.617.517.818.518.918.518.719.219.119.519.920.
Nontax revenue1.
Total expenditure and net lending26.028.930.831.231.230.530.130.130.430.630.730.931.331.731.831.731.431.030.830.730.6
Of which: domestically financed18.918.320.020.220.319.919.419.319.619.819.920.220.821.321.621.621.421.321.221.221.1
Total current expenditure14.112.013.414.014.414.113.813.713.713.713.713.713.814.013.913.813.713.613.513.513.4
Budgetary expenditure13.011.112.513.113.413.112.812.812.812.812.812.913.
Wages and salaries4.
Materials and supplies3.
Subsidies and transfers5.
Interest, scheduled0.
Of which: External debt0.
Special accounts expenditure1.
Capital expenditure and net lending11.916.917.317.116.816.516.316.416.716.817.017.217.517.717.917.817.617.417.317.217.1
Capital expenditure10.616.917.417.216.816.616.416.516.716.917.117.317.617.817.917.817.617.417.317.217.1
Domestically financed3.
Externally financed7.010.610.810.910.910.710.710.810.910.810.810.710.610.410.
Of which: Grants4.
Net lending1.
Overall balance (commitment)-11.1-11.3-12.3-12.4-11.7-10.8-10.7-10.6-10.5-10.7-10.4-10.2-10.3-9.7-9.9-9.8-9.6-9.3-9.1-9.0-8.8
Basic balance-4.0-0.7-1.5-1.5-0.8-
Change in payments arrears and float-0.3-0.3-0.4-0.4-0.3-0.3-
Overall balance (cash)-11.4-11.6-12.7-12.8-12.1-11.1-10.8-10.6-10.5-10.7-10.4-10.2-10.3-9.7-9.9-9.8-9.6-9.3-9.1-9.0-8.8
External financing11.612.512.512.512.412.111.511.511.511.411.211.110.810.410.
Budget financing2.
Project financing4.
Of which: Budget financing1.
Debt relief (incl. debt under discussion)
Domestic financing-0.2-
Banking sector-0.3-
Statutory advances-0.1-0.2-0.2-0.2-0.2-0.1-0.1-0.1-0.1-
Deposits with BCEAO-0.3-
Government securities net0.
Nonbanking sector0.2-
Financing gap (+)
Memorandum items:
Revenues from natural resources1.
Of which: oil revenues1.
Of which: revenues from uranium1.
Non-Natural resources revenue13.013.914.
Deposits with BCEAO (balance)
Deposits with BCEAO (months of domestically financed expenditure)
Sources: Nigerien authorities; and IMF staff estimates.
Sources: Nigerien authorities; and IMF staff estimates.
Table 3.Niger: Balance of Payments, 2011-31
(In percent of GDP)
Current account balance-27.5-26.3-20.5-13.4-12.4-10.4-10.7-9.8-10.0-10.4-10.9-11.2-11.9-12.9-13.2-12.8-12.7-12.1-12.3-11.9-11.6
Balance on goods, services and income-32.8-30.9-24.9-17.6-16.5-14.4-14.0-13.1-13.2-13.5-14.0-14.2-14.9-15.8-16.1-15.5-15.4-14.8-15.0-14.6-14.3
Balance on goods-15.3-11.8-8.1-3.7-2.0-0.8-
Exports, f.o.b20.724.425.
Other products10.
Imports, f.o.b36.
Food products7.
Petroleum products4.
Capital goods12.113.411.710.110.59.812.
Other products11.315.414.713.713.813.614.214.514.714.514.514.514.313.913.913.913.813.713.412.912.9
Services and income (net)-17.4-19.1-16.8-13.9-14.5-13.6-13.4-14.5-14.1-13.3-13.3-13.3-13.6-14.0-13.7-13.3-13.1-13.0-12.6-12.4-12.0
Services (net)-16.5-16.3-13.1-10.4-10.0-8.7-9.2-9.2-9.3-9.0-9.5-9.9-10.4-11.2-11.2-11.0-10.9-10.9-10.8-10.7-10.7
Income (net)-0.9-2.8-3.8-3.5-4.5-4.9-4.3-5.3-4.7-4.3-3.8-3.4-3.2-2.8-2.5-2.3-2.2-2.0-1.8-1.6-1.3
Of which: interest on external public debt-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2-0.2
Unrequited current transfers (net)
Private (net)
Public (net)
Of which: grants for budgetary assistance2.
Capital and financial account26.926.820.
Capital account5.
Private capital transfers0.
Project grants4.
Nonproduced, nonfinancial assets0.
Debt cancellation0.
Financial account21.320.513.
Direct investment16.
Portfolio investment0.
Other investment5.
Public sector (net)
Loans for budgetary assistance1.
Project loans3.
Other (net)
Errors and omissions0.
Overall balance-0.70.5-0.4-
Net foreign assets (BCEAO)10.6-
Of which:
Net use of Fund resources0.0-0.1-0.1-
Financing gap0.
Memorandum items:
Foreign Assets of BCEAO (months of imports)
GDP (in CFAF billions)2945.93434.33725.24077.64446.74852.15233.15656.26127.16607.97139.07724.68361.59052.89805.210620.911509.412470.313512.414648.715882.2
Sources: Nigerien authorities; and IMF staff estimates and projections.

Includes the net use of the CFA F counterpart of the general SDR allocation on-lent by the BCEAO in September 2009.

Sources: Nigerien authorities; and IMF staff estimates and projections.

Includes the net use of the CFA F counterpart of the general SDR allocation on-lent by the BCEAO in September 2009.

6. The fiscal strategy embedded in the macroeconomic framework aims at smoothing spending over time and protecting it from possible shocks. The baseline scenario includes a surplus in the basic fiscal balance (in line with the regional convergence criterion of the WAEMU) while allowing for a significant growth in domestically financed investment. This results in an accumulation of deposits at the BCEAO mainly during the second period, which would provide a buffer equivalent to about 3 months of expenditure (excluding foreign financed investment) by 2021.

2012-2016: production of natural resources expands

  • The current account would register a sizeable improvement over this period with the deficit shrinking from about 27½ percent in 2011 to 10½ percent of GDP in 2016 as a result of rising natural resource exports and a marked slowdown in FDI-related and oil imports. The income account deteriorates, owing to the repatriation of dividends by foreign investors; similarly, FDI flows are significantly reduced and turn negative as amortization of the investment financing received by the foreign partners starts (Box 3 in the Staff Report). With public grants declining gradually as a percent of GDP and loans broadly stable, the overall balance of payments is in balance in 2016.

  • Natural resource fiscal revenue increases by about 3½ percent of GDP, to reach 5¼ percent in 2016 (Figure 2). Non-resources fiscal revenues are also expected to increase gradually, reflecting continued efforts to improve domestic revenue mobilization. As a result, the total fiscal revenue-to-GDP ratio rises from 15 percent in 2011 to about 19¾ percent in 2016.

  • Total expenditure increases by about 4 ½ percent of GDP, with capital expenditure growing from 12 percent of GDP in 2011 to 16 ½ percent in 2016. This makes it possible to meet Niger’s significant investment needs while taking into account the country’s limited administrative implementation capacity. The substantial increase in investment is aimed at increasing productive capacity in the non-resource sectors and removing bottlenecks, thus raising the economy’s growth potential.

2017-2024: the economy diversifies

  • With existing oil and uranium projects reaching maximum production capacity, their impact on GDP growth falls substantially. Still, the projected launching of new natural resources projects would allow the sector to contribute about 1 percent to GDP growth. Improvements in productive capacity, stemming from investments in the previous period, are projected to lead to higher non-resource GDP growth.

  • Economic diversification and rising domestic incomes are expected to lead to a more open economy, with both exports and imports increasing. FDI outflows persist until 2021, as the repayments of loans for the megaprojects continue. Project loans remain broadly stable at about 5 percent of GDP. As the economy develops, external financing declines gradually with grants dropping more markedly than external loans. Altogether, these developments allow the overall balance of payments to remain in a mild surplus.

  • Total fiscal revenue increases by 2½ percentage points of GDP, as the diversification process leads to higher non-natural resource revenue. Total capital expenditure increases by about 1½ percent of GDP, reaching about 17¾ percent of GDP.

2025-2031: the economy reaches a steady state

  • Annual GDP growth stabilizes at about 6 percent to 6½ percent. The volumes of oil and uranium production remain stable at their peak levels. As domestic consumption continues to increase, exports of refined oil products drop, while the current account shows deficits of around 12 percent of GDP. With the amortization of the loans linked to oil and mineral projects completed, FDI flows turn positive again, while external official financing stabilizes at around 9 percent of GDP. As a result, the balance-of-payments exhibits a small surplus of about ½ percent of GDP.

  • Total revenue as percent of GDP stabilizes at 21¾ percent of GDP, reflecting the slowdown in resource revenue growth, partially compensated by higher growth in non-natural resource revenue. Total expenditure and capital expenditure become stable at about 30 and 17 percent of GDP, respectively.

The basic fiscal balance is equivalent to domestic revenue minus expenditure (excluding foreign-financed capital expenditure).

The elasticity of 0.63 is the trade balance elasticity from Tokarick (2010). We selected the small country case for Niger, given that the country is unable to affect the foreign prices of the goods it imports and exports. The value is consistent with the elasticity obtained for the WAEMU region and used in the 2011 WAEMU exchange rate assessment.

While studies usually consider the end of the WEO projection period for the calculation of the underlying CAB, in this study we selected 2017, since it is by this year that FDI-related imports stabilize and that full capacity is reached in domestic production of refined oil products.

The NFA position is for the Nigerien economy as a whole and NFA values are from Lane and Milesi-Ferretti (2007), updated and extended recently by the IMF’s Research Department (WEO, October 2010). Arguably, the usefulness of calculating a current account consistent with a constant level of NFA is questionable for an economy that relies on exhaustible resources, and hence, where one would expect the level of NFA to move in line with the mineral life cycle.

While other studies chose 2009 as the norm year, we here considered 2007 since many variables in 2009 were affected by the shock of the food crisis.

Four dummies have been included in the model to account for i) political instability in 1984; ii) the 1994 devaluation; iii) the 2005 food crisis, and iv) the impact of the global financial crisis in 2008.

The index is: HH=√(Σ(xi/X) for i going from 1 to N., xi is the export value of a specific ith commodity, X is the country’ s total exports, and N is the number of commodity groups. It can be normalized to take values between 0 and 1, with 0 reflecting an equal distribution of market shares among exporters and 1 indicating the maximum degree of market concentration.

The commodity dependence is identified here with primary commodity exports equal to 60 percent or more of the total exports.

Gross capital formation has been scaled before the logarithms to obtain the same scale for all the variables.

The previous medium-term scenario was prepared at the time of the conclusion of the third review under the ECF arrangement (Country Report No. 10/146, May, 2010).

Exploration is ongoing for petroleum with a view to defining sufficient resources for an export project, which might have an important impact on revenue. Nonetheless, prospects are still uncertain, so it is still too early to include it in the analysis.

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