Abstract
This paper analyzes the performance of Niger in poverty reduction and growth inclusiveness based on three surveys conducted in 2005, 2007/08 and 2011, a year before oil production started. The findings show that growth was pro-poor but less inclusive. While there was a significant reduction in the poverty headcount during the period 2005-11, inequality increased; growth was more beneficial to the top level of the income distribution. During 2008-11, higher and more balanced growth associated with lower inflation helped to achieve a higher poverty reduction and a slower increase in inequality compared to 2005-08.
This paper analyzes the performance of Niger in poverty reduction and growth inclusiveness based on three surveys conducted in 2005, 2007/08 and 2011, a year before oil production started. The findings show that growth was pro-poor but less inclusive. While there was a significant reduction in the poverty headcount during the period 2005-11, inequality increased; growth was more beneficial to the top level of the income distribution. During 2008-11, higher and more balanced growth associated with lower inflation helped to achieve a higher poverty reduction and a slower increase in inequality compared to 2005-08.
A. Introduction
1. New developments in the mining sector in Niger provide an opportunity for high and sustained growth going forward. The growth performance in Niger in the last 10 years has been strong averaging 5.1 percent, although accompanied by large volatility owing mainly to climate shocks and security challenges in the region. The growth rate was below zero in 2004 and 2009 because of droughts but reached a peak of 11.1 percent in 2012 as a newly built oil refinery came on stream. Projects in the resource sector to intensify oil and uranium production and the recent discovery of gold will allow growth to surpass the past decade average of 5.1 percent, on average, in the medium term.
2. However the performance in terms of poverty reduction and improvement in social conditions was mixed. According the World Bank, the poverty headcount ratio at US$ 1.25 per day decreased from 78 percent in 1994 to 43 percent in 2008, infant mortality rate (under 5) decreased from 278.6 per 1000 in 1994 to 124 per 1000 in 2011, and gross primary school enrollment rate increased from 28.7 percent to 70.8 percent between 1994 and 2011. Despite this improvement in the poverty headcount and access to social infrastructure, the country was ranked last in the 2013 Human Development Indicator Report of the UNDP.
3. Against this background, this paper assesses how recent growth has contributed to improving the welfare of Nigerien. The findings are crucial to formulate policies that could help the government achieve sustainable growth that is inclusive and pro-poor, reinforcing the social fabric and reducing the spillover risks from the regional security situation. To achieve these objectives, tools and methodologies commonly applied by the IMF are used based on three surveys conducted in 2005, 2007/2008,2 and 2011.3
Niger: Stylized Facts: Economic and Social Indicators and the Business Environment
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; World Bank; UNDP; World Economic Outlook database; and IMF staff calculations.
Niger: Stylized Facts: Economic and Social Indicators and the Business Environment
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; World Bank; UNDP; World Economic Outlook database; and IMF staff calculations.Niger: Stylized Facts: Economic and Social Indicators and the Business Environment
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; World Bank; UNDP; World Economic Outlook database; and IMF staff calculations.B. Stylized Facts
4. The Nigerien economy is undiversified and subject to recurrent shocks. The economy is heavily dependent on agriculture which represents about a third of total GDP and serves as primary activity for about 70 percent of the households in the 2011 survey. The agriculture sector is subject to severe weather shocks that occur on a regular basis and are the source of large GDP variations. Between 2004 and 2011 the country has recorded three major droughts in 2004, 2009 and 2011 that directly affected the poor households through the income channel as most rural households have their primary activity in agriculture or livestock, but also through the price channel as inflation increases after a bad harvest. Another challenge that the Nigerien economy faces is the internal (Tuareg rebellion) and external (regional conflicts and terrorism) security situation that place substantial strains on both resource allocation and the business environment.
5. Inflation has been very volatile but recent policies put in place by the government have helped to moderate the fluctuations. Food inflation reached 15 percent in 2005 following the 2004 drought and was negative in 2006 and 2007 before increasing sharply to above 20 percent in 2008 because of the 2007-09 Tuareg rebellion and lower growth in agriculture production in 2007. Inflation has been moderate and less volatile in recent years despite weather shocks owing to the policies that the government has put in place to support the most vulnerable families in urban and rural areas through free cereals distribution or selling at subsidized prices (Figure 2a).
Niger: Inflation, 2000-13
(Average, in percent)
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; and IMF staff calculations.
Niger: Inflation, 2000-13
(Average, in percent)
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; and IMF staff calculations.Niger: Inflation, 2000-13
(Average, in percent)
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; and IMF staff calculations.6. The business climate has not improved in recent years. Private sector development is key for structural transformation, which is necessary for strong and sustained growth that could benefit a large part of the population, coupled with right policies. Niger is among the countries that offer the most difficult conditions for business development. It ranked 176 in the 2014 Doing Business Report, one notch down from three years ago (Figure 1). The main obstacles for doing business are the predominance of the informal sector, access to finance, and governance (Figure 2b)
Niger: Main Obstacles for Doing Business
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Source: World Bank and International Finance Corporationcorporate survey data of 2009.
Niger: Main Obstacles for Doing Business
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Source: World Bank and International Finance Corporationcorporate survey data of 2009.Niger: Main Obstacles for Doing Business
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Source: World Bank and International Finance Corporationcorporate survey data of 2009.C. How Pro-Poor and Inclusive was Growth during 2005-2011?
Definition of Pro-Poor Growth and Inclusive Growth
7. In this paper, we apply the most commonly used definitions of pro-poor and inclusive growth:—following Ravallion and Chen (2003), growth is defined as pro-poor when it reduces poverty headcount;—and following Rauniyar and Kanbur (2010), growth is defined as inclusive when it is not associated with an increase in inequality. In other words, growth is inclusive when it does not lead to a reduction in the income share of the bottom quintile of the income distribution.
How Pro-Poor was Growth?
8. Growth was pro-poor in Niger during both periods (2005-08 and 2008-11) but more in the second period. The national poverty headcount using the national poverty line declined from 62.1 percent in 2005 to 59.5 percent in 2008 and to 48.2 percent in 2011 (Figure 1). The drop was more significant in the second period with 19 percent decrease in the poverty rate against 4.2 percent decrease in the first period. The elasticity of the poverty headcount with regard to growth was also higher in the second period 1.2 against 0.3 in the first period. This elasticity is higher than the one for Mozambique 0.3 during 1996/97-2002/03, and lower than the one for Mali 1.9 during 2001-06. The reduction of poverty was more significant in urban than rural areas which are more vulnerable to climate shocks and have a higher fertility rate. The poverty rate in urban areas fell by 16.8 percent in the first period against 2.7 percent in rural areas, and the reductions were respectively 51.2 percent and 14.6 percent in the second period.
How Inclusive was Growth?
9. The growth incidence curves and the Gini coefficients show that growth was not inclusive in either period (Figure 3). The Gini coefficient increased by 11.1 percent during the first period and 4.5 percent during the second period. The growth incidence curve between 2005 and 2008 shows a decline or no improvement in welfare for the bottom half of the income distribution while there was an improvement for the top half that gets bigger as one moves towards the top quintiles. In the 2008-11 period, the growth incidence curve shows that all income categories experienced improvements in welfare with higher increases for the poorest and the bottom of the top half of the income distribution.
Niger: Growth Inclusiveness1
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; and IMF staff calculations.1 As the agriculture GDP in year N is based on the production during the agricultural campaign of year N/year N + 1, we used the average growth of 2004-05 to analyze the poverty during the period 2005-08 and the average growth of 2008-10 for the period 2008-11.
Niger: Growth Inclusiveness1
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; and IMF staff calculations.1 As the agriculture GDP in year N is based on the production during the agricultural campaign of year N/year N + 1, we used the average growth of 2004-05 to analyze the poverty during the period 2005-08 and the average growth of 2008-10 for the period 2008-11.Niger: Growth Inclusiveness1
Citation: IMF Staff Country Reports 2015, 064; 10.5089/9781498323789.002.A005
Sources: Nigerien authorities; and IMF staff calculations.1 As the agriculture GDP in year N is based on the production during the agricultural campaign of year N/year N + 1, we used the average growth of 2004-05 to analyze the poverty during the period 2005-08 and the average growth of 2008-10 for the period 2008-11.10. Higher growth in agriculture and non agriculture sectors, with lower inflation explained the more pro-poor and less non inclusive growth in the second period. Real GDP averaged 4.1 percent in the first period and increased to an average of 5.8 percent in the second period while inflation averaged 4.8 percent in the first period and decreased to an average of 1.5 percent in the second period (Figure 3). The higher elasticity of poverty with regard to growth in the second period suggests that policies implemented by the government to support poor households were effective.
D. The Determinants of Poverty in Niger
11. Mirroring the profile of the Nigerien population, most of the poor are in rural areas and working mainly in the agriculture sector. Using data of the 2011 survey, we estimated the factors explaining poverty in Niger:4
The predominance of poverty in the rural areas is evidenced by a strong positive effect of the urban dummy. Being a woman head of a household in the rural areas increases the likelihood of being poor. In the urban centers gender on poverty is statistically significant but with a marginal effect.
Civil servants are better off with stronger effect in the rural areas. Civil servants working in remote rural areas enjoy often a higher salary because of additional allowances they receive; moreover, with the low cost of living in rural areas, they could save and live in better conditions. The workers in the trade and transportation sectors are also better off mainly in rural areas and especially for men.
The size of the household has a strong and negative effective on welfare. The effect gets bigger when the sample is restricted to the rural areas or to male.
Lack of education has a strong negative effect on welfare. The effect more than doubles in urban areas as education gives more opportunity for a well paid job. The effect is small in rural areas. Restricting the sample to men, the effect weakens slightly suggesting that lack of education has a stronger negative effect on welfare for women.
Working in the agriculture sector has a negative effect on welfare which almost triples in urban areas and is reduced in the rural areas. In urban areas only poor families work exclusively in the agriculture sector, the rich families are often doing agriculture as a side activity.
Determinants of Households Welfare
Determinants of Households Welfare
| All sample | Urban | Rural | Male | |||||
|---|---|---|---|---|---|---|---|---|
| Household size | -0.37 | *** | -0.35 | *** | -0.38 | *** | -0.39 | *** |
| Age of the head of the household | -0.03 | *** | -0.04 | *** | -0.03 | *** | -0.02 | *** |
| Sex (Male) | 0.14 | *** | 0.02 | *** | 0.18 | *** | ||
| Urban | 0.41 | *** | 0.38 | *** | ||||
| Farmer | -0.10 | *** | -0.28 | *** | -0.06 | *** | -0.11 | *** |
| Education (not educated) | -0.14 | *** | -0.38 | *** | -0.04 | *** | -0.12 | *** |
| Commerce and transport | 0.13 | *** | 0.09 | *** | 0.19 | *** | 0.13 | *** |
| Public service | 0.38 | *** | 0.23 | *** | 0.51 | *** | 0.39 | *** |
| Constant | 0.90 | *** | 1.59 | *** | 0.72 | *** | 1.02 | *** |
| Number of observations | 3,859 | 1,516 | 2,343 | 3,344 | ||||
| Number of observations (with weight) | 2,521,252 | 453,116 | 2,068,136 | 2,247,590 | ||||
| Adjusted R-square | 0.3998 | 0.3493 | 0.2437 | 0.40891 | ||||
| Note: *** indicates significant at 99 percent | ||||||||
Determinants of Households Welfare
| All sample | Urban | Rural | Male | |||||
|---|---|---|---|---|---|---|---|---|
| Household size | -0.37 | *** | -0.35 | *** | -0.38 | *** | -0.39 | *** |
| Age of the head of the household | -0.03 | *** | -0.04 | *** | -0.03 | *** | -0.02 | *** |
| Sex (Male) | 0.14 | *** | 0.02 | *** | 0.18 | *** | ||
| Urban | 0.41 | *** | 0.38 | *** | ||||
| Farmer | -0.10 | *** | -0.28 | *** | -0.06 | *** | -0.11 | *** |
| Education (not educated) | -0.14 | *** | -0.38 | *** | -0.04 | *** | -0.12 | *** |
| Commerce and transport | 0.13 | *** | 0.09 | *** | 0.19 | *** | 0.13 | *** |
| Public service | 0.38 | *** | 0.23 | *** | 0.51 | *** | 0.39 | *** |
| Constant | 0.90 | *** | 1.59 | *** | 0.72 | *** | 1.02 | *** |
| Number of observations | 3,859 | 1,516 | 2,343 | 3,344 | ||||
| Number of observations (with weight) | 2,521,252 | 453,116 | 2,068,136 | 2,247,590 | ||||
| Adjusted R-square | 0.3998 | 0.3493 | 0.2437 | 0.40891 | ||||
| Note: *** indicates significant at 99 percent | ||||||||
E. Conclusion and Policy Implications
12. The recent growth in Niger was pro-poor, resulting in a significant reduction in poverty; however this growth did not lead to a reduction in income inequality. Higher growth in all sectors combined with low inflation translated into a faster reduction in poverty and moderated the increase in inequality. Therefore macroeconomic stability with high and sustained growth is important to achieve inclusive growth in Niger. To achieve pro-poor and inclusive growth, the authorities should consider the following policies:
Improve budget allocation to priority spending with a balanced and sustainable fiscal policy. Our results show that spending on education for women is crucial for poverty reduction. Policies to support vulnerable households could also be effective in smoothing inflation and reducing poverty. Better coordination among different stakeholders could improve resource allocation and ensure fiscal sustainability.
Reinforce resilience to exogenous shocks through agriculture modernization. Investing in water management, irrigation, agriculture mechanization, and improved seeds and fertilizers could improve resilience to climate shocks, reducing poverty in rural areas. The government has recently launched the 3N Initiative–(Nigeriens Nourish Nigeriens)–(aimed at scaling up agriculture and livestock production to ensure food self-sufficiency. Downstream activities in the agricultural sector such as storage, agro-processing and trade can also help improve resilience and provide higher incomes.
Maintain political stability and improve regional cooperation to mitigate security risk. Niger is engaged in a peace keeping mission in the north of Mali and is cooperating closely with the international community to tackle the spillover risks of regional conflicts and terrorism threats. This engagement places substantial strains on priority spending. Improved political stability across the region could contribute to ensuring that public resources from the natural resource sectors are invested in high return infrastructure projects ensuring intergenerational benefits.
Improve the business climate to promote private sector development and structural transformation. Private sector development is critical to economic growth. Therefore, it is important that the main impediments to private sector development are quickly addressed. A good judicial system, simple procedures to register businesses, access to official documents, and a simple tax system would be conducive to reducing the informal sector predominance and increasing access to the financial sector.
References
Balakrishnan, Ravi, Chad Steinberg, and Murtaza Syed, 2013, “The Elusive Quest for Inclusive Growth: Growth, Poverty, and Inequality in Asia”. WP/13/152 (Washington, June).
International Monetary Fund, 2010, Regional Economic Outlook: Asia and Pacific, Consolidating the Recovery and Building Sustainable Growth (Washington, October).
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Prepared by Mamadou D. Barry (AFR).
For future use the 2007/2008 survey will be referred as the 2008 survey.
In 2014, a new survey will update the one from 2011.
We estimate a equation of the deviation from the poverty line (ln(welfare/poverty line)) on the following factors: size of the household (in ln), age of the head of household (in ln) and dummies for: gender, location, education, branch of activity (agriculture, commerce and transport), and socio-professional background (public sector).