Fragility and Development Challenges in IsDB Member Countries: The Case of Niger

Cheikh Ahmed Diop, Mustafa Yagci

22 Nov, 2023

Introduction

While the political and security-related challenges in West Africa have risen recently, the political turmoil that unfolded in Niger in July 2023 has raised more significant attention and concern globally. Niger’s strategic location at the intersection of North, West, and Central Africa (Figure 1), its mineral resources and its vast land of 1,267,000 km² ―the biggest among the Economic Community of West African States (ECOWAS)― and its strong demographic growth are some of the reasons behind the interest for the political developments in Niger. However, the country’s situation is not isolated in Western Africa and the Sahel region. This article aims to shed light on Niger’s underlying economic challenges and how these are compounded by fragility. Furthermore, it analyzes the potential impacts of the recent political trouble on the country’s development prospects.

I. Niger’s critical development challenges

Niger is surrounded by seven neighboring countries: Algeria and Libya to its north, Nigeria and Benin to its south, Burkina Faso to its southeast, Chad to its east, and Mali to its west (Figure 1). As of 2022, Niger has a population of 26.2 million people, with a population growth rate of 3.8%. Moreover, it has the world’s highest fertility rate, with about seven children per woman. The country’s population is expected to reach 70 million people by 2050. Its demographics indicate a very young population; about 49% is under 14 as of 2022.

1. Commodity dependence and economic vulnerability

Since its independence in 1960, Niger’s economy has mainly depended on agriculture. Several years of drought and the oil crisis in the early 1970s negatively affected its economic development prospects. In the following years, political developments, commodity prices, and the climate influenced the country’s economic development dynamics without achieving any significant structural transformation in the process. As Figure 2a highlights, the share of agriculture in Niger’s GDP has decreased from more than 70% to around 40% since 1960s. Nevertheless, the share of employment in agriculture remained relatively stable since 1990s (Figure 2b). In other words, the country could not shift the majority of the labor force from the traditional agricultural sector to other sectors such as industry and services, to a large extent.

Figure 2: Economic Structure of Niger

Source: The World Bank, World Development Indicators, 04 July 2023

In terms of Niger’s trade structure, the country’s main exports, as of 2022, are uranium, petroleum, gold, and agricultural products. Niger is the world’s second-largest exporter of uranium, with a share of 14.8% in global uranium exports. Correspondingly, Niger’s ores and metals exports, the bulk of them in uranium exports, correspond to 6% of its total exports.   Niger’s total merchandise exports in 2022 reached USD1.3 billion (9% of GDP) compared with its total merchandise imports of USD3.8 billion (26% of GDP). This suggests a trade deficit of USD2.5 billion (18% of GDP) in 2022. The main export partners of Niger in 2022 were the United Arab Emirates (57.8%), France (8.0%), China (7.7%), Mali (6.3%), and Burkina Faso (5.0%). 

2. Low-Income Trap

Between 1961 and 2022, annually Niger’s GDP growth averaged 2.9% and population growth averaged 3.2%. As a result of the country’s weak economic performance and high population growth, its GDP per capita has followed a declining trend for several decades between 1965 and 2004 (Figure 3a).  As one of the poorest countries in the world, Niger is classified among the least developed countries (LDCs) by the United Nations. The country ranks 189th out of 191countries in the United Nations Development Programme (UNDP) Human Development Index.

Despite its daunting development challenges, Niger has achieved a commendable economic performance since the early 2000s. Its GDP growth rate averaged 5.7% annually from 2005 to 2022, compared with an average of 1.2% from 1965 to 2004. In line with this strong growth performance, the country’s poverty headcount ratio (international poverty line at USD2.15 a day) decreased from 80.5% in 2005 to 50.6% in 2018 (Fig.3b). In fact, Niger reached the completion point of the heavily indebted poor-income countries (HIPC) initiative, which resulted in its significant debt relief. 

Figure 3. Economic Growth and Poverty Trends

Source: UN World Population Prospects (2022) and World Bank WDI (2023).

However, Niger’s economy has a structural external deficit, with its current account balance showing an average of -12.4% from 2006 to 2022, reflecting unfavorable terms of trade and its commodity dependence. In terms of financing, the country heavily relies on official development assistance and official aid, which averaged to 10% of its GDP between 2006 and 2021.

There is uncertainty regarding the extent and length of the disruption induced by the recent political turmoil in the country. Geopolitical tensions in the West African sub-region remain significant and an escalation of these tensions could threaten decades of economic cooperation and integration efforts dampening the development prospects in the region. In addition, Niger’s landlocked position and its dependency on foreign aid make it vulnerable to economic and financial sanctions, such as border closures and the suspension of official development assistance.

II. Addressing the root causes of fragility

Niger is classified among the fragile contexts according to the Organisation for Economic Cooperation and Development (OECD) framework (2022). The country is also included in the World Bank List of Fragile and Conflict-Affected Situations (FCS) since July 2020. In terms of economic and environmental fragility, the key risk factors for Niger can be cited as resource dependence, current account deficit, environment-related displacement, lack of adaptive capacity to climate change, non-renewable resource crimes, and water stress. 

Niger’s classification as FCS is not due to its governance per se but is mainly due to its security issues. Its security issues affect essential agricultural areas in the country, causing disruptions in the production and service delivery of its agricultural commodities.

Figure 4 shows the evolution of Niger’s performance according to the World Bank’s Country Policy and Institutional Assessment (CPIA) framework. Firstly, Niger’s overall CPIA score has improved from 3.26 in 2005 to 3.44 in 2022 (1=low to 6=high). Secondly, this performance is higher than several groupings’ averages, including the averages for total IDA countries and sub-Saharan Africa (Figure 4a). Furthermore, Niger’s CPIA performance is primarily due to the relatively high quality of its economic management. At the same time, the country’s weakest scores are related to its public sector management and institutions and social inclusion/equity (Figure 4b).

Figure 4. CPIA Performance (2005-2022)

Source: Source: World Bank WDI, September 2023.

Source: World Bank WDI, September 2023.

Therefore, development institutions’ interventions to support the country should focus on capacity building and human development. They should also address the country’s economic and environmental vulnerability challenges to foster resilience and create conditions conducive to more stable and sustainable economic activities.

Conclusion

Political stability is one of the critical preconditions for achieving inclusive and sustainable development. The evidence is clear that in countries where political stability cannot be maintained, economic objectives of sustainable growth, eradicating poverty, and inclusive development cannot be accomplished. In this context, critical dimensions such as human development, environment and climate change, and institutional capacity building need to be prioritized in development interventions.


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