Niger: Risk Assessment
Country Rating1
Rating: C
Business Climate Rating1
Rating: D
Risk Assessment2
Recovery driven by the farm and mining sectors
The economic situation remained difficult in the 2010 first half as a result of the drying up of financing, associated with the political situation a year earlier, and a food crisis triggered by poor weather conditions. In cooperation with donor countries, government authorities implemented an emergency plan at midyear that made it possible to limit the impact of the food shortage on the people. The gradual resumption of disbursements from abroad in conjunction with improvement in the farm sector situation resulted in strong growth for the rest of the year and augurs an economic acceleration in 2011. The good results expected from the 2010/11 agricultural campaign are likely to accumulate with the recoveries in the mining and transport sectors. Two large mining and oil projects (Imouraren and Agadem) going into the production phase are expected to significantly enhance the development potential of Niger, a country ultimately destined to become a world leading producer of uranium.
Resumption of relations with the international financial community
Talks with the IMF, interrupted in the aftermath of the coup d'état in February 2010, resumed in September of the same year in the framework of an Extended Credit Facility agreed in May 2008. The Fund applauded the government for the implementation of its plan to combat the food crisis and its prudent fiscal management. At the same time, the European commission announced the gradual resumption of its development aid. Over-indebtedness risk has, moreover, tended to ease as a result of the expected growth of export revenues, while the debt relief granted under the HIPC and MDRI initiatives (2004 and 2006) sharply reduced Niger's debt ratios. The large current account deficit, associated with the surge in imports of capital goods, has been mostly financed by foreign investment. The main challenge to be taken up in coming years will be to exercise prudence in managing the upcoming windfall and take pains to ensure that it is instrumental in reducing poverty. That will entail strengthening Niger's institutional capacity and the establishment of a comprehensive natural-resource management strategy.
A deteriorated security situation
The determination of President Tandja to stay in power resulted in a political crisis in 2009 (constitutional referendum and both legislative and local elections boycotted by the opposition and denounced by the international community) and then in his overthrow via a military coup in February 2010. The junta suspended the controversial constitution of 2009 and took steps to rapidly improve relations with international community by setting up an interim government responsible for organizing democratic elections. A constitutional referendum was organized successfully in October 2007 and was approved by the people. The focus now is on the presidential and legislative elections to be held late January 2011. The strategic decisions taken on foreign investment have not been and are not expected to be called into question. But the security situation is very shaky. Although the Touareg rebels agreed, under the 2009 peace treaty, to disarm in exchange for general amnesty, Niger and foreign interests are increasingly faced with the terrorist threat posed by Al-Qaida in the Islamic Maghreb as attested by the long list of kidnappings it has carried out in northern Niger since 2008.
Strengths
- World‘s sixth largest uranium producer
- Oil reserves
- Debt relief under the HIPC and MDRI initiatives
Weaknesses
- Dependence of the farm sector (nearly a third of GDP) on weather conditions
- Very high level of poverty
- Difficult political and security context