Niger's economy is expected to recover following a challenging year marked by political instability. This recovery hinges on favorable security and climate conditions, along with sustained oil production for exports, as detailed in the World Bank's latest economic update for Niger.
The report examines recent economic and poverty trends in Niger and offers a three-year outlook. It also includes an analysis of the costs associated with improving access to quality primary and secondary education, along with policy recommendations.
The report highlights that the political crisis triggered by the unconstitutional regime change on July 26, 2023, coupled with commercial and financial sanctions imposed by ECOWAS* and WAEMU*, significantly reduced GDP growth to 2%. Before the crisis, GDP growth was projected at 6.9% for 2023 and expected to rise to 12% in 2024 due to large-scale oil exports through a pipeline commissioned at the end of 2023. Government spending decreased because of asset freezes, loss of regional financing, and a reduction in external financing amounting to approximately 7.5% of GDP. Private investment also fell sharply in 2023 due to uncertainty and a liquidity crisis in the banking sector caused by financial sanctions.
"Despite the heavy sanctions imposed by ECOWAS in 2023, Niger's economy has shown resilience due in part to proactive measures taken by the authorities. These measures have enabled the government to continue paying public sector salaries and manage the energy crisis caused by the interruption of electricity imports from Nigeria. However, Niger's economy remains fragile and largely dependent on rainfed agriculture, thus exposing it to climate shocks. Investing in human capital, particularly education, is crucial for achieving sustainable and inclusive growth," said Han Fraeters, World Bank Country Manager for Niger.
With sanctions lifted on February 24, 2024, and partial restoration of financing, growth could rebound to 5.7% in 2024. This rebound would be driven by oil exports while non-oil industries and service sectors face a challenging recovery after suffering significant losses in 2023. The extreme poverty rate is expected to decline between 2024 and 2026, reaching 42.5 percent by late-2026 if solid agricultural output growth continues alongside effective use of increased oil revenues for public benefit.
“While oil production and exports are expected to boost government revenues, it will also increase the volatility of growth. Plus, it is a finite resource; Niger's oil reserves are expected to begin declining in the mid-2030s if there are no new discoveries. It is therefore crucial to focus on increasing productivity by investing in sectors such as education,” said Mahama Samir Bandaogo, Senior Economist at the World Bank and co-author of the report. “The education sector faces many challenges and requires substantial investment. However several options exist for financing necessary additional expenditure without compromising fiscal sustainability including improving spending efficiency within education sector itself strengthening domestic revenue mobilization both oil non-oil create additional fiscal space sustainably."
*ECOWAS: Economic Community of West African States
*WAEMU: West African Economic And Monetary Union