Niger Anticipates Economic Recovery on the Back of Oil Revenues

Niger’s economy is set to rebound after a year marked by an unprecedented political crisis. However, the rebound is dependent on favorable security and climate conditions, and continued oil production for exports, according to the World Bank’s latest economic update for Niger, published today.

The report analyzes the country’s recent economic and poverty trends and provides a three-year outlook. In a dedicated chapter, it also analyzes the costs of improving access to quality primary and secondary education and offers some policy recommendations.

The report notes that the political crisis following the unconstitutional regime change on July 26, 2023, and the subsequent commercial and financial sanctions imposed by ECOWAS* and WAEMU*, significantly reduced GDP growth to 2%. Prior to the crisis, GDP growth had been projected at 6.9 % for 2023 and was expected to rise to 12 % in 2024, driven by large-scale oil exports through the pipeline that was commissioned at the end of 2023. Government spending fell due to asset freezes, loss of regional financing, and a significant reduction in external financing amounting to approximately 7.5 % of GDP. Private investment also sharply declined in 2023 due to uncertainty and a liquidity crisis in the banking sector caused by the 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 the lifting of sanctions 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, which suffered heavy losses in 2023, face a challenging recovery. The extreme poverty rate is expected to decline between 2024 and 2026, reaching 42.5 percent by the end of 2026, in line with projected growth rates. This assumes solid growth in agriculture output and the effective use of increased oil revenues for the benefit of the population.

“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, and 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 the necessary additional expenditure without compromising fiscal sustainability. These include improving spending efficiency in the education sector and strengthening domestic revenue mobilization, both oil and non-oil, to create additional fiscal space sustainably.”

Distributed by APO Group on behalf of The World Bank Group.