## Contributions to Real GDP Growth in Niger

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---

### Key findings: growth drivers and sectoral structure
- Economic growth in Niger is essentially driven by the agriculture and services sectors, with favorable prospects for the industry sector due to the start of oil exports in 2024.
- Agriculture:
  - Employs about 80 percent of the population.
  - Contributes approximately to 40 percent of GDP.
  - Dominated by subsistence and rainfed farming with persistently low productivity.
  - Irrigated surfaces planned to expand from 18,000 hectares to 39,700 hectares by 2027.
- Services:
  - Dominated by transport and informal trade.
  - Contribution averaged about 1.9 percent (over the last two decades).
  - Constrained by inadequate infrastructure, limited financial intermediation, insufficient formalization, weak institutional frameworks and regulatory inefficiencies.
- Resource/extractive sector:
  - Historically volatile; peak in 2012 linked to Soraz refinery operationalization in 2011.
  - Further prominence with the operationalization of the Niger-Benin pipeline in 2024 and start of crude oil exports expected to boost near- and medium-term growth.
- Demand-side drivers:
  - Historically driven by private consumption and private investment.
  - Public consumption and investment contribute meaningfully but are constrained by low revenue mobilization, governance challenges, and financial constraints.

### Potential output and output gap estimates
- Methodology:
  - Employed a wide range of statistical filters (HP, BK, CF, BW) and a production function model (PF) using annual data for 1990-2023.
  - Sectoral statistical filters show volatile trend growth particularly in agriculture and industry, with a steep rise in 2012 across filters.
- Output gap:
  - Estimated to have fluctuated between -4 percent and 4 percent between 1990 and 2023.
  - Production function model and statistical filters yield similar results.
  - Niger has frequently operated below potential with recurrent negative output gaps associated with the global commodity price downturn in 2014–2016, the COVID-19 pandemic, recurrent droughts, and security challenges.
  - Temporary positive output gaps coincide with resource booms, favorable international commodity prices, and positive climate shocks.
- Demographics and labor:
  - Demographic growth rate is 3.8 percent per year.
  - Fertility rate is 6.9 children per woman.
  - Recurrent negative output gaps underscore underutilization of labor, particularly youth and women.

### Potential growth rates and historical averages
- Potential growth is estimated at about 6 percent over the medium-term.
- Average potential GDP growth rates by period:
  - 1991-2001: 2.3 percent
  - 2002-2012: 5.0 percent
  - 2013-2023: 5.4 percent
- The deceleration in increase of potential growth from 2002-2012 to 2013-2023 reflects limited productivity improvements.

### Contributions to potential growth (production function results)
- Labor:
  - Labor has a structurally significant contribution to potential growth.
- Physical capital:
  - Average contribution of physical capital to potential GDP over 2011-2022 is 2.5 percent.
  - Notable peaks of contribution: 6.5 percent in 2011 and 4.6 percent in 2017, linked to increased investment in infrastructure and extraction technologies.
  - Physical capital accumulation associated with growth peaks, but constrained by weak public investment efficiency and limited private sector participation.
- Human capital:
  - Human capital index is one of the lowest in the world with an average of 2 years of schooling for the population as a whole and stark regional and gender inequalities.
  - A simple mechanical simulation: an average annual 5 percent increase in the human capital index to close the gap relative to the WAEMU region by 2029 would result on average in a 2.3 percentage point gain in potential growth.
- Total factor productivity (TFP):
  - TFP growth contributes on average 1 percent to potential growth over 2011-2023.
  - Weak TFP growth reflects low technology adoption and inefficiencies in resource use.

### Downside risks to growth
- Climate shocks and natural disasters:
  - Severe events—mainly droughts and floods—occur approximately every two years.
  - Between 2010 and 2023, disasters affected about 3 percent of the population annually and incurred a cumulated cost of at least US$271 million (1.4 percent of GDP).
  - In 2024, flooding combined with heavy rain affected more than 1.5 million people, claimed more than 300 lives, and damaged more than 158,000 houses.
  - Heavy reliance on rain-fed farming heightens vulnerability; climate-resilient agriculture and water management are critical.
- Geopolitical instability and security challenges:
  - Insurgent groups and cross-border conflicts disrupt trade routes, deter investment, and strain public finances through rising defense and humanitarian expenditures.
  - Security challenges dampen economic activity, increase uncertainty, and hinder implementation of structural reforms and investor confidence.
- Volatility of resource-driven growth:
  - Resource sector exposure to price shocks and production fluctuations produces episodic positive output gaps and volatility in aggregate growth.

### Policy implications and priorities (as presented)
- Structural reforms and investments that could boost real and potential growth:
  - Investment in human capital (education, healthcare, vocational training) to raise skills and close the WAEMU gap.
  - Development of the extractive sector and agro-industrial value chains to leverage resource and agricultural potential.
  - Diffusion of digital technologies to improve productivity and service delivery.
  - Investments in climate-resilient agriculture and water management systems.
  - Strengthen climate, disaster, and security risk management.
  - Improve public investment efficiency and create a more conducive environment for private sector participation to accelerate capital accumulation and attract FDI.
  - Address governance challenges and low revenue mobilization to enhance fiscal space for growth-enhancing investments.

### Reform agenda and key growth drivers
- Structural bottlenecks to be tackled, diversification promoted, and resilience to shocks built.
- Key drivers of growth:
  - human capital development;
  - development of the extractive sector and agro-industrial value chains;
  - diffusion of digital technologies.
- Consistent potential growth pathway will focus on policies including:
  - leveraging technology for private sector growth;
  - fostering financial inclusion and digital finance;
  - ensuring transparency and adequate governance of the resource sector;
  - strengthening climate resilience and disaster risk management;
  - enhancing human capital development.

### Leveraging technology and agricultural transformation
- New technologies (agri-platforms, smart agriculture) can:
  - enhance agricultural productivity;
  - link agriculture to global value chains.
- Transition from subsistence to commercial agriculture requires substantial investments in:
  - irrigation;
  - logistics;
  - digital infrastructure.
- Target export markets with competitive advantages (horticultural products and livestock) to drive diversification.
- Strengthening farmer organizations can:
  - aggregate production;
  - improve quality;
  - attract private investment.

### Digital finance and financial inclusion
- Expanding digital finance is a promising strategy to accelerate growth and inclusion.
- Mobile financial services can provide rural and underserved populations with access to financial products, improving resilience and productivity.
- Current situation:
  - mobile money penetration and financial inclusion remains very low in Niger.
- Policy measures recommended:
  - digitalize government payments;
  - improve financial literacy;
  - create a conducive regulatory environment to scale digital finance.
- Expected benefits:
  - opportunities for small and medium-sized enterprises to thrive and boost growth.

### Extractive sector development and governance
- Extractive sector has significant potential to drive growth but must be developed responsibly to ensure sustainability and inclusivity.
- Policy recommendation:
  - implement transparent fiscal rules to manage oil revenues to avoid the “resource curse” and ensure windfalls are invested in human capital development and critical infrastructure.

### Climate resilience and disaster risk management (DRM)
- Climate shocks and natural disasters are significant risks: recurring droughts and floods cause substantial economic losses and exacerbate food insecurity.
- Priority actions:
  - strengthen climate resilience and DRM frameworks;
  - invest in risk reduction;
  - implement early warning systems;
  - establish disaster risk financing.
- Implementation note:
  - stepped up implementation of measures under the current IMF’s Resilience and Sustainability Facility arrangement (RSF) will help build resilience to climate change.

### Human capital investment
- Investing in human capital is essential to unlock economic potential and address structural challenges.
- Education system needs significant improvement to enhance literacy rates, skill development, and labor productivity.
- Addressing gender disparities in education and employment is particularly important; women face significant barriers to labor market participation.
- Specific initiatives:
  - increase school attendance;
  - delay early marriages;
  - expand vocational training for women.
- Health improvements and reduced malnutrition will contribute to a healthier, more productive workforce.

### Appendix I — Cobb-Douglas production function and growth accounting (methodology highlights)
- Production function specified as:
  - Y_t = A_t K_t^α (h_t L_t)^{1−α} with 0<α<1
  - Y_t refers to total output (GDP) at time t;
  - A_t is total factor productivity (TFP) at time t and determined as the Solow residual;
  - K_t is the capital stock at t;
  - h_t is the index of human capital at time t;
  - L_t is the labor input at time t and assumed equal to total active population as a proxy.
- Capital accumulation equation:
  - K_t = (1−δ)K_{t−1} + I_t
  - δ is the rate of depreciation of capital; I_t is investment at time t.
- Calibration and data:
  - δ calibrated to 0.05;
  - 1−α calibrated to 0.545;
  - calibration based on averages over the period 1990-2019;
  - data sources: Penn World Table version 10.01, IMF’s 2024 WEO October vintage, and IMF staff projections.
- Potential output derivation:
  - combines actual stock of capital with average filtered series of different filters of TFP;
  - potential labor input assumed equal to actual active population corrected by the human capital index from Penn World Table version 10.01.

### Appendix II — Overview of univariate statistical filters (trend extraction)
- Univariate statistical filters decompose a series y_t into trend, cyclical, and noise components; trend used as proxy for potential output.
- Filters described:
  - Hodrick-Prescott (HP) Filter: minimizes sum of squares between observed series (real GDP) and trend (potential GDP) while penalizing variations in the trend.
  - Baxter-King (BK) Filter: moving average with symmetric weights on lags and leads; loses observations at beginning and end; suited when raw series follows near-i.i.d. process.
  - Christiano and Fitzgerald (CF) Filter: one-sided moving average with weights minimizing distance to the “ideal” filter; does not lose observations towards the end; suitable for random-walk series.
  - Butterworth (BW) Filter: isolates low-frequency fluctuations; alternative to traditional linear filters such as HP.

*Source: sipea2025041 — Contributions to Real GDP Growth in Niger (IMF), December 17, 2024.*

### 1. Contributions to Real GDP Growth in Niger __________________________________________ 4

### Contributions to Real GDP Growth in Niger

### Key findings: growth drivers and sectoral structure
- Economic growth in Niger is essentially driven by the agriculture and services sectors, with favorable prospects for the industry sector due to the start of oil exports in 2024.
- Agriculture:
  - Employs about 80 percent of the population.
  - Contributes approximately to 40 percent of GDP.
  - Dominated by subsistence and rainfed farming with persistently low productivity.
  - Irrigated surfaces planned to expand from 18,000 hectares to 39,700 hectares by 2027.
- Services:
  - Dominated by transport and informal trade.
  - Contribution averaged about 1.9 percent (over the last two decades).
  - Constrained by inadequate infrastructure, limited financial intermediation, insufficient formalization, weak institutional frameworks and regulatory inefficiencies.
- Resource/extractive sector:
  - Historically volatile; peak in 2012 linked to Soraz refinery operationalization in 2011.
  - Further prominence with the operationalization of the Niger-Benin pipeline in 2024 and start of crude oil exports expected to boost near- and medium-term growth.
- Demand-side drivers:
  - Historically driven by private consumption and private investment.
  - Public consumption and investment contribute meaningfully but are constrained by low revenue mobilization, governance challenges, and financial constraints.

### Potential output and output gap estimates
- Methodology:
  - Employed a wide range of statistical filters (HP, BK, CF, BW) and a production function model (PF) using annual data for 1990-2023.
  - Sectoral statistical filters show volatile trend growth particularly in agriculture and industry, with a steep rise in 2012 across filters.
- Output gap:
  - Estimated to have fluctuated between -4 percent and 4 percent between 1990 and 2023.
  - Production function model and statistical filters yield similar results.
  - Niger has frequently operated below potential with recurrent negative output gaps associated with the global commodity price downturn in 2014–2016, the COVID-19 pandemic, recurrent droughts, and security challenges.
  - Temporary positive output gaps coincide with resource booms, favorable international commodity prices, and positive climate shocks.
- Demographics and labor:
  - Demographic growth rate is 3.8 percent per year.
  - Fertility rate is 6.9 children per woman.
  - Recurrent negative output gaps underscore underutilization of labor, particularly youth and women.

### Potential growth rates and historical averages
- Potential growth is estimated at about 6 percent over the medium-term.
- Average potential GDP growth rates by period:
  - 1991-2001: 2.3 percent
  - 2002-2012: 5.0 percent
  - 2013-2023: 5.4 percent
- The deceleration in increase of potential growth from 2002-2012 to 2013-2023 reflects limited productivity improvements.

### Contributions to potential growth (production function results)
- Labor:
  - Labor has a structurally significant contribution to potential growth.
- Physical capital:
  - Average contribution of physical capital to potential GDP over 2011-2022 is 2.5 percent.
  - Notable peaks of contribution: 6.5 percent in 2011 and 4.6 percent in 2017, linked to increased investment in infrastructure and extraction technologies.
  - Physical capital accumulation associated with growth peaks, but constrained by weak public investment efficiency and limited private sector participation.
- Human capital:
  - Human capital index is one of the lowest in the world with an average of 2 years of schooling for the population as a whole and stark regional and gender inequalities.
  - A simple mechanical simulation: an average annual 5 percent increase in the human capital index to close the gap relative to the WAEMU region by 2029 would result on average in a 2.3 percentage point gain in potential growth.
- Total factor productivity (TFP):
  - TFP growth contributes on average 1 percent to potential growth over 2011-2023.
  - Weak TFP growth reflects low technology adoption and inefficiencies in resource use.

### Downside risks to growth
- Climate shocks and natural disasters:
  - Severe events—mainly droughts and floods—occur approximately every two years.
  - Between 2010 and 2023, disasters affected about 3 percent of the population annually and incurred a cumulated cost of at least US$271 million (1.4 percent of GDP).
  - In 2024, flooding combined with heavy rain affected more than 1.5 million people, claimed more than 300 lives, and damaged more than 158,000 houses.
  - Heavy reliance on rain-fed farming heightens vulnerability; climate-resilient agriculture and water management are critical.
- Geopolitical instability and security challenges:
  - Insurgent groups and cross-border conflicts disrupt trade routes, deter investment, and strain public finances through rising defense and humanitarian expenditures.
  - Security challenges dampen economic activity, increase uncertainty, and hinder implementation of structural reforms and investor confidence.
- Volatility of resource-driven growth:
  - Resource sector exposure to price shocks and production fluctuations produces episodic positive output gaps and volatility in aggregate growth.

### Policy implications and priorities (as presented)
- Structural reforms and investments that could boost real and potential growth:
  - Investment in human capital (education, healthcare, vocational training) to raise skills and close the WAEMU gap.
  - Development of the extractive sector and agro-industrial value chains to leverage resource and agricultural potential.
  - Diffusion of digital technologies to improve productivity and service delivery.
  - Investments in climate-resilient agriculture and water management systems.
  - Strengthen climate, disaster, and security risk management.
  - Improve public investment efficiency and create a more conducive environment for private sector participation to accelerate capital accumulation and attract FDI.
  - Address governance challenges and low revenue mobilization to enhance fiscal space for growth-enhancing investments.

*Source: sipea2025041 — Contributions to Real GDP Growth in Niger (IMF), December 17, 2024.*

### 24.      Addressing growth challenges in Niger requires a comprehensive reform agenda that

### 24.      Addressing growth challenges in Niger requires a comprehensive reform agenda that

### Reform agenda and key growth drivers
- Structural bottlenecks to be tackled, diversification promoted, and resilience to shocks built.
- Key drivers of growth:
  - human capital development;
  - development of the extractive sector and agro-industrial value chains;
  - diffusion of digital technologies.
- Consistent potential growth pathway will focus on policies including:
  - leveraging technology for private sector growth;
  - fostering financial inclusion and digital finance;
  - ensuring transparency and adequate governance of the resource sector;
  - strengthening climate resilience and disaster risk management;
  - enhancing human capital development.

### Leveraging technology and agricultural transformation
- New technologies (agri-platforms, smart agriculture) can:
  - enhance agricultural productivity;
  - link agriculture to global value chains.
- Transition from subsistence to commercial agriculture requires substantial investments in:
  - irrigation;
  - logistics;
  - digital infrastructure.
- Target export markets with competitive advantages (horticultural products and livestock) to drive diversification.
- Strengthening farmer organizations can:
  - aggregate production;
  - improve quality;
  - attract private investment.

### Digital finance and financial inclusion
- Expanding digital finance is a promising strategy to accelerate growth and inclusion.
- Mobile financial services can provide rural and underserved populations with access to financial products, improving resilience and productivity.
- Current situation:
  - mobile money penetration and financial inclusion remains very low in Niger.
- Policy measures recommended:
  - digitalize government payments;
  - improve financial literacy;
  - create a conducive regulatory environment to scale digital finance.
- Expected benefits:
  - opportunities for small and medium-sized enterprises to thrive and boost growth.
- Cross-reference: (see IMF Country Report No. 23/29).

### Extractive sector development and governance
- Extractive sector has significant potential to drive growth but must be developed responsibly to ensure sustainability and inclusivity.
- Policy recommendation:
  - implement transparent fiscal rules to manage oil revenues to avoid the “resource curse” and ensure windfalls are invested in human capital development and critical infrastructure.

### Climate resilience and disaster risk management (DRM)
- Climate shocks and natural disasters are significant risks: recurring droughts and floods cause substantial economic losses and exacerbate food insecurity.
- Priority actions:
  - strengthen climate resilience and DRM frameworks;
  - invest in risk reduction;
  - implement early warning systems;
  - establish disaster risk financing.
- Implementation note:
  - stepped up implementation of measures under the current IMF’s Resilience and Sustainability Facility arrangement (RSF) will help build resilience to climate change.

### Human capital investment
- Investing in human capital is essential to unlock economic potential and address structural challenges.
- Education system needs significant improvement to enhance literacy rates, skill development, and labor productivity.
- Addressing gender disparities in education and employment is particularly important; women face significant barriers to labor market participation.
- Specific initiatives:
  - increase school attendance;
  - delay early marriages;
  - expand vocational training for women.
- Health improvements and reduced malnutrition will contribute to a healthier, more productive workforce.
- Cross-reference: (see IMF Country Report No. 23/29).

### Appendix I — Cobb-Douglas production function and growth accounting (methodology highlights)
- Production function specified as:
  - Y_t = A_t K_t^α (h_t L_t)^{1−α} with 0<α<1
  - Y_t refers to total output (GDP) at time t;
  - A_t is total factor productivity (TFP) at time t and determined as the Solow residual;
  - K_t is the capital stock at t;
  - h_t is the index of human capital at time t;
  - L_t is the labor input at time t and assumed equal to total active population as a proxy.
- Capital accumulation equation:
  - K_t = (1−δ)K_{t−1} + I_t
  - δ is the rate of depreciation of capital; I_t is investment at time t.
- Calibration and data:
  - δ calibrated to 0.05;
  - 1−α calibrated to 0.545;
  - calibration based on averages over the period 1990-2019;
  - data sources: Penn World Table version 10.01, IMF’s 2024 WEO October vintage, and IMF staff projections.
- Potential output derivation:
  - combines actual stock of capital with average filtered series of different filters of TFP;
  - potential labor input assumed equal to actual active population corrected by the human capital index from Penn World Table version 10.01.

### Appendix II — Overview of univariate statistical filters (trend extraction)
- Univariate statistical filters decompose a series y_t into trend, cyclical, and noise components; trend used as proxy for potential output.
- Filters described:
  - Hodrick-Prescott (HP) Filter: minimizes sum of squares between observed series (real GDP) and trend (potential GDP) while penalizing variations in the trend.
  - Baxter-King (BK) Filter: moving average with symmetric weights on lags and leads; loses observations at beginning and end; suited when raw series follows near-i.i.d. process.
  - Christiano and Fitzgerald (CF) Filter: one-sided moving average with weights minimizing distance to the “ideal” filter; does not lose observations towards the end; suitable for random-walk series.
  - Butterworth (BW) Filter: isolates low-frequency fluctuations; alternative to traditional linear filters such as HP.

*NIGER INTERNATIONAL MONETARY FUND*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025041.pdf_