## _cr1564 ## Source details **Canonical URL:** [_cr1564](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr1564.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr1564.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr1564.pdf.json) --- ### External sector development - Current account: - Deteriorated in 2013, mainly due to higher food and capital goods imports linked to extractive industry and basic infrastructure projects. - Deficit expected to widen further in 2014-15 and gradually improve from 2016 as major infrastructure projects end, oil and mining sectors come on stream, and public and private savings increase. - Expanded uranium production impact deferred to 2019-20 following a government-AREVA agreement. - External financing composition (2013): - Foreign direct investment (FDI): about 53 percent of total external financing. - Loans: 17 percent of total external financing. - Grants: 49 percent of total external financing. - Near-term financing drivers: - Large projects in extractive industries and infrastructure; FDIs expected to remain high and external borrowing to rise. - Anticipated 2014 refinancing operation to SORAZ refinery: US$ 880 million (CFAF 435 billion) noted in staff text as expected for 2014 financing plans. - Reserves and regional arrangements: - As a WAEMU member, Niger may sustain large current account deficits thanks to access to pooled reserves of the Central Bank of West African States. - Pooled reserves correspond to 4.7 months of 2015 imports, 50 percent of broad money, and about 91 percent of short-term liabilities in the region. - Other external-balance features: - Services and primary income balances continuously negative (services dominated by freight; primary income impacted by interest payments and profit repatriation); remittances limited. - Large imports of capital and intermediary goods (mining and infrastructure) are the main factor contributing to the large current account deficit. - Large current account deficit financed by combination of FDI, donor support, and external borrowing, allowing reserve accumulation. ### Model-based assessment (REER and current account) - REER evolution: - REER appreciated by about 3.6 percent in 2013, mostly related to the euro appreciation, reversing depreciation in 2008-2012. - Over 1995-2013 observed moderate cumulative appreciation may signal some erosion in external competitiveness. - CGER-based assessments (three approaches): - No significant misalignments of Niger’s REER; different CGER approaches give conflicting point estimates but large confidence intervals. - 90 percent confidence intervals for MB and REER approaches are wide and contain negative and positive values. - EBA-lite: - Norm and fitted value very close in 2013, suggesting little or no policy gap; large recent increase in current account deficit mostly driven by large FDI-driven imports expected to return to trend after 2019. - Box: model-based REER assessment results (2013): - Macroeconomic balance approach: overvaluation of about 6.19 percent. - Equilibrium real exchange rate (fundamentals): 4.1 percent undervaluation. - External sustainability method: misalignment of about 9.64 percent. - Overall: exchange rate does not show significant misalignment from equilibrium, assessments subject to large uncertainty due to data limitations and structural changes. - Technical calibration notes: - Underlying current account for macro-balance uses projected current account for 2019 (steady-state of new projects). - External sustainability NFA position = average of NFA projected by external sustainability approach for 2013-2019; medium-term growth projection set to 7.3 percent and inflation to 3 percent (WAEMU norm). - Elasticity used: 0.63 (median from Tokarick (2010)); CA account norm: -6.3 (average model prediction for 2013-2019). ### Natural resource discoveries, investment plans, and macroeconomic modeling - Resource timeline and macro significance: - Azelik uranium mine began operating in 2011. - Integrated oil project (field + refinery) started in 2012. - Imouraren uranium expected to begin production around 2019-20 when prices make mine profitable. - Natural resource outcome contributed to 12.3 percent of total GDP in 2013 and projected to double as a share of GDP in 2020. - Total government revenue from natural resources expected to increase by about 2 percent of GDP. - DSGE model features and calibration: - Model includes resource revenue, financial market frictions, large share of poor households without financial access, public investment inefficiencies and absorptive constraints, government financing via concessional debt, external commercial debt, and consumption VAT. - Calibrated using historical Niger data and literature parameter values. - Public investment simulated plans: - Baseline: public investment as percent of GDP gradually increases to peak of 19 percent of GDP in 2026, stays at peak for 5 years, then gradually returns to current level. - Aggressive: more front-loaded scaling-up; reaches same peak in 6 years (one half the time of baseline). - Natural resource production scenarios: - Baseline: - Oil: increases from current level of 18,000 barrels per day to peak at 80,000 barrels per day by 2019, stays at peak for 10 years. - Uranium: increases from 4639 metric tons per year to peak at 10300 metric tons per year in 2019. - Adverse: - Oil: rises more slowly, peak at 26,400 barrels per day in 2024. - Uranium: only slightly increases over coming 8 years, reaches peak at 4400 metric tons per year before rapidly declining to current level. - Financing options compared in simulations: - Scaling up investment financed through consumption tax (blue solid lines) versus financed through commercial debt (red dashed lines). - Policy tradeoff: smooth tax rates and borrow within fiscal space; evaluate returns to public investment accounting for distortive taxes needed to service incremental public debt. - Key simulation findings: - Aggressive scaling-up increases public capital stock, raises output gradually, offsets short-run public debt so debt-to-GDP declines in long run. - Baseline implies less short-run debt increase but slower capital accumulation. - Absence of a well-established sovereign wealth fund to smooth consumption and save against revenue volatility. - Under the adverse scenario both plans imply undesirably high debt or painful tax adjustments in the long run; reductions in private consumption and investment more severe under adverse scenario. - Policy implications: - Public investment scaling-up to fill infrastructure gaps is needed and, with clearly identified projects, favorable for long-term growth and debt sustainability. - Authorities should account for commodity price and extraction-rate uncertainty when making fiscal policy decisions. - Consider establishing mechanisms (e.g., sovereign wealth fund) and institutional capacity to save and manage revenue volatility and intergenerational equity. ### Fiscal stance, spending efficiency, human capital, and budget execution - Fiscal pro-cyclicality: - Public expenditure became more expansionary with stronger growth and resource-related windfall revenues; correlation coefficient of public spending with the output gap is about 0.7 since 2008. - Level and composition of spending: - Public investment stood at 17.2 percent of GDP in 2014 (WAEMU average: 10.2 percent of GDP). - Increased spending absorbed largely by general public services and economic affairs; social spending also expanded. - Education and social outcomes: - Net enrollment rates: primary education 62.8 percent; secondary education 12.2 percent. - Education attainment is the lowest in the WAEMU region. - Improving efficiency in delivering education services could yield large gains without increasing spending. - Spending inefficiency and productivity: - Output per worker far below frontier African countries due to lower productivity and human capital contributions. - Growth accounting decomposition follows Cobb-Douglas function; despite high levels of education and capital spending, Niger’s income remains far behind GDP frontier due to inefficiency. - Budget execution and key fiscal figures: - Inefficiency partly stems from uncertainty in budget allocation and execution; actual social sector executions lower due to delays in credit release and investment project commitments. - Expenditure share of subsidy and transfers: 5.5 percent of GDP (largest current expenditure item). - Share of natural resource revenue: 22 percent of total revenues in 2012. - Selected Table 2 excerpts (percent of GDP; budgets and executions by year and end-June executions): - Education — Total education entries include: 4.43, 3.85, 4.84, 4.26, 5.86, 4.53, 6.29, 5.24, 7.28, 3.11. - Health — Total health entries include: 1.72, 1.28, 1.82, 1.50, 2.36, 1.69, 3.05, 1.97, 2.57, 0.64. - Memorandum cross-country comparison (most recent data): Niger education 4.89; Niger health 2.55; WAEMU average education 4.07; WAEMU average health 2.07; WAEMU+ average education 3.42; WAEMU+ average health 1.85. - Policy recommendations on budgeting: - Closely link budget planning and execution with development plans; stabilize credit allocation to prioritized spending. - Strengthen public financial management and strategic budget planning within medium-term expenditure framework. - Improve efficiency of social spending by monitoring outcomes and improving education service delivery. ### Subsidy reform and fiscal space - Fuel pricing and subsidies: - Domestic retail prices of fuel products kept lower than other WAEMU countries because crude oil from CNPC to SORAZ fixed below international prices. - Fuel subsidy has regressive distributional impact and diverts fiscal resources away from priority public expenditures. - Authorities encouraged to create fiscal space by reducing subsidies for oil and energy sectors and reallocate savings to urgent spending such as food security and security. - Initial reforms to phase out fuel subsidies implemented late 2010-early 2011 but lost momentum. - Recommended fiscal reforms (short- and medium-term agenda): 1) Adoption of a resource neutral fiscal rule: consider non-resource primary balance as benchmark alongside WAEMU basic fiscal balance to avoid expenditure pro-cyclicality. 2) Mobilization of larger natural resource revenues: natural resource revenue was 22 percent of total revenues in 2012; raising this contribution recommended. 3) Expenditure rationalization: rely on cuts in transfers and wage bill for lasting adjustments; re-engage in subsidy reform (reduce tax exemptions on fuel, complementary safety-net provisions), following IMF technical assistance in 2010. ### Energy sector: access, prices, and policy priorities - Energy access and consumption (selected figures): - Per capita energy consumption: 0.13 toe in 2009. - GDP per capita: US$445.9 in 2013. - Population: estimated at 16 million and growing at around 3.9 percent per year. - About 84 percent of population lives in rural areas. - Less than 5 percent of population uses LPG. - Electricity access level: only 9 percent overall; urban access almost 40 percent; rural access less than 1 percent. - Households’ energy consumption: almost 90 percent of total energy consumption. - Energy mix and targets: - Dominated by biomass and wood fuel; government plans to increase renewable energy share to 10 percent by 2020 (from less than 1 percent in 2007) and reduce biomass share to 62 percent in 2020 (from 87 percent in 2007). - Electricity demand trends: - Total electricity net consumption grew at 9.2 percent in 2011. - Over 2007-2011 average annual growth in net electricity consumption: Niger 8.2 percent. - Domestic refining and oil production: - SORAZ refinery maximum capacity: 20,000 barrels per day; operating at 18,000 barrels per day. - Proven reserves at Agadem block amounting to 80,000 barrels per day beyond SORAZ capacity; government exploring exporting around 60,000 barrels per day. - Study identified Niger-Chad-Cameroon route as most cost-efficient export route. - Energy price administration and fiscal implications: - Administered prices create possibility for implicit subsidies. - Crude oil sold to SORAZ at US$70 per barrel (below WTI average above US$94 per barrel each year since 2011). - Since January 2012 retail subsidy removed on gasoline, diesel, LPG; explicit subsidy remains on kerosene at 96.02 CFAF/liter (approximately 19 US cents/liter). - Expected reduction or elimination of kerosene subsidy over time with SORAZ lamp oil production starting April 2014. - Petroleum price structure (as of August 1, 2013) — USD per unit: - Price Ex-SORAZ: Gasoline 0.63, Diesel 0.64, Fuel Oil 0.64, Kerosene 0.93, LPG 3.00 - Taxes: Gasoline 0.19, Diesel 0.20, Fuel Oil 0.12, Kerosene 0.07, LPG ... - Storage, losses etc (SONIDEP): Gasoline 0.06, Diesel 0.07, Fuel Oil 0.07, Kerosene 0.06, LPG 0.20 - Transport to SONIDEP storage facilities: Gasoline 0.09, Diesel 0.08, Fuel Oil 0.08, Kerosene 0.05, LPG ... - Price Ex-SONIDEP: Gasoline 0.97, Diesel 0.98, Fuel Oil 0.90, Kerosene 1.11, LPG 3.20 - Expenses and distribution margin: Gasoline 0.11, Diesel 0.09, Fuel Oil 0.00, Kerosene 0.08, LPG 4.30 - Subsidy: Gasoline 0.00, Diesel 0.00, Fuel Oil 0.00, Kerosene -0.19, LPG ... - Retail Price: Gasoline 1.08, Diesel 1.08, Fuel Oil 0.90, Kerosene 0.99, LPG 7.50 - Of which: 6kg LPG cylinder 3.60; 3kg LPG cylinder 1.80 - Electricity sub-sector fiscal leakages: - NIGELEC monopoly exempt from VAT and TIPP payments to government; presents revenue leakage risk. - Energy policy recommendations: - Improve access to energy as key objective; address price controls that act as implicit subsidies. - Increase grid penetration and investment; continue renewable energy initiatives (20MW solar at Guesselbody; 200MW coal at Salkadamna; 130MW hydroelectric at Kandadji). - Promote energy conservation campaigns (incandescent bulb replacement, solar lamps, energy-saving bulbs) and shared transport arrangements (car-pooling). ### Financial development and banking sector (overview and diagnostics) - Financial depth and inclusion: - Broad money (M2) to GDP: 24.2 percent in 2013 (WAEMU average: 37 percent). - Private sector credit to GDP: 14 percent in 2013 (WAEMU average: 20 percent). - Account at a formal financial institution (2011, age 15+): 1.5 percent in Niger (sub-Saharan Africa average: 21 percent). - Loan from a financial institution in the past year (2011, age 15+): 1.3 percent in Niger (sub-Saharan Africa average: 5.2 percent). - Mobile money and outreach (BCEAO as of end June 2014): - 3 bank intermediaries involved in mobile banking; mobile banking service outlets countrywide 15,234 (compared to 655 in 2011); holders of electronic purse 958,010 (compared to 538,378 in 2011). - Banking sector structure and vulnerabilities: - Dominated by commercial banks; almost all banks associated with foreign, Pan-African Bank (PAB) groups. - High net interest margins and overheads reflect high lending rates, inefficiency, limited competition, and infrastructure constraints. - Agriculture and livestock contribute more than 40 percent to GDP but receive less than 1 percent of total bank credit. - Share of credit to public or semi-public enterprises: approximately 20 percent of total. - Concentration and maturity: - Credit to the 5 biggest borrowers corresponds to 12.3 percent of total at end-2012. - Credit concentration on the five largest borrowers: 143 percent of regulatory capital at end-June 2013 (major source of risk). - Share of medium- and long-term credit increased from 16.89 percent on average in 2004 to 38.26 percent in 2013. - Financial inclusion and firm access (Enterprise Survey): - Firms with 5-19 employees: 17.6 percent have bank loan/credit line. - Medium firms (20-99 employees): 67.2 percent have bank loan/credit line. - Large firms (100+ employees): 56.9 percent have bank loan/credit line. - Firms with >=10 percent foreign ownership: 65.8 percent have bank loan/credit line; domestic firms: 20.7 percent; firms with female top management: 9.7 percent. - Prudential indicators (selected trends 2008–2014): - Regulatory capital to risk-weighted assets: 4.0 (2008), 8.3 (2009), 13.5 (2010), 13.5 (2011), 16.7 (2012), 15.5 (2013), 16.0 (2014 Dec.), 16.5 (2014 Jun.) - Gross NPLs to total loans: 16.0 (2008), 14.7 (2009), 18.2 (2010), 19.6 (2011), 17.1 (2012), 16.5 (2013), 19.3 (2014 Dec.), 17.3 (2014 Jun.) - Provisioning rate: 50.3 (2008), 64.9 (2009), 47.7 (2010), 58.0 (2011), 54.6 (2012), 67.3 (2013), 61.1 (2014 Dec.), 48.6 (2014 Jun.) - Liquid assets to total assets: 35.3 (2008), 33.3 (2009), 29.7 (2010), 33.4 (2011), 32.5 (2012), 22.4 (2013) - Total loans to total deposits: 86.0 (2008), 95.7 (2009), 94.0 (2010), 108.8 (2011), 104.7 (2012), 93.7 (2013), 93.3 (2014 Dec.), 90.2 (2014 Jun.) - Heterogeneity and near-term deterioration: - At December 2012 three banks were below the minimum requirement. - Some deterioration in capital adequacy and asset quality emerged in 2013. - Foreign shareholding at year-end 2012 constituted 54 percent of banking sector’s total capital. - Non-banking financial institutions: - Microfinance outstanding loans: 0.6 percent of GDP in 2010 (WAEMU average: 1.4 percent). - Number of deposit-taking micro-financial institutions reduced to 49 from 106 between 2009 and 2012. - Insurance penetration (premiums/GDP) about 0.6 percent in 2010. - Niger sovereign issued a 7-year bond for 16.6 billion CFAF in 2009 and a 5-year bond for 25 billion CFAF in 2013. - Empirical regression findings (panel regressions 1997-2011): - Weak institutional and information environment hinders financial sector development; impact more pronounced in WAEMU than in EAC/Nigeria/Ghana/South Africa. - High bank net intermediation margin impact prominent in WAEMU. - Selected regression coefficients: bank net interest margin coefficients around -0.58 (0.32) to -1.04 (0.40); public credit registry coverage coefficients around 0.53 (0.30) to 0.71 (0.34). - Policy recommendations for financial sector: - Banks should hold more capital buffers despite meeting WAEMU minimum capital requirement of CFAF 5 billion; consider countercyclical capital buffer. - Establish commercial court to resolve disputes and increase predictability of debt recovery. - Establish credit reference bureau to facilitate credit information sharing. - Tackle land titling constraints beginning with surveying/titling land in/adjacent to major urban centers. - Embrace mobile banking and implement regulatory/supervisory frameworks for mobile banking. ### Food security, markets, and regional trade - Policy and market integration: - Structural food security originally under Rural Development Strategy (RDS), replaced by “3N” Initiative up to 2035 (PDES 2012-2015). - Short-term government food-security responses often surprise private stakeholders, disrupting market functioning and stockpiling incentives. - Markets supplied transfers more timely and larger than humanitarian transfers during the 2010 crisis. - Cross-border trade structure: - Niger shares over 1,500 km border with Nigeria; “K²M axis” (Maradi-Katsina-Kano) fosters trader networks. - Principal traded goods: livestock, cowpeas, peppers, tigernuts from Niger; grains and manufactured goods from Nigeria; re-exports from Benin/Togo to Nigeria. - Niger exports almost 97 percent of its livestock to Nigeria. - Nigeria supplies almost 60 percent of Niger’s grains deficits. - 1990s estimate: around 200,000 tons of Nigerian millet and maize sold in Niger each year. - 2005 food crisis highlights: - Production at end-2004 was only 7.5 percent below national food requirement. - July 2005 millet prices averaged between 25000 and 30000 FCFA per 100kg sack (normal level 15000 CFAF). - Drivers: high prices in Nigeria, market disruptions from uncoordinated government interventions, production drops in neighboring countries, obstructions to cross-border flows, structural demand changes. - 2010 food crisis findings: - 2009 harvest shortfall estimated around 400,000 tons of grain (similar to 2005). - Improved market functioning and regional trade mitigated 2010 impact compared with 2005. - Early Warning System (EWS) detected 2010 crisis quickly due to contingency plan developed in 2007. - Market supply data early February 2010: 80% to 100% of markets in Niger were supplied weekly with close to 4,300 tons from Nigeria, 1,750 tons from Benin and 240 tons from Burkina Faso. - Food security financing and market roles: - Food crises increase volatility of production, inflation, and terms of trade. - Annualized fiscal costs of food tax decreases estimated at around .7 percent of GDP between 2006 and 2008. - Role for bank financing in cereal markets and need for reliable market information; limited bank presence in agriculture zones. - Policy recommendations: - Integrate markets and traders into national food-security policies to avoid disruptive interventions. - Establish strong regional market monitoring system to work with national systems covering prices and flows for agricultural and livestock products. - Better understand household–market interactions to identify when price changes affect food access. - Institute regional regulation mechanism for grains markets and prices given dependence on Nigeria and neighbors. ### Business climate, poverty, and inclusive growth - Doing Business and main obstacles: - 2014 Doing Business rank: Niger 176 out of 189 countries (moved 2 notches down compared to 2013). - Main firm-reported obstacles (World Bank-IFC Enterprise Survey 2009; percent of responses): Practice of the informal sector 21.2; Access to finance 20.4; Policy instability 15.6; Corruption 13.8; Tax rates 12.8; Electricity 5.7; Transportation 2.8; Tax administration 2.6; Inadequately educated workforce 2.5; Access to land 2.1. - Poverty and pro-poor growth (2005-2011): - Poverty headcount (national poverty line): 2005: 62.1 percent; 2008: 59.5 percent; 2011: 48.2 percent. - Elasticity of poverty headcount with respect to growth: 2005-08 = 0.3; 2008-11 = 1.2. - Urban vs rural poverty reductions: - 2005-08: urban poverty fell by 16.8 percent; rural poverty fell by 2.7 percent. - 2008-11: urban poverty fell by 51.2 percent; rural poverty fell by 14.6 percent. - Gini coefficient changes: - 2005-08: increased by 11.1 percent (Gini 30.5 to 33.9). - 2008-11: increased by 4.5 percent (Gini 33.9 to 35.5). - Determinants of welfare (2011 regressions, All sample coefficients): - Household size (ln): -0.37 *** - Age of household head (ln): -0.03 *** - Sex (Male): 0.14 *** - Urban dummy: 0.41 *** - Farmer: -0.10 *** (urban coefficient: -0.28 ***) - Education (not educated): -0.14 *** (urban coefficient: -0.38 ***) - Commerce and transport: 0.13 *** - Public service: 0.38 *** - Observations: 3,859 (All sample); weighted observations: 2,521,252; Adjusted R-square: 0.3998. - Food security and shocks: - Food insecurity can affect more than 45 percent of total population during crisis years. - Households often contract debt and sell assets in crises, eroding capital stocks and nutrition; higher food prices shift expenditures toward staples at expense of health and education. - Policy recommendations for inclusive growth: - Improve budget allocation to priority spending with balanced and sustainable fiscal policy; emphasize education for women. - Reinforce resilience to exogenous shocks through agriculture modernization (water management, irrigation, mechanization, improved seeds and fertilizers). - Scale up downstream agriculture (storage, agro-processing, trade). - Maintain political stability and improve regional cooperation to mitigate security risk. - Improve business climate: reduce informality, improve access to finance, strengthen governance (better judicial system, simpler business registration procedures, simpler tax system). *Source: IMF staff report (External Stability Assessment section), December 3, 2014.* ### 1. Balance of Payment Characteristics 2000, 2005 and 2010-19 ___________________________ 6 ### 1. Balance of Payment Characteristics 2000, 2005 and 2010-19 ### External sector development - Key recent trend: - The current account balance deteriorated in 2013, mainly due to higher food and capital goods imports linked to extractive industry and basic infrastructure projects. - The deficit is expected to widen further in 2014-15, driven by large investment in the extractive industry and basic infrastructure, and to gradually improve from 2016 as major infrastructure projects end, oil and mining sectors come on stream, and public and private savings increase. - Expanded uranium production impact was deferred to 2019-20 following a government-AREVA agreement. - Composition and sources of external financing: - In 2013, foreign direct investment (FDI) remained the main source of external financing, about 53 percent of the total, although declining relative to 2012. - In 2013 loans represented 17 percent of total external financing; grants represented 49 percent of total external financing. - Aid and foreign direct investments are the main sources of external financing; external borrowing—mainly on concessional terms—has increased significantly. - Near-term external financing will continue to be driven by large projects in extractive industries and infrastructure; FDIs are expected to remain high and external borrowing to rise. - A 2014 anticipated operation to refinance the SORAZ refinery: US$ 880 million (CFAF 435 billion) is noted in staff text as expected for 2014 financing plans. - Reserves and regional arrangements: - Niger, as a WAEMU member, may sustain large current account deficits thanks to access to pooled reserves of the Central Bank of West African States. - The level of pooled reserves in the WAEMU system corresponds to 4.7 months of 2015 imports, 50 percent of broad money, and about 91 percent of short-term liabilities in the region. - Other external-balance features: - Services and primary income balances are continuously negative; services dominated by freight and primary income impacted by interest payments and profit repatriation; remittances limited. - Large import of capital and intermediary goods (reflecting mining and infrastructure projects) is the main factor contributing to the large current account deficit. - Large current account deficit has been financed by a combination of FDI, donor support, and external borrowing, allowing reserve accumulation. ### Model-based assessment (real effective exchange rate and current account) - Recent REER evolution: - The real effective exchange rate (REER) appreciated by about 3.6 percent in 2013, mostly related to the euro appreciation, reversing depreciation in 2008-2012. - Over 1995-2013 the observed moderate cumulative appreciation may signal some erosion in external competitiveness. - CGER-based assessments (three approaches) — overall result: - Model-based assessments do not point to significant misalignments of Niger’s REER; different CGER approaches give conflicting point estimates but large confidence intervals. - The 90 percent confidence intervals for the MB and REER approaches are wide and contain negative and positive values, reinforcing an overall assessment of absence of major misalignment. - EBA-lite: - The EBA-lite methodology produced a norm and fitted value that were very close in 2013, consistent with the CGER assessment and suggesting little or no policy gap; the large recent increase in the current account deficit is mostly driven by large FDI-driven imports expected to return to trend after 2019. - Box: model-based REER assessment results (2013): - Macroeconomic balance approach suggests an overvaluation of the real exchange rate of about 6.19 percent. - Equilibrium real exchange rate estimated as a function of medium-term fundamentals points to a 4.1 percent undervaluation. - External sustainability method indicates a misalignment of about 9.64 percent. - Overall assessment: Niger’s exchange rate does not show significant misalignment from its equilibrium value, but assessments are subject to large uncertainty due to data limitations and ongoing structural changes. - Additional technical notes from the assessment: - Underlying current account used in the macro-balance is the projected current account for 2019, when new resource projects and infrastructure investments are expected to reach steady-state. - For external sustainability, the net foreign asset (NFA) position used is the average of the NFA projected by the external sustainability approach for 2013-2019; medium-term growth projection set to 7.3 percent and inflation to 3 percent (WAEMU norm). - The elasticity of 0.63 is the median of the trade balance elasticity of small and low income countries from Tokarick (2010); the CA account norm of -6.3 is the average model prediction for 2013-2019. ### Broader competitiveness indicators - Doing Business and business environment: - 2014 Doing Business rank: Niger ranked 176 out of 189 countries. - In the WAEMU only Senegal and Guinea Bissau ranked below Niger (positions 178 and 180 respectively). - Niger moved 2 notches down compared to the 2013 ranking. - Areas of comparative weakness (relative to WAEMU and SSA averages): - Nigerien firms face more severe challenges in: - Trading across borders - Starting a new business - Resolving insolvency - Dealing with construction permits - Firm-reported main obstacles (WB-IFC Enterprise Survey 2009; percent of responses): - Practice of the informal sector: 21.2 - Access to finance: 20.4 - Policy instability: 15.6 - Corruption: 13.8 - Tax rates: 12.8 - Access to land: 2.1 - Inadequately educated workforce: 2.5 - Tax administration: 2.6 - Transportation: 2.8 - Electricity: 5.7 - Implication: - Despite no major REER misalignment, structural competitiveness constraints—rule of law, financial sector depth, political stability, regulation of the informal sector—remain critical to improving productivity, diversifying the economy, sustaining growth, and reducing poverty. ### Conclusion and policy direction - Overall assessment: - Model-based REER assessments do not indicate significant misalignment as of end-2013, but broader competitiveness indicators reveal important structural issues. - Policy implications: - Fast-tracking structural reforms to improve the business climate is recommended. - Key areas to address include: rule of law, financial sector deepening, political stability, and informal sector regulation to raise productivity and support inclusive, diversified growth. *Source: IMF staff report (External Stability Assessment section), December 3, 2014.* ### 1. Large foreign direct investment (FDI) from China and France in new oil and uranium ### 1. Large foreign direct investment (FDI) from China and France in new oil and uranium ### Natural resource discoveries, timeline, and macroeconomic significance - Azelik uranium mine began operating in 2011. - An integrated oil project (including an oil field and a refinery) started in 2012. - Imouraren uranium is expected to begin production at around 2019-20 when prices reach a level that would make the mine profitable. - Natural resource outcome contributes to 12.3 percent of total GDP in 2013, and is projected to double as a share of GDP in 2020. - Total government revenue from natural resources is expected to increase by about 2 percent of GDP. ### Modeling approach and calibration - A DSGE model combining resource revenue and financial market frictions in a natural-resource rich capital-scarce economy is used. - The model builds on frameworks in Araujo et al (2013), Buffie et al (2012), Berg et al. (2013), and Melina et al. (2013). - Key model features: - Large share of poor households without access to financial markets. - Public investment subject to inefficiencies and absorptive capacity constraints; public capital enters production functions in traded and non-traded sectors. - Natural resource sector produces resource GDP and generates resource revenue for the government. - Government financing options include concessional debt, external commercial debt, and consumption VAT tax. - Fiscal adjustments via tax rates and government non-capital expenditures may be constrained by ceilings and floors. - The model is calibrated using historical data of Niger and standard parameter values from the literature. ### Public investment plans (simulated) - Baseline public investment plan: - Public investment as a percentage of GDP gradually increases until it reaches its peak of 19 percent of GDP in 2026 and stays at the peak for 5 years before it gradually goes back to the current level. - Aggressive public investment plan: - Public investment scaling-up is more front-loaded and resembles the pattern in the natural resource revenue. - Public investment as a percentage of GDP reaches the same peak in 6 years (one half of the time in the baseline case). ### Natural resource production scenarios (simulated) - Baseline natural resource GDP scenario: - Oil production: increases from current level of 18,000 barrels per day to peak at 80,000 barrels per day by 2019, and stays at the peak for 10 years. - Uranium production: increases from current level of 4639 metric tons per year and reaches peak at 10300 metric tons per year in 2019. - Adverse natural resource GDP scenario: - Uses same projections for natural resource prices, but production quantities are delayed and much lower. - Oil production: increases much more slowly and reaches the peak at 26,400 barrels per day in 2024. - Uranium production: only slightly increases over the coming 8 years and reaches peak at 4400 metric tons per year before it rapidly declines to the current level. ### Financing options and policy tradeoffs - Simulations compare scaling up investment financed through consumption tax (blue solid lines) versus financed through commercial debt (red dashed lines). - Policy considerations: - Smooth tax rates and borrow through debt within the country’s fiscal space to finance lumpy public investment. - Evaluate returns to public investment accounting for increases in distortive taxes needed to service incremental public debt. ### Key simulation findings and policy recommendations - The economy benefits from a relatively more aggressive investment scaling-up: - Aggressive plan increases public capital stock and raises output gradually, which offsets short-run public debt increases so that the debt-to-GDP ratio declines in the long run. - The benchmark (baseline) plan may have a less pronounced debt increase in the short run, but slower capital accumulation. - Absence of a well-established sovereign wealth fund: - No sovereign wealth fund has yet been well-established to smooth consumption, save against revenue volatility for intergenerational equity, or address future financial needs from large investment scaling-ups. - Risks and cautions: - Downside risks from uncertainty in natural resource extraction can undermine macroeconomic effects of investment. - Under the adverse scenario both baseline and aggressive plans imply undesirably high levels of debt or painful tax adjustments in the long run. - Reductions in private consumption and investment are more severe under the adverse scenario compared with the baseline scenario. - Policy implication summary: - Public investment scaling-up to fill infrastructure gaps is needed and, with clearly identified projects, is favorable for long-term growth and debt sustainability. - Authorities should account for commodity price and extraction-rate uncertainty when making fiscal policy decisions. - Consider establishing mechanisms (e.g., sovereign wealth fund) and institutional capacity to save and manage revenue volatility and intergenerational equity. ### Fiscal stance, spending efficiency, and development priorities - Fiscal pro-cyclicality: - Public expenditure became more expansionary with stronger growth and resource-related windfall revenues; pro-cyclicality of fiscal policy has been rising since 2008. - The correlation coefficient of public spending with the output gap is about 0.7 since 2008. - Level and composition of spending: - Public investment stood at 17.2 percent of GDP in 2014, higher than the WAEMU average of 10.2 percent of GDP. - Increased spending has been absorbed largely by general public services and spending related to economic affairs (including agriculture, transport, infrastructure); social spending has also expanded. - Education and social outcomes: - Net enrollment rates: primary education 62.8 percent; secondary education 12.2 percent. - Education attainment is the lowest in the WAEMU region. - Improving efficiency in delivering education services could yield large gains without increasing spending. - Infrastructure and capital spending: - World Bank report noted infrastructure spending has made only marginal contributions to annual per capita GDP growth in Niger. - Poor condition of infrastructure, especially road network, is a critical bottleneck; lack of infrastructure outside Niamey and large financing needs persist. - High unit cost of capital spending and delays in budget execution impede access to basic infrastructure (road, electricity, ICT). *Prepared by Grace Bin Li (RES), Hou Wang (RES/SPR), and Manabu Nose (FAD); source document: IMF staff analysis in the provided chapter.* ### 6. Although public spending has been significantly increased, it is found to accompany ### _cr1564 - 6. Although public spending has been significantly increased, it is found to accompany ### Spending inefficiency, productivity, and human capital - Output per worker in Niger is far below the level of frontier African countries (Cameroon, Ghana, and Kenya) and other WAEMU countries due to much lower contributions of productivity and human capital. - Growth accounting analysis follows a Cobb-Douglas aggregate production function and decomposes differences in output per worker into capital-output ratio, educational attainment, and productivity (following Hall and Jones (1999); Mankiw, Romer, and Weil (1992); Klenow and Rodriguez (1997)). - Despite one of the highest levels of education and capital spending among West African countries, Niger’s income level is far behind the GDP frontier. - An increase in the level of social spending (education and health) and public investment contributed little to development in Niger because of spending inefficiency. - Higher efficiency in public spending, as demonstrated in other WAEMU countries, could generate much higher growth impact and lead to higher social and economic outcomes. ### Development needs and strategic constraints - Major demographic and geographic constraints: - Share of school-age population projected to increase from 48 percent to 51 percent in next 20 years. - Geographical proximity to conflict-affected fragile countries. - Short-term shocks: - Elevated Islamic terrorism threat and food insecurity have negatively affected growth by interrupting uranium and agricultural productions and foreign investment. - Long-term opportunity: - Large social and economic gains expected if resources are allocated to improve coverage of education services for the increasing school-age population and promote human capital accumulation. - Budget planning and execution recommendations: - Closely link budget planning and execution with development plans for long-term and short-term strategies. - Stabilize credit allocation and authorization to prioritized spending. - Strengthen public financial management and strategic budget planning for consistent resource allocation in the medium-term expenditure framework. - Improve efficiency of social spending by closely monitoring social outcomes based on specific indicators and by improving service delivery in education to maximize educational attainment. ### Budget allocation, execution, and key fiscal figures - Inefficiency of spending partly stems from uncertainty in budget allocation and execution; actual budget executions in the social sector have been much lower due to delays in credit release and commitments to implement investment projects, especially capital spending. - Composition of public expenditure and key figures: - Expenditure share of subsidy and transfers is currently 5.5 percent of GDP (largest among current expenditure items). - Subsidy and transfers to public schools comprise a large component of education spending. - The government succeeded in creating room for education spending in the 2012 budget with a 19 percent increase in expenditure compared with the 2011 budget by temporarily eliminating fuel subsidy. - Share of natural resource revenue was only 22 percent of total revenues in 2012. - Table 2 (selected entries, percent of GDP; budgets and executions by year and end-June executions): - Education: Wage and salary entries include 1.24, 1.23, 1.55, 1.50, 1.63, 1.63, 1.91, 1.91, 1.70, 0.92; Capital spending entries include 0.71, 0.42, 0.75, 0.46, 1.40, 0.67, 1.84, 1.09, 2.34, 0.72; Materials and supplies entries include 0.33, 0.23, 0.33, 0.24, 0.31, 0.19, 0.35, 0.29, 0.47, 0.16; Subsidy and transfers entries include 2.15, 1.97, 2.21, 2.07, 2.51, 2.04, 2.17, 1.94, 2.77, 1.31; Total education entries include 4.43, 3.85, 4.84, 4.26, 5.86, 4.53, 6.29, 5.24, 7.28, 3.11. - Health: Wage and salary entries include 0.35, 0.35, 0.45, 0.39, 0.43, 0.54, 0.62, 0.62, 0.46, 0.31; Capital spending entries include 0.68, 0.39, 0.48, 0.36, 0.96, 0.31, 1.61, 0.69, 1.12, 0.08; Materials and supplies entries include 0.24, 0.16, 0.24, 0.16, 0.23, 0.17, 0.13, 0.11, 0.19, 0.04; Subsidy and transfers entries include 0.45, 0.37, 0.65, 0.59, 0.74, 0.67, 0.68, 0.55, 0.79, 0.21; Total health entries include 1.72, 1.28, 1.82, 1.50, 2.36, 1.69, 3.05, 1.97, 2.57, 0.64. - Memorandum: Cross-country comparison (most recent data): Niger education 4.89; Niger health 2.55; WAEMU average education 4.07; WAEMU average health 2.07; WAEMU+ average education 3.42; WAEMU+ average health 1.85. ### Subsidy reform and fiscal space - Domestic retail prices of fuel products (gasoline, diesel, kerosene, and LPG) have been kept lower than other WAEMU countries because the retail price of crude oil from CNPC to SORAZ remains fixed and below international prices. - Fuel subsidy effects: - Fuel subsidy has a regressive distributional impact and diverts fiscal resources away from priority public expenditures, which is detrimental to growth and poverty reduction objectives. - Authorities are encouraged to create fiscal space by reducing subsidies for oil and energy sectors and reallocate savings to urgent spending needs such as food security and security spending. - Historical note: - Initial reforms to gradually phase out fuel subsidies were implemented in late 2010-early 2011 by a transitional government, but the reform lost momentum because of perceived lack of legitimacy for such a sensitive reform process. ### Policy recommendations (short- and medium-term fiscal agendas) - Three key fiscal policy reforms identified: 1) Adoption of a resource neutral fiscal rule: - Consider the non-resource primary balance as an alternative fiscal policy benchmark, together with the traditional basic fiscal balance used in the WAEMU currency union. - Objective: avoid pro-cyclicality of expenditure and ensure smoother budget allocation for productive public spending. 2) Mobilization of larger natural resource revenues: - Further revenue mobilization is recommended; natural resource revenue accounted for only 22 percent of total revenues in 2012. - Raising this contribution is essential to finance development needs and create fiscal space to absorb future shocks. 3) Expenditure rationalization: - Fiscal adjustments that rely primarily on cuts in transfers and the wage bill tend to last longer and can be expansionary; those that rely primarily on tax increases and cuts in public investment tend to be contractionary and unsustainable (Gupta, Clements et al, 2005). - Re-engage in subsidy reform by reconsidering the pricing formula and reducing tax exemptions on fuel products, accompanied by complementary safety-net provisions for the transition to a new automatic fuel adjustment mechanism as recommended by IMF technical assistance in 2010. - Reduction of fuel subsidies can create fiscal space for prioritized social and capital expenditure, as temporarily achieved in the 2012 budget. ### Energy sector overview and challenges - Energy access and consumption: - Niger’s per capita energy consumption was 0.13 toe in 2009. - GDP per capita was US$445.9 in 2013. - Population estimated at 16 million and growing at around 3.9 percent per year. - About 84 percent of the population lives in rural areas. - Less than 5 percent of the population uses liquefied petroleum gas (LPG). - Overall electricity access level is only 9 percent: urban access almost 40 percent; rural access less than 1 percent. - Households’ energy consumption accounts for almost 90 percent of Niger’s total energy consumption; transportation 9 percent; industry, services and agriculture together absorb the remainder; agriculture absorbs less than 1 percent of primary energy consumed. - Energy mix: - Highly concentrated and dominated by biomass and wood fuel, supplemented by petroleum, solar energy and coal. - Government plans to increase share of renewable energy in the national energy balance to 10 percent by 2020 (from less than 1 percent in 2007) and reduce biomass share to 62 percent in 2020 (from 87 percent in 2007). - Electricity demand and trends: - Total electricity net consumption grew at 9.2 percent in 2011 (faster than WAEMU, Africa, and world totals). - WAEMU consumption shares in 2011: Ivory Coast 38.2 percent; Senegal 22.4 percent. - Over 2007-2011 average annual growth in net electricity consumption: Burkina Faso 11.8 percent; Niger 8.2 percent. - Niger’s total primary energy consumption doubled over 1980-2011, while energy intensity (energy consumption per unit of GDP) fluctuated. - Domestic refining and oil: - Commercial development of Niger’s crude oil resources began in 2011 with the commissioning of the SORAZ refinery in Zinder. - SORAZ maximum capacity: 20,000 barrels per day; presently operating at 18,000 barrels per day. - Domestic consumption is surging and supply does not always meet local demand. *IMF staff summary based on the provided chapter content.* ### 8. Energy price developments impact macroeconomic activity through various channels. Rising ### 8. Energy price developments impact macroeconomic activity through various channels. Rising ### Channels of impact and historical context - Rising international oil prices can lead to inflation, fiscal deficits and external sector imbalances in oil-importing countries, with potential impact on GDP growth. - Higher fuel prices affect consumers directly through higher costs of transportation and electricity services and indirectly through increasing manufacturing operating costs. - Fuel tax receipts have been volatile, reflecting fluctuations in the price of oil on the international market and a rigid retail fuel pricing system. - Indirect fiscal effects of spiraling international oil prices can be manifested through reduced tax buoyancy on account of a weaker domestic economy. - The impact on the external accounts occurs via higher outlays for oil imports and potentially increasing external debt based on the payment arrangements. - IMF technical assistance in 2001 facilitated a fuel-pricing formula that adjusted retail prices monthly whenever the change in international prices exceeded CFAF 5; otherwise taxes would offset intended changes. - An explicit subsidy was introduced in the formula in 2005 to cushion the domestic economy; during rapidly increasing international oil prices that began in 2007 and peaked in July 2008, the subsidy component kept domestic prices fixed for an extended period. - Oil prices reached a record of US$147.50 per barrel on July 11, 2008. - By 2010, adverse international price shocks and euro depreciation led to dwindling fuel tax receipts and external sector imbalances; smuggling increased due to artificially low prices. - From June 2011 the government adopted a more flexible retail fuel pricing system and existing subsidies were gradually unwound. ### Niger’s transition to producer status and market developments - Niger became a net fuel exporter since 2012 and could soon export crude oil. - Previously Niger imported up to 85 percent of its electricity from Nigeria. - Since 2012, exports to Burkina Faso and Mali began; export markets opened in Chad for fuel (especially premium) and Nigeria for gasoil. - Proven reserves at the Agadem block amounting to 80,000 barrels per day are beyond SORAZ refining capacity. - The government is exploring the possibility of exporting around 60,000 barrels per day of crude oil. - A study identified the Niger-Chad-Cameroon route as the most cost-efficient export route. - SORAZ refinery production mainly destined to SONIDEP; SONIDEP given monopoly to export refined products from SORAZ, creating tensions between the two entities. - Total export sales for January to September 2014 fell relative to January to September 2013: - Volume fell by 6.1 percent. - Value fell by 11.0 percent. - Domestic sales volume rose by 8.6 percent to 436.3 million tons, equivalent to an 8.8 percent increase to CFAF 199.8 billion in value. - Export sales were strong in the first quarter but fell when domestic demand firmed. ### Price administration, implicit subsidies, and fiscal implications - The government administers prices for crude and refined products, creating the possibility for implicit subsidies. - Crude oil is sold to SORAZ at US$70 per barrel, below the international oil price (WTI) that averaged above US$94 per barrel each year since 2011. - Since January 2012 the SORAZ consumer products (gasoline, diesel, LPG) were introduced on the domestic market with no retail subsidy on these three products; nevertheless: - Retail price of gasoline is US$1.08 per liter, lower than the WAEMU average. - The only remaining explicit subsidy is on kerosene (lamp oil), which is imported: - This subsidy stands at 96.02 CFAF/liter (approximately 19 US cents/liter). - With SORAZ lamp oil production starting in April 2014, the subsidy is expected to be reduced or eliminated over time. - The administered price structure may cause revenue loss for the government and risks to the financial soundness of the refinery; full liberalization would likely increase SORAZ sales revenue and government tax receipts even after accounting for price elasticity. - The refinery is almost operating at full capacity; additional investment may be needed to increase capacity, but investment costs may require allowing ex-refinery prices to increase to be recouped. ### Petroleum price structure (as of August 1, 2013) — (USD per unit) - Units: Liter for Gasoline, Diesel Oil, Fuel Oil, Kerosene; 12.5 kilo for LPG. - Quantity source: Gasoline (SORAZ), Diesel (SORAZ), Fuel Oil (Imported), Kerosene (Imported), LPG (SORAZ). - Price Ex-SORAZ: Gasoline 0.63, Diesel 0.64, Fuel Oil 0.64, Kerosene 0.93, LPG 3.00 - Taxes: Gasoline 0.19, Diesel 0.20, Fuel Oil 0.12, Kerosene 0.07, LPG ... - Storage, losses etc (SONIDEP): Gasoline 0.06, Diesel 0.07, Fuel Oil 0.07, Kerosene 0.06, LPG 0.20 - Transport to SONIDEP storage facilities: Gasoline 0.09, Diesel 0.08, Fuel Oil 0.08, Kerosene 0.05, LPG ... - Price Ex-SONIDEP: Gasoline 0.97, Diesel 0.98, Fuel Oil 0.90, Kerosene 1.11, LPG 3.20 - Expenses and distribution margin: Gasoline 0.11, Diesel 0.09, Fuel Oil 0.00, Kerosene 0.08, LPG 4.30 - Subsidy: Gasoline 0.00, Diesel 0.00, Fuel Oil 0.00, Kerosene -0.19, LPG ... - Retail Price: Gasoline 1.08, Diesel 1.08, Fuel Oil 0.90, Kerosene 0.99, LPG 7.50 - Of which: 6kg LPG cylinder 3.60; 3kg LPG cylinder 1.80 - Sources: SONIDEP; and IMF staff calculations. ### Electricity sub-sector and fiscal leakages - Ensuring financial equilibrium of the electricity sub-sector is a key challenge. - The World Bank’s Energy Sector Assessment (June 2012) highlights risks that domestic generation may substitute lower-cost electricity imports from Nigeria, increasing costs. - NIGELEC holds the public monopoly to generate, transmit and distribute electricity; it is exempt from VAT and TIPP payments to the government, presenting a source of revenue leakage. ### Policy recommendations and sectoral priorities - Improving access to energy should be a key economic objective. - Limited access constrains growth; price controls act as implicit subsidies and create disincentives for sector development. - The trade-off between price stability and fiscal sustainability is a core challenge for price-setting in poor countries, particularly when crude oil resources are available. - Increase penetration and investment in the grid to allow for more widespread electricity distribution to spread investment costs in power plants. - Continue initiatives to develop renewable energy to improve access at reasonable cost: - 20MW solar photovoltaic power plant at Guesselbody (20km from Niamey). - 200MW (expandable to 400MW) coal plant at Salkadamna (Tahoua). - 130MW hydroelectric plant at Kandadji. - Harness and develop abundant renewable energy potential: - Solar energy is highly feasible given climatic conditions. - Average wind speeds indicate moderate potential for wind power beyond small-scale water-pumping installations. - Geothermal potential is likely though unconfirmed; revelations of geothermal basins occurred during oil exploration activities. - Coal and hydroelectric plants are under development. - Constraints: large initial capital investments and reliability concerns requiring back-up fossil fuel facilities. - Include an energy conservation promotional campaign in the public information program accompanying the new energy policy: - Recommendations: incandescent bulb replacement program with solar lamps and energy saving bulbs; guidelines for proper use and maintenance of vehicles and household appliances. - Promote shared arrangements, such as car-pooling, to reduce traffic congestion and transportation costs for students and workers. *Source: IMF staff country diagnostic analysis on Niger energy sector (excerpt provided).* ### 6. The business climate has not improved in recent years. Private sector development is key ### 6. The business climate has not improved in recent years. Private sector development is key ### Business climate and obstacles for private sector development - Niger ranked 176 in the 2014 Doing Business Report, one notch down from three years ago. - Main obstacles for doing business (percent of responses, World Bank and IFC corporate survey data of 2009): - Practice of the informal sector: 21.2 - Access to finance: 20.4 - Policy instability: 15.6 - Corruption: 13.8 - Tax rates: 12.8 - Electricity: 5.7 - Transportation: 2.8 - Tax administration: 2.6 - Inadequately educated workforce: 2.5 - Access to land: 2.1 - The predominance of the informal sector, access to finance, and governance are identified as the main impediments to private sector development. ### Pro-poor and inclusive growth (2005-2011) - Definitions applied: - Pro-poor: growth that reduces poverty headcount (Ravallion and Chen, 2003). - Inclusive: growth not associated with an increase in inequality; i.e., growth that does not lead to a reduction in the income share of the bottom quintile (Rauniyar and Kanbur, 2010). - Poverty headcount (national poverty line): - 2005: 62.1 percent - 2008: 59.5 percent - 2011: 48.2 percent - Changes and elasticities: - First period (2005-08): poverty rate decreased by 4.2 percent; elasticity of the poverty headcount with regard to growth = 0.3. - Second period (2008-11): poverty rate decreased by 19 percent; elasticity of the poverty headcount with regard to growth = 1.2. - Comparative elasticities cited: - Mozambique (1996/97-2002/03): 0.3 - Mali (2001-06): 1.9 - Urban vs rural poverty reductions: - First period: urban poverty fell by 16.8 percent; rural poverty fell by 2.7 percent. - Second period: urban poverty fell by 51.2 percent; rural poverty fell by 14.6 percent. - Inequality and inclusiveness: - Gini coefficient changes: - First period: increased by 11.1 percent (from Gini 30.5 in 2005 to Gini 33.9 in 2008). - Second period: increased by 4.5 percent (from Gini 33.9 in 2008 to Gini 35.5 in 2011). - Growth incidence findings: - 2005–2008: decline or no improvement in welfare for the bottom half of the income distribution; improvement for the top half. - 2008–2011: welfare improvements across all income categories, with higher increases for the poorest and the bottom of the top half. - Growth and inflation performance (period averages): - Real GDP averaged 4.1 percent in the first period and 5.8 percent in the second period. - Inflation averaged 4.8 percent in the first period and 1.5 percent in the second period. - Interpretation: - Higher growth across agriculture and non-agriculture sectors combined with lower inflation explained the more pro-poor and less non-inclusive growth in the second period. - The higher elasticity of poverty with regard to growth in the second period suggests government policies supporting poor households were effective. ### Determinants of poverty (2011 survey regressions) - Key regression setup: equation of ln(welfare/poverty line) on household size (ln), age of head (ln), and dummies for gender, location, education, branch of activity (agriculture, commerce and transport), and socio-professional background (public sector). - Main empirical findings (significance indicated where noted): - Household size: strong negative effect on welfare (All sample coefficient: -0.37 ***). - Age of head of household: negative effect (All sample coefficient: -0.03 ***). - Sex (Male): positive effect (All sample coefficient: 0.14 ***). - Urban dummy: strong positive effect (All sample coefficient: 0.41 ***). - Farmer: negative effect (All sample coefficient: -0.10 ***); effect is much stronger in urban areas (urban coefficient: -0.28 ***). - Education (not educated): negative effect (All sample coefficient: -0.14 ***); effect more than doubles in urban areas (urban coefficient: -0.38 ***). - Commerce and transport: positive effect (All sample coefficient: 0.13 ***). - Public service: positive effect (All sample coefficient: 0.38 ***). - Sample and fit: - Number of observations: 3,859 (All sample) - Number of observations (with weight): 2,521,252 - Adjusted R-square (All sample): 0.3998 - Interpretation: - Poverty is concentrated in rural areas and among households working mainly in agriculture. - Being a woman head of household in rural areas increases the likelihood of being poor. - Civil servants and workers in trade and transportation are relatively better off, with stronger effects in rural areas. - Lack of education has a particularly strong negative effect in urban areas and for women. - Household size substantially reduces welfare, especially in rural samples and for males. ### Food security, shocks, and macroeconomic implications - Chronic vulnerability: - Food insecurity can affect more than 45 percent of the total population during crisis years. - Food crises causes and effects: - Arise from grain deficits due to poor harvests and locust attacks, leading to increased food prices and reduced accessibility. - Households contract debt and sell accumulated assets (livestock) to meet rising food costs, eroding capital stocks and nutrition. - Increased food prices shift expenditures toward basic staples at the expense of health and education, adversely affecting child nutrition. - Impact on inflation and terms of trade: - Food crisis shocks increase volatility of production and adversely affect inflation and terms of trade. - Annualized fiscal costs of food tax decreases estimated at around .7 percent of GDP between 2006 and 2008. - Market role and financing: - Increasing role of markets in food supply raises importance of bank financing for cereal markets and reliable market information. - Limited bank presence in agriculture zones: Sonibank, BIA, and Ecobank started opening branches in 2005 in the agriculture zone (Marad). - Lack of reliable market information can lead speculative losses and price volatility. - Public prevention system: - National System for Disaster and Crisis Prevention and Management (NSDCPM) supports grain banks, labor-intensive jobs, small-scale irrigation, and other initiatives. - Food Security Fund and the National Security Stock effectiveness varied by year (more effective in 2010 than 2001 or 2005). ### Conclusions and policy implications - Macro and structural priorities: - Recent growth was pro-poor with significant poverty reduction, but it did not reduce income inequality. - Macroeconomic stability with high and sustained growth is important to achieve inclusive growth in Niger. - Policy recommendations: - Improve budget allocation to priority spending with a balanced and sustainable fiscal policy. - Emphasized: spending on education for women is crucial for poverty reduction. - Policies to support vulnerable households could smooth inflation and reduce poverty. - Better coordination among stakeholders to improve resource allocation and ensure fiscal sustainability. - Reinforce resilience to exogenous shocks through agriculture modernization. - Invest in water management, irrigation, agriculture mechanization, improved seeds and fertilizers to improve resilience to climate shocks and reduce rural poverty. - Scale up downstream activities in agriculture (storage, agro-processing and trade) to improve resilience and provide higher incomes. - Note: government launched the 3N Initiative–(Nigeriens Nourish Nigeriens)–aimed at scaling up agriculture and livestock production to ensure food self-sufficiency. - Maintain political stability and improve regional cooperation to mitigate security risk. - Security engagement (e.g., peace keeping in north of Mali) places strains on priority spending. - Improved regional political stability could help ensure natural resource revenues are invested in high-return infrastructure projects. - Improve the business climate to promote private sector development and structural transformation. - Address main impediments: reduce informality, improve access to finance, and strengthen governance. - Specific improvements recommended: a good judicial system, simple procedures to register businesses, access to official documents, and a simple tax system to reduce informality and increase access to the financial sector. *Source: IMF staff calculations and Nigerien authorities, content from the IMF Country Report chapter titled "6. The business climate has not improved in recent years. Private sector development is key."* ### 5. Policies seem not to have fully integrated the role of markets and traders in managing ### _cr1564 - 5. Policies seem not to have fully integrated the role of markets and traders in managing ### Overview and context - Structural food security was first implemented under the Rural Development Strategy (RDS) and was recently replaced by the “3N” Initiative (Nigeriens Nourishing Nigeriens) defined up to 2035 and included in the Economic and Social Development Plan (PDES) for the 2012-2015 period. - Despite the 3N initiative’s stated intent to integrate markets and regional interdependences, short-term government food-security responses often surprise private stakeholders, disrupting market functioning and raising risks to private-sector investment in marketing activities and stockpiling. ### Role of markets - Markets supplied transfers that were more timely and, in aggregate, larger than humanitarian transfers during the 2010 crisis. - Staff recommends stressing the importance of markets in food security, given lessons from the 2010 crisis. Key factual points: - Markets responded more timely than international organizations in the 2010 crisis. ### Role of regionalization and regional policies - Given strong regional interdependencies with neighboring agricultural and food economies, authorities are urged to leverage integration frameworks such as WAEMU Agricultural Policy (WAP) and the ECOWAS agricultural policy. - Note: the 3N Initiative references formal integration frameworks such as WAP and ECOWAS agricultural policy, but references were not broken down in the initiative. ### Cross-border trade structure and determinants - Niger shares a long border (over 1,500 km) with Nigeria; cultural and social affinities (Hausa people) foster trader networks (the “K²M axis”: Maradi in Niger; Katsina and Kano in Nigeria). - Principal traded goods: livestock, cowpeas (niebe), peppers, tigernuts (souchet) from Niger; grains and manufactured goods from Nigeria; re-exports (from Benin/Togo) to Nigeria. - Niger exports almost entirely (97 percent) its livestock to Nigeria. - Nigeria supplies almost 60 percent of Niger’s grains deficits. - Estimates for the 1990s: around 200,000 tons of Nigerian millet and maize sold in Niger each year. - Niger’s agricultural market information system shows maize represents between 40 and 55 percent of the country’s dryland cereal imports; millet comprises between 30 and 40 percent of such imports. - Production variability drivers: rainfall variability, locust attacks, provision of seeds and fertilizers. - Policy and macro factors affecting flows: opening/closing borders, differing fiscal policy, levels of public grains purchases, exchange rates of naira, CFAF, cedi, international food aid flows, conflicts. - Regional integration (ECOWAS, WAEMU) supported trade via tariff and fiscal policy harmonization. - Barriers: complicated rules and regulations (impacting small traders), emerging language barriers, reservations about the naira despite recent stability, lack of hedging instruments against exchange rate risk, rising insecurity reducing trader mobility. ### The 2005 food crisis (selected findings) - Production at end-2004 was only 7.5 percent below the national food requirement. - July 2005 millet prices averaged between 25000 and 30000 FCFA per 100kg sack, versus a normal level of 15000 CFAF. - Drivers of the 2005 price spike: - High price levels in Nigeria meant no incentives for exports to Niger. - Disruption of domestic markets by uncoordinated government interventions (anticipating bidders to government grains’ auctions bought most stocks from Niger markets). - Drop in agricultural production in neighboring countries (Cameroon, Nigeria, Chad). - Formal and informal obstructions to cross-border flows, notably from Nigeria and later from Niger. - Structural demand changes due to urban population increases in Nigeria. - Niger’s early warning system failed to detect subregional widespread grain shortfalls and the direction/volume of grain flows from Niger to Nigeria, contributing to supply tightness and sudden price rises. - Collapse in terms of trade between cash crops (e.g., onions) and grains and between livestock and grains exacerbated poverty. ### The 2010 food crisis (selected findings) - The 2009 harvest shortfall was estimated at around 400,000 tons of grain, almost the same level as the 2005 deficit. - Improved market functioning and regional trade mitigated the 2010 crisis’ impact compared with 2005. - Early Warning System (EWS) detected the 2010 crisis quickly due to a national contingency plan for food security and nutrition developed in 2007 with expanded parameters (cereal output, prices, imports, nutritional status). - Market supply data in early February 2010 (joint assessment by CILSS, WFP, FEWS NET): - 80% to 100 percent of markets in Niger were supplied each week with close to 4,300 tons of dry grain from Nigeria, 1,750 tons from Benin and 240 tons from Burkina Faso. - WFP regional purchases composition: 60 percent from government grain offices and 40 percent from major traders; supplies used for “work for money” schemes and direct distribution. - Price differentials for dry grains between Niger and neighboring markets remained positive, creating incentives to export products to Niger; cross-border grain trade favored Niger until July-August 2010 and prices remained stable. - The poorest in Niger are closely linked to the health of the Nigerian economy; Nigeria bears significant regional economic responsibility. ### Challenges ahead and policy recommendations - Improve integration of markets and traders into national food-security policies to avoid disruptive, surprise interventions that undermine private-sector marketing and stockpiling incentives. - Improve regional market monitoring systems: - Establish a strong regional market monitoring system to work with national market information systems. - Regional system should encompass prices and flows for agricultural and livestock products and support database and cartography development. - Better understand household–market interactions to identify when price changes affect food access (Niger could leverage work done in Mauritania). - Institute a regional regulation mechanism for grains markets and prices to stabilize food prices across the region, given Niger’s dependence on Nigeria and neighboring countries to manage deficits and stabilize domestic prices. *Source: _cr1564 - 5. Policies seem not to have fully integrated the role of markets and traders in managing (PDF).* ### 2. Niger’s level of financial development is among the lowest in the West African ### _cr1564 - 2. Niger’s level of financial development is among the lowest in the West African ### Financial depth and intermediation - Broad money (M2) to GDP: 24.2 percent in 2013 (WAEMU average: 37 percent). - Private sector credit to GDP: 14 percent in 2013 (WAEMU average: 20 percent). - Bank credit to the private sector increased between 2007 and 2012 relative to 2006 but remained the lowest in the WAEMU. - Credit growth decelerated markedly and has remained modest since August 2013. ### Financial inclusion and product underdevelopment - Account ownership and loan usage (2011, population aged 15+): - Account at a formal financial institution: 1.5 percent in Niger (sub-Saharan Africa average: 21 percent). - Loan from a financial institution in the past year: 1.3 percent in Niger (sub-Saharan Africa average: 5.2 percent). - Mobile payments and other indicators (2011, selected): - Saved at a financial institution in the past year (% age 15+): Niger 1.16, SSA 5.79. - Mobile phone used to pay bills (% age 15+): Niger 0.37, SSA 3.01. - Purchased agricultural insurance (% working in agric., age 15+): Niger 1.3, SSA 1.52. - Loan from a financial institution in the past year (% age 15+): Niger 1.52, SSA 10.86. - Emergence of mobile money services: three telecom companies provide mobile money services; BCEAO reported as of end June 2014: 3 bank intermediaries involved in mobile banking; mobile banking service outlets countrywide 15,234 (compared to 655 in 2011); holders of electronic purse 958,010 (compared to 538,378 in 2011). ### Banking sector structure, costs, and vulnerabilities - Financial sector dominated by commercial banks; bank-centric system implies banks are crucial for catalyzing growth but the economy suffers from limited long-term financing. - Bank organization: almost all banks are associated with foreign, Pan-African Bank (PAB) groups; network banks facilitate economies of scale and sub-regional integration but pose risks if regulation and supervision are not harmonized. - Banks’ net interest margins and overheads are very high relative to the region: - High bank net intermediation margin reflects high lending rates, inefficiency, limited competition, and heightened risks due to exposure to primary commodity exports and volatile food and petroleum prices. - High overheads reflect investment in networks and structural rigidities related to inefficient basic infrastructure and energy. - Banking sector composition (as reported elsewhere in the content): - 11 banks, 40 registered microfinance institutions, several postal offices providing financial services, four insurance companies, CNSS, one brokerage firm, one branch of WAEMU regional stock exchange. (Note: alternative listing elsewhere states ten banks, one financial institution, 49 registered microfinance institutions, several postal offices, five insurance companies, CNSS, one brokerage firm, one branch of WAEMU stock exchange; asset totals at end-2009 about 660 FCAF billions, ~80 percent corresponding to banking sector (93 percent excluding CNSS)). ### Distribution of credit and sectoral allocation - Share of credit to public or semi-public enterprises: approximately 20 percent of total. - Loans mainly extended to extractive industry, commerce, and transport. - Agriculture and livestock contribute more than 40 percent to GDP but receive less than 1 percent of total bank credit. - Large exposure to few borrowers; banking sector focus on corporate rather than SMEs; no clear evidence of leasing and factoring services to SMEs from publicly available information. ### Institutional and information environment constraints - Ease of doing business indicators lag sub-Saharan Africa averages; key constraints include enforcement of contracts, inadequate public registries, and weak judicial system. - Weak creditor rights and unpredictability of debt recovery reduce banks’ willingness to extend credit. - Inefficient land ownership systems and customary land tenure hinder credible collateral and land titling. - Table 1 (selected values, 2012 cross-country comparison): - Registering property: Procedures (Number) — Niger 4 (Benin 4; Cote d'Ivoire 6; Guinea-Bissau 8; Senegal 6.4; SSA 6); Cost (% of property value) — Niger 11 (Benin 11.8; Cote d'Ivoire 13.9; Guinea-Bissau 11; Senegal 9; SSA 20). - Cost of business start-up (Percent of GNI per capita) — Niger 112.8 (Benin 126.8; Cote d'Ivoire 130; Guinea-Bissau 42; Senegal 67; SSA 64). - Getting credit: Legal rights (Index) — all listed countries 6; Credit information (Index) — Niger 1 (SSA 2); Public Registry Coverage (% of adults) — Niger 0.8 (Benin 10.9; Cote d'Ivoire 2.9; Guinea-Bissau 1.1; Senegal 5; SSA 4). - Protecting investors: Investor protection (Index) — Niger 3 (Benin 3.3; Cote d'Ivoire 3.3; Guinea-Bissau 4; Senegal 5; SSA 3). - Enforcing contracts: Procedures (Number) — Niger 39 (Benin 42; Cote d'Ivoire 33; Guinea-Bissau 40; Senegal 39; SSA 43); Cost (Percent of claim) — Niger 60 (Benin 65; Cote d'Ivoire 42; Guinea-Bissau 25; Senegal 51; SSA 27). ### Empirical findings (panel regression results) - Dataset: Augmented financial structure database (Beck, Demirgüç-Kunt and Levine; Čihák et al.), using select World Bank doing business indices; sample covers WAEMU (eight countries) relative to EAC (Kenya, Tanzania, Uganda) and Nigeria, Ghana, South Africa; data range 1997-2011; number of cross-section identifiers 14. - Main empirical conclusions: - Weaknesses in institutional and information environment hinder financial sector development across the sample. - The impact of institutional and information weaknesses is more pronounced in WAEMU countries than in the EAC, Nigeria, Ghana, and South Africa combined. - The impact of high bank net intermediation margin in the WAEMU is more prominent but becomes irrelevant in the EAC, Nigeria, Ghana, and South Africa combined. - Selected regression coefficients and diagnostics (as presented in Table 2; standard errors in parentheses): - Intercept examples: 0.66, 0.64, 0.64, 0.55, 0.55, 0.61, 0.61, 0.60, 0.60, 0.66, 0.66. - Bank net interest margin: -0.58 (0.32), -1.04 (0.40), -1.04 (0.40), -0.96 (0.35), -0.92 (0.36), -0.97 (0.35), -1.00 (0.36). - Credit depth of information index: coefficients around 0.02 (standard errors 0.00–0.04). - Strength of legal rights index: coefficients around 0.01 (standard errors 0.00–0.01). - Procedures to enforce a contract: coefficients around -0.01 (standard errors 0.00). - Public credit registry coverage: coefficients 0.53 (0.30), 0.69 (0.34), 0.69 (0.33), 0.71 (0.33), 0.70 (0.33), 0.71 (0.34). - Dummy (1 for non-WAEMU): 0.72 (0.05), 0.07 (0.04), 0.05 (0.05), 0.04 (0.05), 0.08 (0.04), 0.08 (0.04). - R-square values: 0.7079, 0.6622, 0.7185, 0.6786, 0.6713, 0.6605. - Prob > chi2: 0.000 across reported specifications. - sigma_u, sigma_e, rho reported with values such as sigma_u 0.046, 0.0436; sigma_e 0.0336, 0.0354; rho 0.6518, 0.6028, etc. - Note definitions: Credit depth of information index (0=low to 6=high); strength of legal rights index (0=weak to 10=strong); procedures to enforce a contract (number); public credit registry coverage (% of adults). ### Policy recommendations - Capital buffers and macroprudential policy: - Banks should hold more capital buffers despite meeting WAEMU minimum capital requirement of CFAF 5 billion. - Consider introducing a countercyclical capital buffer to protect the banking sector during periods of excessive credit growth; buffer functions: protect banks from losses after credit booms, help ensure credit availability during stress, and act as a brake on unrestrained credit growth by increasing cost of credit in buildup phases. - Business environment and information infrastructure: - Prioritize establishing a commercial court to resolve commercial disputes and increase predictability of debt recovery. - Regulator should urgently consider establishing a credit reference bureau to facilitate credit information sharing among banks and financial institutions. - Land titling and collateral: - Tackle constraints hindering land titling; begin by surveying and titling land in or adjacent to major urban centers rather than attempting national titling at once. - Financial access and mobile banking: - Banks should embrace mobile banking to rapidly enhance financial access. - Authorities should implement regulatory and supervisory frameworks for mobile banking to ensure safety for end-users, facilitate innovation, support efficient competition, and develop the sub-sector. ### Key statistics and system summary (selected) - Broad money (M2) to GDP: 24.2 percent (2013). - Private sector credit to GDP: 14 percent (2013). - M2 to GDP alternative measure in 2012 cited as 23 percent (against Sub-Saharan Africa average 37 percent). - Bank accounts penetration (2011, Findex/Gallup): 1.5 percent of population aged 15+. - Total financial institutions assets at end-2009: about 660 FCAF billions (about 80 percent banking sector; 93 percent excluding CNSS). - Banking sector composition reported across sections: ten or eleven banks (classification: 4 middle size with assets between 100 and 200 billion CFAF; 6 small with assets <100 billion CFAF), microfinance institutions 40 or 49 (different sections), postal outlets and insurance companies counts vary by section. *Italic: IMF staff note prepared for Niger country analysis as presented in the supplied content unit.* ### 1.7 percent (BCEAO). ### 1.7 percent (BCEAO) ### Bank credit allocation and maturity - The credit granted to the 5 biggest borrowers corresponds to 12.3 percent of the total at the end of 2012. - Share of medium- and long-term credit increased from 16.89 percent on average in 2004 to 38.26 percent in 2013. - Credit concentration on the five largest borrowers is very high at 143 percent of regulatory capital at end-June 2013 and represents a major source of risk. - Sectoral allocation (2012) — contribution to GDP and average credit allocation in percent of total (2012): - Agriculture and Livestock: 45.21 (contribution), 36.36 (credit) - Commerce: 15.78 (contribution), 9.19 (credit) - Extractive industry: 12.78 (contribution), 8.25 (credit) - Manufacturing + Electricity and Water: 8.50 (contribution), 18.03 (credit) - Transport: 7.19 (contribution), 8.18 (credit) - Other Services + Financial Institutions: 7.17 (contribution), 9.62 (credit) - Public Works: 2.86 (contribution), 0.00 (credit) - (Figures presented as "Contribution to GDP (2012)" and "Average credit allocated to the sector in % of total (2012)") ### Financial inclusion and segmentation - Formal financial services are typically limited to small segments of the population. - Enterprise Survey evidence (manufacturing firms in Niamey and Maradi): - Firms with 5-19 employees: 17.6 percent have a bank loan or a credit line. - Medium firms (20-99 employees): 67.2 percent have a bank loan or a credit line. - Large firms (100+ employees): 56.9 percent have a bank loan or a credit line. - Ownership and gender segmentation: - Firms with 10 percent or more foreign ownership: 65.8 percent have a bank loan or a credit line. - Domestic firms: 20.7 percent have a bank loan or a credit line. - Firms where top management is female: 9.7 percent have access to a bank loan or a credit line. - Geographic coverage: Firms outside of the main urban centers are not covered by Survey data and are expected to be even more credit constrained. - Financial inclusion indicators (2011) — selected values (Findex): - Account at a formal financial institution (% age 15+): Niger 1.52, Sub-Saharan Africa 5.00 - Loan from a fin. Inst. in the past year (% age 15+): Niger 1.30, Sub-Saharan Africa 10.00 - Mobile phone used to pay bills (% age 15+): Niger 0.37, Sub-Saharan Africa 5.00 - Purchased agric. Insur. (% working in agric., age 15+): Niger 5.79, Sub-Saharan Africa 10.00 - Saved at a fin. Inst. in the past year (% age 15+): Niger 1.16, Sub-Saharan Africa 15.00 ### Prudential indicators, profitability, and risks (summary of trends 2008–2014) - Capital adequacy and solvency: - Regulatory capital to risk-weighted assets: 4.0 (2008), 8.3 (2009), 13.5 (2010), 13.5 (2011), 16.7 (2012), 15.5 (2013), 16.0 (2014 Dec.), 16.5 (2014 Jun.) - Tier 1 capital to risk-weighted assets: 3.2 (2008), 7.8 (2009), 13.2 (2010), 13.2 (2011), 16.1 (2012), 14.9 (2013), 15.5 (2014 Dec.), 16.0 (2014 Jun.) - Capital to total assets: 2.6 (2008), 6.3 (2009), 8.4 (2010), 9.2 (2011), 10.1 (2012), 9.4 (2013), 9.4 (2014 Dec.), 9.6 (2014 Jun.) - Asset quality and concentration: - Total loans to total assets: 60.8 (2008), 62.3 (2009), 56.1 (2010), 61.2 (2011), 60.0 (2012), 58.6 (2013), 58.8 (2014 Dec.), 57.4 (2014 Jun.) - Concentration: credit to the 5 biggest borrowers to regulatory capital: 748.6 (2008), 219.1 (2009), 123.8 (2010), 152.2 (2011), 135.6 (2012), 128.3 (2013), 128.5 (2014 Dec.), 127.9 (2014 Jun.) - Gross NPLs to total loans: 16.0 (2008), 14.7 (2009), 18.2 (2010), 19.6 (2011), 17.1 (2012), 16.5 (2013), 19.3 (2014 Dec.), 17.3 (2014 Jun.) - Provisioning rate: 50.3 (2008), 64.9 (2009), 47.7 (2010), 58.0 (2011), 54.6 (2012), 67.3 (2013), 61.1 (2014 Dec.), 48.6 (2014 Jun.) - Net NPLs to total loans: 6.3 (2008), 8.2 (2009), 10.5 (2010), 9.3 (2011), 8.6 (2012), 6.1 (2013), 8.5 (2014 Dec.), 7.0 (2014 Jun.) - Net NPLs to capital: 148.1 (2008), 80.8 (2009), 70.8 (2010), 36.0 (2011), 61.6 (2012), 51.0 (2013), 34.3 (2014 Dec.), 42.5 (2014 Jun.) - Earnings and profitability (selected): - Average interest rate on loans: 10.4 (2008), 10.4 (2009), 11.2 (2010), 10.4 (2011), 10.5 (2012) - Average interest margin: 8.3 (2008), 8.1 (2009), 8.6 (2010), 8.2 (2011), 8.4 (2012) - After-tax return on average assets (ROA): 2.3 (2010), 1.0 (2011), 1.8 (2012) - After-tax return on average equity (ROE): 0.2 (2008), 6.1 (2009), 13.0 (2010), 7.3 (2011), 16.2 (2012) - Non-interest expenses to net banking income: 55.4 (2008), 21.1 (2009), 54.3 (2010), 55.9 (2011), 53.9 (2012) - Salaries and wages to net banking income: 20.7 (2008), 18.8 (2009), 20.6 (2010), 23.2 (2011), 23.5 (2012) - Liquidity: - Liquid assets to total assets: 35.3 (2008), 33.3 (2009), 29.7 (2010), 33.4 (2011), 32.5 (2012), 22.4 (2013) - Liquid assets to total deposits: 49.9 (2008), 49.8 (2009), 46.0 (2010), 52.6 (2011), 51.4 (2012), 36.2 (2013) - Total loans to total deposits: 86.0 (2008), 95.7 (2009), 94.0 (2010), 108.8 (2011), 104.7 (2012), 93.7 (2013), 93.3 (2014 Dec.), 90.2 (2014 Jun.) - Total deposits to total liabilities: 70.7 (2008), 65.1 (2009), 65.4 (2010), 63.5 (2011), 63.2 (2012), 62.6 (2013), 60.8 (2014 Dec.), 63.6 (2014 Jun.) - Sight deposits to total liabilities: 43.8 (2008), 41.0 (2009), 43.4 (2010), 41.1 (2011), 42.0 (2012), 41.0 (2013), 39.8 (2014 Dec.), 42.8 (2014 Jun.) - Term deposits to total liabilities: 26.9 (2008), 24.1 (2009), 22.0 (2010), 22.4 (2011), 21.2 (2012), 21.6 (2013), 21.0 (2014 Dec.), 20.8 (2014 Jun.) - Heterogeneity and near-term deterioration: - At December 2012 three banks were below the minimum requirement. - Some deterioration in capital adequacy and asset quality emerged in 2013. - The banking system has a large share of foreign ownership: foreign shareholding at year-end 2012 constituted 54 percent of the banking sector’s total capital, dominated by regional-based groups representing western and northern Africa. ### Non-banking financial institutions and markets - Microfinance: - Volume of outstanding loans corresponded to 0.6 percent of GDP in 2010 against an average of 1.4 percent in the WAEMU. - Between 2009 and 2012 the number of deposit-taking micro-financial institutions reduced to 49 from 106 (Source: IMF Financial Access Survey). - The sector has undergone a consolidation process due to poor management practices and weak profitability. - Insurance and securities: - Penetration of the insurance sector (premiums in relation to GDP) was about 0.6 percent in 2010. - Operations in the regional securities market and the regional bond market are limited. - Niger sovereign issued a 7-year bond for 16.6 billion CFAF in 2009 and a 5-year bond for 25 billion CFAF in 2013. *Source: BCEAO; IMF staff estimates and surveys as reported in the document.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr1564.pdf_