After the coup d’état, gloomy prospects for Niger’s economy

Three months after the 26 July coup that toppled Niger’s President Mohamed Bazoum, sanctions imposed by the Economic Community of West African States (ECOWAS) and the suspension of international funding are clouding the economic prospects of one of the world’s poorest countries.

– International funding suspended –

The European Union (EU), a major partner of Niger, had allocated €503 million ($554 million) “to improve governance, education and sustainable growth in Niger for the period 2021-2024”, according to its website.

But like other partners such as France, the EU announced that it was “immediately halting” its budget support in the wake of the coup.

Overall, the amount of budget support provided to Niger is now estimated at 254 million dollars to be disbursed, compared with the 1.166 billion dollars forecast before the coup, according to a study by the World Bank (WB) and the United Nations World Food Programme (WFP), consulted by AFP.

In terms of funding for development projects, “only 82 million dollars (0.55% of GDP) have been disbursed in 2023, compared with the significant flows expected of 625 million dollars (3.6% of GDP)”, according to the study, which indicates that this suspension “will weigh heavily on the country’s ability to implement projects and execute the budget”.

These figures, drawn up at the beginning of October, do not take into account the suspension by Washington of the majority of its support programmes for the country, amounting to some 500 million dollars.

– A slashed budget –

Only 62% of Niger’s budget is financed by domestic revenue, according to the EU.

At the beginning of October, the military regime announced a 40% reduction in the national budget for 2023, due to the “heavy sanctions imposed by international and regional organisations”, which “expose the country to a significant drop in both external and internal revenue”.The ECOWAS sanctions prevent Niger from accessing the regional financial market of the West African Economic and Monetary Union (WAEMU) to finance its budget and carry out banking transactions.

In response, the Nigerien authorities have demanded that taxpayers pay taxes in cash, instead of depositing them in the Treasury account, which has been frozen by the sanctions.Faced with a drastic fall in revenue, the government is giving priority to paying civil servants’ salaries, to the detriment of public investment, according to the WB.

It adds that “the new administration has missed several interest payments (on its debt, editor’s note), a situation that has already led to arrears and could very probably lead to the suspension” of other international financial support.

– Infrastructure under threat –

Nigeria has announced the suspension of its electricity supply to Niger, which accounted for 71% of the country’s consumption before the coup. The Niger electricity company (Nigelec) is only managing to meet between 25% and 50% of demand, depending on the region, and its financial situation is deteriorating, according to the WB. Several infrastructure projects are also threatened by the suspension of Western cooperation. The commissioning of the Gorou Banda solar power plant, financed by the French Development Agency (AFD), has been delayed.

Work on the Kandadji dam, financed by AFD, the West African Development Bank (BOAD) and the Ecowas Investment Bank (EBID), has also come to a halt.

“Delays in electricity infrastructure projects will hamper increased access to affordable and reliable electricity for households and industry”, says the WB, in a country where only 20% of the population has access to electricity.

– Sluggish economy –

While GDP growth was expected to reach 6% in 2023, boosted by oil exports, it could fall to 2.3% “if the sanctions continue until the end of the year”, according to the WB.

Some 700,000 more people could fall into extreme poverty in 2023.

The risk of a cash shortage has diminished, however, as money transfer agencies continue to operate in Niger despite the sanctions.

Remittances to Niger are “limited (…) but generally benefit the poorest households”, explains the WB.

– Mali’s example –

Like Niger, Mali was subjected to economic sanctions by Ecowas after a coup d’état.In Mali, “economic growth has proved resilient despite the ECOWAS sanctions”, according to a WB note published in April 2023. The budget deficit has stabilised “at a high level of 5% of GDP” to the detriment of public investment, but poverty has increased.