by The opportunities for an entrepreneur in a low-growth, high-poverty economy like Niger represent a million new unexplored avenues. The effort of working under immense constraints could lead to new, innovative and cost–effective products and services which would bring real change to its people, and Niger could be a fascinating opportunity for strong-willed and self-made entrepreneurs.
It would be useful to summarise the key aspects of Niger’s economy, the challenges it faces, the policy changes that could be brought about, and what this could mean for a new generation of entrepreneurs.
Overview of Niger’s Economy
Niger’s economy is based largely on subsistence crops, livestock, and some of the world’s largest uranium deposits. Drought cycles, desertification, a 3.4% population growth rate and the drop in world demand for uranium have undercut an already marginal economy. Traditional subsistence farming, herding, small trading, and informal markets dominate an economy that generates few formal sector jobs. Between 1988 and 1995, 28% to 30% of the total economy of Niger was in the unregulated informal sector, including small and even large scale rural and urban production, transport and services. Oil and gas have now become a major revenue earner, as well as employment generator, due to increased investment from other countries, particularly China.
Challenges:
While Niger has been making good progress in the past six years, it faces tmajor challenges in its pursuit of achieving the Millenium Development Goals (MDGs).
- Inability to sustain high economic growth.
The uranium boom that occurred during the 1970s was the last big boom to date, and the in early 2000s the oil and gas sector opened up in a big way. The growth decade of 1970-1980 was not leveraged to its full potential, as occurred in other countries such as India and Indonesia. During that decade, real GDP grew at an annual average of 1.6% and income per capita based on PPP stood at US$533, equivalent to that of India and Indonesia over the period 1975-80. The savings rate averaged 7.9% of GDP during 1971-80. Niger attracted huge flows of foreign direct investments, mainly directed to the uranium sector, and investment averaged 17.4% of GDP (higher than that of Mauritius). Exports averaged 19.1% of GDP, comparable to the levels of Philippines and Thailand, and far higher than those observed in many Sub-Saharan African countries with a similar level of development.Despite the renewed policy goal of economic diversification, Niger’s economy remains largely dominated by agriculture. This makes it extremely vulnerable to risks, with weak resilience to climatic fluctuations and changes in the terms of trade. The 2004 drought and locust attacks underscore the fragility of its agriculture-led-growth strategy. As agricultural growth collapsed by more than 13%, it lead to an overall fall in economic growth. According to a recent World Bank report, poverty stands at 62-65% of the total population. - Lack of infrastructure.
This severely limits overall growth potential and locks the country in a poverty trap. The low level of capital infrastructure in Niger is reflected in its lower growth rates and real GDP per capita, compared to the average for sub-Saharan Africa. Niger’s infrastructure gaps also translate into higher business costs, and limit its capacity to compete in regional and international markets. For example, comparison of domestic costs of truck transport within the West African Economic and Monetary Union (WAEMU) region shows that costs per ton per kilometre are about a third higher in Niger than other WAEMU countries, with the exception of Burkina Faso. - High exposure to external shocks and consequences.
Due to the over-reliance of Niger’s economy on international aid, especially that from World Bank and IMF, global downturns affect Niger’s monetary sources and in turn affect the capacity of Niger to fund its critical necessities. Past experience shows that Niger’s economy is highly vulnerable to, and hit by, exogenous factors, including sharp variability of rainfall, terms of trade shocks, and volatility of aid flows. Evidence shows that these shocks result in lower growth performance and severely affect human development. For example in 2004, drought and locust attacks led to about a 1% drop in real GDP growth and a 4% decline in per capita GDP, reflecting a decline of more than 13% in agricultural production. Prospects of growth may also have been hampered by the occurrence of droughts and delays in mobilizing foreign aid to finance the externally funded expenditures and investment programs needed to boost growth and achieve the MDGs. While these points are only some of the myriad of problems that Niger faces, there are still plenty of unexplored opportunities for the country as a whole.
Opportunities:
It is useful to consider the potential for growth in business opportunities in Niger, and what these mean to existing and potential entrepreneurs.
- Targeting of plugging infrastructure gaps on clear priority methodology.
Niger has to look at plugging those critical parts of its infrastructure which represent immediate barriers to growth. A recent World Bank report states that Niger is increasingly going to invest in rural areas to raise farmers’ income, agriculture productivity and improve service delivery. This is a good opportunity for a new generation of entrepreneurs to look at the infrastructure sector, as there will be increased funding from the United Nations Development Program. The current military junta will also be looking at this as a first phase of development to attract foreign investments. Storage facilities and cold chains would help Niger leverage its competitive position in onions, and also transportation equipments with refrigeration to expand the supply to the meat sub-sector. - Tapping the potential of the tourism industry.
Niger has considerable natural resource assets that could help launch it as an international destination based on niche markets such as adventure holidays. These assets include Agadez, already a favorite destination for tourists, the River Niger, also a magnet for tourism, and Air Tenere. Niger also has an outstanding cultural and historical background – both ancient and modern – which lends itself to tourism. The tourism sector could provide linkages with other sectors, including the handicrafts and agriculture sectors, that could be enhanced to increase tourism expenditure in Niger. Currently, while demand for tourism does exist, supply is constrained by weaknesses in infrastructure and low product quality, as well as issues of knowledge management, taxation and financial infrastructure. - Public-private partnerships.
Niger must look to the private sector for ensuring delivery of public services such as education and healthcare. This would ensure that it could focus its financial and human capital towards the rural areas, and would be an ideal opportunity for the entrepreneurs too. - Government policy for entrepreneurs.
The “Doing Business” 2011 report of the World Bank states that over the past six years, Niger has come a long way reducing the number of days required to start a business. However, the number of procedures post-incorporation is also very high. There is high minimum capital is required to start a company in Niger according to Legal Form: Sociétés à Responsabilité Limitée (Limited Liability Company) (Doing Business 2011 Report – Making a Difference for Entrepreneurs). Moreover, it requires 17 procedures, takes 265 days, and costs 2,352% GNI per capita to build a warehouse in Niger. The major component of this 265 days is the obtaining of permits from the muncipality, which takes around 180 days. This shows a huge delay and lethargy within government departments. There should be proper systems, mandated by the government, aiming to attract more investors. The laws of mergers and/or acquisitions should be specifically set so that there are no inter-company conflicts arising from the practices followed. When trading across borders, the government should reduce some of the double taxation norms, which would give a further boost to the economy.
In summary, Niger has immense potential as a country; it has several untapped opportunities and some unique challenges. Together, these could act as the right ingredients for an entrepreneur looking to grow their business.
