AFRICAN DEVELOPMENT BANK GROUP
NIGER
COMBINED 2013-2017 COUNTRY STRATEGY PAPER
AND PORTFOLIO REVIEW
ORWA DEPARTMENT
October 2013
Translated Document TABLE OF CONTENTS
LIST OF ACRONYMS AND ABBREVIATIONS .................................................................................. ii
EXECUTIVE SUMMARY ..................................................................................................................IV
I. INTRODUCTION ....................................................................................................................... 1
II. COUNTRY CONTEXT AND PROSPECTS ............................................................................ 1
2.1 POLITICAL, ECONOMIC AND SOCIAL CONTEXT............................................................................. 1
2.2 STRATEGIC OPTIONS...................................................................................................................... 9
2.3 AID COORDINATION/HARMONIZATION AND BANK POSITIONING .............................................. 11
III. COUNTRY PORTFOLIO REVIEW....................................................................................... 11
3.1 PORFOLIO OVERVIEW AND PERFORMANCE ................................................................................ 12
3.2 KEY LESSONS FROM THE PORTFOLIO REVIEW………………………………………………….13
IV. 2005-09 STRATEGY AND KEY LESSONS ........................................................................... 15
4.1 IMPLEMENTATION OF THE 2005-09 COUNTRY STRATEGY, EXTENDED TO 2012……………….14
4.2 KEY LESSONS……………………………………………………………………………………15
V. BANK COUNTRY STRATEGY 2013-17 IN NIGER............................................................. 16
5.1 RATIONALE FOR BANK INVOLVEMENT AND PILLARS ................................................................ 16
5.2 OUTCOMES AND TARGETS .......................................................................................................... 17
5.3 STRATEGY IMPLEMENTATION INSTRUMENTS …………………………………………………..18
5.4 MONITORING/EVALUATION......................................................................................................... 19
5.5 ISSUES COVERED BY COUNTRY DIALOGUE …………………………………………………….19
5.6 POTENTIAL RISKS AND MITIGATION MEASURES ........................................................................ 19
VI. CONCLUSION AND RECOMMENDATION ....................................................................... 20
6.1 CONCLUSION................................................................................................................................ 21
6.2 RECOMMENDATION ..................................................................................................................... 21
LIST OF GRAPHS
Graph 1: Real GDP Growth Rate (%)...........................................................................................................2
Graph 2: Budget Balance (% of GDP)..........................................................................................................3
Graph 3: Country’s Strategic Option...........................................................................................................9
Graph 4: Breakdown by Sector of the Bank’s Active Portfolio in Niger.....................................................11
LIST OF BOXES
Box 1: Potential for the export of crude oil and refined products to enhance the external balance .....2
Box 2: High factor costs, an obstacle to the expansion of extractive industries ....................................9
Box 3: Co-operation between the Bank and Niger ...............................................................................11
The following conventions have been used in this combined 2013-17 Country Strategy Paper and Portfolio Review:

In the tables, a blank indicates that the corresponding item is "not applicable" in this case; (...) indicates that data are not available; 0 or 0.0 indicates that the figure is equal to zero or that it is negligible. Given that some figures have been rounded, the totals may not exactly match the sum of the components.

A dash (-) between years or months (for example, 2010-11 or March-September) indicates the period covered from the first year or month to the last year or month indicated inclusive; a slash (/) between years (e.g., 2010/11) indicates a fiscal (or financial) year.

Unless otherwise indicated, all amounts are expressed in CFAF. Where reference is made to the dollar, it is the United
States dollar. LIST OF ANNEXES
Annex 1:
Map of Niger .................................................................................................................................
Annex 2: Selected Macroeconomic Indicators ............................................................................................
Annex 3: Comparative Socio-economic Indicators .......................................................................................
Annex 4: Bank Portfolio in Niger at end-September 2013 ...........................................................................
Annex 5: Portfolio Performance Improvement Action Plan .........................................................................
Annex 6: Indicative Grant/Loan Programme for the CSP 2013-17 ..............................................................
Annex 7: Bank ‘s Fiduciary Strategy in Niger ...............................................................................................
Annex 8: Challenges Related to the Environment, Climate Change and Green Growth ..............................
Annex 9: Development Partners’ Areas of Intervention in Niger in 2013 ....................................................
Annex 10 Implementation Status of the Kandadji Programme – Phase I (Agricultural Component) ...........
Annex 11: CSP 2013-17 Indicative Results Framework ................................................................................. iFISCAL YEAR
1 January – 31 December
CURRENCY EQUIVALENTS (September 2013)
UA 1 = EUR 1.1449
UA 1 = USD 1.51528
UA 1 = CFAF 751.00517
INDICATIVE SCHEDULE FOR THE PREPARATION OF NIGER CSP 2013-17
Key stages in the preparation of CSP 2013-17 Dates
9 May 2013
Consideration of CSP Concept Note by Operations Committee (OpsCom)
CSP Preparation Mission to Niger
13 to 25 May 2013
24 to 30 June 2013
16 to 22 July 2013
24 July 2013
Review of CSP Draft Report by Peer Reviewers
Review of CSP Draft Report by Niger Country Team and Readiness Review
Review by Country Team
4 September 2013
23 September 2013
3 October 2013
Second virtual review of revised version of Report by Niger Country Team
Dialogue Mission to Niger
Review by Operations Committee (OpsCom)
Board consideration
4 December 2013
LIST OF ACRONYMS AND ABBREVIATIONS
:African Development Fund
ADF
AEO
:African Economic Outlook
:Agence Francaise de developpement (French Development Agency)
:African Development Bank
AFD
AfDB
AWF
BADEA
BCEAO
BTP
:African Water Facility
:Arab Bank for Economic Development in Africa
:Central Bank of West African States
:Construction and Public Works
:Autonomous Road Maintenance Financing Fund
:Climate Change
CAFER
CC
:Common External Tariff
CET
:Franc of the African Financial Community
:Climate Investment Fund
CFAF
CIF
Corruption Perception Index
CPI :
:Country Policy and Institutional Assessment
:Sector Committee
CPIA
CS
:Country Strategy Paper
CSP
CSRD
:Supreme Council for the Restoration of Democracy
CTN
:National Technical Council
Development Assistance Committee of the Organization for Economic Co-operation DAC/OECD
:and Development
DB
:Doing Business
:Trans-Saharan Backbone
DTS
:European Commission
EC
Economic Community of West African States
:Economic Partnership Agreement
ECOWAS :
EPA
:European Union
EU
:Foreign Direct Investment
:Gross Domestic Product
FDI
GDP ii
:Gross Enrolment Rate
GER
GWh
:Gigawatt per hour
HALCIA
:High Authority to Combat Corruption and Related Crimes
Human Development Index
HDI :
I3N
:“Nigeriens Feeding Nigeriens” Initiative
:International Competitive Bidding
:Islamic Development Bank
ICB
IDB
IMF
:International Monetary Fund
:Kuwait Fund for Arab Economic Development
:Liquefied Petroleum Gas
KFAED
LPG
:Legal Support Facility
LSF
:Money and quasi-money
M2
:Millennium Development Goal
:International Support Mission for Mali
:Movement for Oneness and Jihad in West Africa
:National Competitive Bidding
MDG
MISMA
MUJAO
NCB
:Niger Electricity Company
NIGELEC
ODA
:Official Development Assistance
:OPEC Fund for International Development
:Paris Declaration on Aid Effectiveness
OFID
PD
:National Commission for Strategic Planning
:Economic and Social Development Plan
:Public Expenditure and Financial Accountability /
:Public Expenditure Management and Financial Accountability Review
:Independent Energy Producer
PDES
PDES
PEFA
PEMFAR
PIE
:United Nations Development Programme
:Climate Resilience Pilot Programme
PNUD
PPCR
PPP
:Public-Private Partnership
:Public Finance Management Reform Programme (PRGFP)
:Poverty Reduction Strategy Framework
PRGFP
PRSF
:
:Results-Based Country Strategy Paper
:Regional Integration Strategy
RBCSP
RIS
:Regional Integration Strategy Paper
Rural Water Supply and Sanitation Initiative
:Strategic Climate Fund
RISP
RWSSI
SCF
:Small and Medium-Sized Enterprise
:Small and Medium-Sized Industry
:PDES Permanent Secretariat
SME
SMI
SP/PDES
SRP
:Sahel Resilience Programme
:Migrant remittances (Transferts de fonds des migrants)
:Technical and Financial Partners
:Trans-Sahara Highway
TFM
TFP
TSH
U.S.
:United States of America
:Unit of Account
:West African Economic and Monetary Union
UA
WAEMU iii SUMMARY
1.
Introduction. This paper proposes a strategy for Bank Group intervention in Niger over the period 2013-17, as well as areas where portfolio management could be enhanced.
2. Country Background. Niger is part of the Sahel region where efforts to promote inclusive and green growth meet with greater specific structural challenges than elsewhere, resulting from a combination of factors relating to the environment, climate change, lack of infrastructure, and high poverty levels. These factors particularly increase the populations’ vulnerability to food insecurity, and therefore Niger’s stakeholders have defined resilience to such food insecurity as a specific objective. Moreover, the recent and future context marked by larger scale exploitation of mineral and oil resources aids the funding of economic growth but also calls for greater focus on governance, in order to enable the country participate fully in the exploitation of the underground resources and also use the ensuing national income for its priority development actions. The country has other assets and opportunities, including: (a) the agro-forestry and pastoral sector which can develop significantly; and (b) untapped potential for the production of energy, especially renewable energy.
3.
The Bank's portfolio in Niger comprises 18 operations (only one in the private sector), totalling about UA 240 million, with an overall disbursement rate as at end April 2013 of about 24%, an average age of three years and 27% of projects at risk. As at end November 2013, the overall disbursement rate (excluding private sector window projects) increased to 31%. The 2.36 score for the overall performance of the Bank's portfolio in Niger in 2013 (against 2.25 in 2010) is deemed satisfactory. Despite this overall positive assessment, the portfolio is experiencing difficulties, including hindrances observed in the implementation of Phase 1 of the Kandadji Project and the Tibiri-Dakoro Road Project caused by the contractors recruited for the works. The implementation of the proposed portfolio enhancement action plan should help to improve the quality at entry and execution of future Bank operations.
4.
Country Strategy for the 2013-17 Period. The Bank’s country strategy to help
Niger use its opportunities while addressing its major challenges and remaining selective, will be based on two pillars: (i) strengthening resilience to food insecurity; and (ii) strengthening governance, particularly of natural resources.
5.
Pillar 1 aims, not only to create and enhance productive capacity in agriculture, but also to increase market access capabilities by supporting the development of anchor infrastructure that could contribute to this effort. Special attention will be paid to the areas of water control and management, transport (to facilitate access to national and regional markets), and energy. The Bank’s experience in Niger shows that it can effectively remain committed to these strategic infrastructure sectors, considering its ability to mobilize other actors, especially in the implementation of major structuring projects.
6.
Pillar 2 is aimed at strengthening Niger’s governance framework to enable the country to take full advantage of its natural resources, ensure sustainable exploitation of these resources, promote and maintain macroeconomic stability and create an enabling environment for private investment. These factors are essential to the robust, inclusive and green growth desired by the country. The strategy will also support cross-cutting themes, with specific emphasis on gender promotion, since the goal sought is to systematically integrate the dimensions of climate change and the green economy, gender, capacity building and skills development as well as the promotion of youth employment into Bank operations, in line with the priorities of the 2013-22 Tenyear Strategy. Economic and sector-based surveys will also be undertaken to strengthen the Bank's role as a knowledge institution. iv
7.
With specific reference to gender promotion, which is a key issue within Niger’s context, the Bank’s action will be at three levels. Furthermore, operations that will be prepared will contribute directly to improving the status of women. In Niger, women are the most vulnerable in terms of food insecurity – a problem that Pillar 1 of the strategy plans to directly solve. Concerning
Pillar 2, the strategy will seek to support national gender-sensitive budgeting efforts in the area of governance and public finance management. Therefore, all operations prepared within the strategy framework will incorporate this objective whose purpose is to promote gender, with precise indicators to assess progress made. In addition, policy dialogue with Niger’s stakeholders on the subject will be strengthened, particularly with the involvement of the Bank Group President’s
Special Gender Envoy. Lastly, the envisaged study on women’s status and child trafficking will generate necessary knowledge to move forward the gender promotion agenda.
8.
The strategy proposed above is consistent with government priorities as set out in the 2012-15 Economic and Social Development Plan (PDES). In addition, it will contribute to the implementation of the Bank Group’s 2013-2022 Ten-Year Strategy, particularly the broad aspects relating to infrastructure development, regional economic integration, private sector development and promotion of good governance. The proposed Bank strategy will further contribute to the implementation of the West Africa Regional Integration Strategy (RISP 2011-15), and the Bank’s
Sahel Initiative under preparation.
9.
The strategy will be financed from the resources of the ADF-12 public sector window for 2013, and those of ADF-13 and ADF-14 for 2017. These resources and those of the regional envelope and private sector window will all serve as catalysts for mobilizing additional financing, especially from other technical and financial partners. As part of the implementation of this strategy, the Bank will pay special attention to the mobilization of resources for Niger. Accordingly, all Bank
Group sovereign and non-sovereign instruments, co-financing and/or guarantee arrangements, as well as the resources of fiduciary funds or facilities will be used. Furthermore, and in accordance with the Bank’s Ten-Year Strategy, public-private partnerships (PPP) will be sought, particularly to finance major infrastructure projects. It is recommended that national procurement procedures be applied for national competitive bidding (NCB) relating to Bank-financed operations. v
I. INTRODUCTION
1.1 This report proposes a new strategy for Bank Group involvement in Niger over the period 2013-2017 and areas where portfolio management needs to be strengthened. Since 2011, the internal political climate in Niger has normalized and resulting in the enhanced visibility and stability needed by the Bank Group to develop a country strategy. In terms of economic development, Niger is facing significant challenges, including recurrent food insecurity, an obvious vulnerability to climate change, partly due to the country's location in the Sahel, a regional environment in search of stability and, finally, the need to strengthen the governance of extractive industries. The government recently adopted an Economic and Social Development Plan (PDES) as a response to these multiple challenges. All these factors, as well as the recent adoption by the Bank of a 2013-2022 Ten-Year Strategy, underpin the need to develop a new country strategy for Niger, covering the period 2013-
17. Beside this introduction, this CSP 2013-17 has six sections. Section II presents the country’s political, economic and social context, and assesses medium-term prospects. It analyses the challenges, opportunities and country strategic framework, aid coordination and harmonization, and the Bank’s positioning in the country. Section III assesses portfolio performance. Section
IV is an overview of the implementation of the Bank’s previous strategy and draws key lessons for CSP 2013-17. Section V presents the Bank's Niger strategy for the 2013-17 period and highlights the strategic pillars, expected outcomes and targets, the issues covered by the country dialogue, potential risks and mitigation measures. Section VI presents the conclusion and recommendation addressed to the Board.
II. COUNTRY CONTEXT AND PROSPECTS
2.1 Political, Economic and Social Context
2.1.1 Political and Security Context
2.1.1.1 Continuing consolidation of the democratic process is a guarantee of stability, peace, and the implementation of reforms. However, the interplay of political alliances and regional threats poses risks for internal balance. A broad-based government was formed in August 2013. The ruling coalition, the “Movement for the Revival of the Republic/Mouvance pour la Renaissance de la République (MRN)" has a comfortable majority in the National
Assembly, although political alliances are being re-formed. The situation remains precarious at the regional level, with potential or actual danger arising from the hybrid forces (identity-related and religious conflict and trafficking of all kinds). The consequences of the Libyan crisis are less alarming than a year ago, but the situation is far from being fully stabilized. The threat of extremist groups like Boko Haram and MUJAO still looms, and the risk of negative impact on
Niger is real, even if it is contained. Finally, Niger has been affected by the crisis in Mali, particularly through the security and humanitarian impact caused by the influx of refugees.
However, the recent progress achieved in the wake of the election of a new president in Mali portends a relative stabilization of the situation. It appears that the natural expansionist tendency of these threats is regional. In this context, any tentative solution can and should be considered only at regional level.
2.1.2 Economic Context
Economic Growth Boosted by the start of oil production (see Box 1) and a good harvest, real GDP growth in 2012 is estimated at over 13% (see Figure 1 below). Primary, secondary and tertiary sector contribution is expected to stand at 6.9%, 4.0% and 2.5%, respectively.
1
2.1.2.1 Although some growth was recorded in 2012 (16.5% against 3.7% in 2011), the primary sector is has shown an erratic performance, contributing somewhat to food insecurity in rural and even urban areas of the country. A long-term analysis shows that agricultural production is often affected by weather conditions. Niger was among the Sahel countries that experienced the drought-related acute food crises of 2005 and 2010, which affected more than 10 million people in the region, including 2 million in Niger. The country
Graph 1: Real GDP Growth (%)
14
12
10
8
6
4
2
0
-2
2004 2005 2006 2007 2008 2009 2010 2011 2012
Niger West Africa Africa therefore considers the search for greater food security a priority. To foster this objective, the authorities, in April 2012, adopted the initiative dubbed “Nigeriens Feeding Nigeriens” (les nigériens nourrissent les nigériens) or 3N, which aims to promote sustainable food security and agricultural development.
Box 1: Crude oil and refined products export potential to
2.1.2.2 The relative weight of the primary strengthen the external trade balance. sector in the economy stood at 46.2% of GDP in 2012, compared with 45.4% in 2011 and 48% in 2010. The primary sector’s volume expansion is mainly driven by agriculture (+24.8%). This may be attributed to rainy season cropping, an uptrend in irrigated agricultural production resulting from
Niger officially joined the circle of African petroleum producing and exporting countries from November 2011. The inauguration of the Zinder refinery in 2011 enabled it to take a step towards consolidating its public finances. By providing the country with the means to produce and exchange crude oil and refined products, especially in the sub-region, the refinery made it possible for the country to strengthen its productive fabric and also reduce the structural deficit in its balance of payments. The Zinder refinery has a capacity of 20 000 barrels/day (or 1 million tonnes per year), and is able to produce the following derivatives: increased investment in agricultural infrastructure and the supply of improved seeds.

Liquefied petroleum gas (LPG): 69 900 tonnes per year;
2.1.2.3 The secondary sector (15% of GDP) experienced high volume growth of 37.7% in 2012, compared with 3% in
2011. The increased activity in this sector in
2012 (traditionally the lowest contribution to
GDP) may be attributed to “extractive activities” which recorded a 152.5% growth related to oil production. After declines in
2011, uranium and gold production rose by


Super petrol: 306 200 tonnes per year;
Diesel: 505 400 tonnes per year
The Agadem deposits were estimated to be able to produce between 60 000 and 80 000 barrels of crude oil per day (3 to 4 million tonnes per year) for export. The route chosen will be the Chad-Cameroon oil pipeline (to the Kribi terminal). The current project consists in building a pipeline connecting the Agadem fields to the Doba pipeline (Chad-Kribi) running from Chad to
Cameroon.
13.2% and 11.9% respectively in 2012. After a 12.1% decline in 2011, refining operations, well in excess of domestic demand, and improved power generation contributed to the 5.7% increase in energy sector value added in 2012. Furthermore, the continued implementation of State infrastructure projects helped to strengthen the construction industry, which recorded a 7.4% growth rate in 2012, compared with a 3.3% decline in 2011. Rechanneling financing to nonextractive sectors in order to diversify the economy would help avoid any likelihood of Dutch disease.
2.1.2.4 The uptrend in the service sector, which accounts for 38.8% of GDP, continued.
After a 7.7% growth in volume in 2011, the pace of growth in the sector continued with a 6.6% rate in 2012. This trend was due to increased activity in freight transport, including oil, which rose by 8.5%.
2.1.2.5 Macroeconomic Management. Inflation increased to 3.9% in 2012, but could fall to 1.8% in 2013. After rising to 2.9% in 2011 from 0.9% in 2010, following a poor crop season, it climbed to 3.9% in 2012, due to the inflationary impact of the floods of July 2012. The decision to temporarily place a cap on food prices, adopted in 2012 following the floods, should
2bring inflation down to 1.8% in 2013, which is below the community’s 3% threshold. The downtrend should be accelerated by the BCEAO’s common monetary policy, which lays emphasis on price stability.
2.1.2.6 The budget deficit is below 3% for 2012, reflecting a significant improvement on
2011, but could drop further to 2% in 2013. In spite of the expansionary fiscal policy adopted in 2012, the overall budget deficit which had widened (see Figure 2), from 2.4% of GDP in