2009 Index of Economic Freedom

Quick Facts

Population:

• 13.7 million

GDP (PPP):

• $8.6 billion
• 5.2% growth
• 4.9% 5-year compound annual growth
• $629 per capita

Unemployment:

Inflation (CPI):

• 0.1%

FDI Inflow:

• $20.5 million

Niger's economic freedom score is 53.8, making its economy the 128th freest in the 2009 Index. Its score increased by 1 point from last year, mainly because of improvements in trade freedom, monetary freedom, and freedom from corruption. Niger is ranked 24th out of 46 countries in the Sub-Saharan Africa region.

Niger scores relatively well in government size, monetary freedom, and trade freedom. Monetary stability is relatively well maintained, and prices (except for petroleum products) are largely set by the market. The government has tried to manage spending more prudently, but results have been mixed. The average tariff rate has decreased, but non-tariff barriers hold down overall trade freedom.

Niger performs poorly in business freedom, labor freedom, financial freedom, property rights, and freedom from corruption. The financial system is fractured and underdeveloped, and the limited availability of financial instruments and high cost of credit deter investment. The inefficient regulatory and legal environment constrains commercial operations and investment. Rigid labor regulations discourage employment growth. The judicial system is not sufficiently independent and is subject to corruption.

Background Back to the top

Landlocked and arid, Niger is one of the world's poorest countries. Over 80 percent of the population is engaged in subsistence farming and herding, most economic activity is informal, infrastructure is poor, and drought causes food shortages. Mineral resources, including uranium and gold, are substantial, and exploration for oil is underway. Niger has strong economic ties to Nigeria, a source of energy and conduit to international markets. Niger was ruled by a single-party civilian regime until a military coup in 1974. Civilian government was restored in 1993 but overthrown again in 1996. A 1999 coup led to a transitional government and a new constitution. Mamadou Tandja won the presidency in 1999 and was re-elected in 2004. A Tuareg rebellion in northern Niger is a source of continuing instability.

Business Freedom 36.9 Back to the top

The overall freedom to start, operate, and close a business is significantly restricted by Niger's regulatory environment. The cost of launching a business is very high. Obtaining all necessary business licenses takes more than the global average of 225 days, and fees are high. Closing a business can be a lengthy process.

Trade Freedom 70.4 Back to the top

Niger's weighted average tariff rate was 9.8 percent in 2006. Import taxes, import licensing and certification regulations, inefficient and non-transparent customs implementation and regulation, and widespread corruption add to the cost of trade. Ten points were deducted from Niger's trade freedom score to account for non-tariff barriers.

Fiscal Freedom 66.3 Back to the top

Niger has high tax rates. The top income tax rate is 45 percent, and the top corporate tax rate is 35 percent. Other taxes include a value-added tax (VAT), a tax on interest, and an insurance tax. In the most recent year, overall tax revenue as a percentage of GDP was 11.0 percent, which in this case reflects a narrow tax base and unsound tax administration.

Government Size 88.8 Back to the top

Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 19.3 percent of GDP. Despite resistance from trade unions, the government has divested a majority share of the national water and telephone companies. Privatization of the electricity company has stalled because of a lack of interested buyers.

Monetary Freedom89.5 Back to the top

Inflation is very low, averaging 0.8 percent between 2005 and 2007. With the exception of petroleum products, the market sets prices, but the government does influence prices through state-owned utilities. Five points were deducted from Niger's monetary freedom score to adjust for measures that distort domestic prices.

Investment Freedom50.0 Back to the top

Foreign and domestic capital are legally equal. Investment is not screened, and all sectors of the economy are open except for those deemed sensitive for national security purposes. Deterrents to investment include limited capacity, inadequate infrastructure, corruption, and political instability. Residents may hold foreign exchange accounts subject to some restrictions. Non-residents may hold foreign exchange accounts with prior approval. Payments and transfers to selected countries are subject to quantitative limits and approval. Some capital transactions to selected countries are subject to authorization. Real estate purchases by non-residents must be reported to the government. Land ownership requires authorization.

Financial Freedom40.0 Back to the top

Niger's underdeveloped financial system remains weak and fragmented. The number of available financial instruments is limited, and scarce access to financing hinders dynamic business activity. The Central Bank of West African States governs Niger's banking institutions and sets minimum reserve requirements. Credit is generally allocated on market terms, but the cost is high, and credit is usually extended only to large businesses. Together, four major commercial banks control about 90 percent of resources. The government is a shareholder in a number of financial institutions. Most capital market activity is centered on the regional stock exchange in C'te d'Ivoire, which also has a very small branch in Niger.

Property Rights30.0 Back to the top

Niger's judicial system is understaffed and subject to pressure from the executive. Corruption is fueled by low salaries and inadequate training programs. Despite an adequate legal regime for the protection of intellectual property rights, the government lacks the capacity and resources to enforce copyright violations, and counterfeit CDs and videocassettes are readily available in most cities.

Freedom From Corruption26.0 Back to the top

Corruption is perceived as pervasive. Niger ranks 123rd out of 179 countries in Transparency International's Corruption Perceptions Index for 2007. Corruption in the executive and legislative branches is compounded by poorly financed and poorly trained law enforcement and weak administrative controls.

Labor Freedom40.6 Back to the top

Niger's restrictive labor regulations hinder employment and productivity growth. The non-salary cost of employing a worker is high, and the difficulty of laying off a worker is a disincentive to additional hiring. Regulations on the number of work hours are very rigid.