2009 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
February 2009
Report

Openness to Foreign Investment

The Government of Niger (GON) welcomes foreign private investment and considers it to be critical to economic growth. Under the Investment Code (revised in 2000) industrial investments enjoy tax and customs exemptions and even, in some cases, exemptions from the value added tax (VAT). Other tax benefits are possible, but terms must be negotiated with the GON on a case-by-case basis. All investors benefit from periods of special tax treatment and tariff protection, which vary with the level and location of investment. The Investment Code contains no provisions for screening, and guarantees equal treatment to foreign investors regardless of nationality.

Total foreign ownership is permitted in all sectors except those few restricted for national security purposes, such as arms and munitions, and private security forces, which require special arrangements. Foreign ownership of land is permitted, but requires authorization from the Ministry of Territorial Management and Community Development.

According to the World Bank, starting a new business in Niger takes 28 days and requires 11 different procedures. Niger ranks near the bottom rankings in terms of ease of doing business, and the current regulatory environment is a significant barrier to private sector growth. In mid-2006, the GON created the National Council of Private Investors (CNIP), which was charged with reviewing Niger’s investment climate and performance and proposing specific actions to address the GON investment priorities. The list of proposed reforms included many factors that are widely recognized as critical for entrepreneurial development:
  • the number of procedures required for starting a business;
  • the length of time required for starting a business;
  • the administrative costs of starting a business;
  • the number of import tariff rates;
  • the total corporate tax rate as a percentage of gross profits; and
  • the number of other corporate taxes.

Unfortunately, the CNIP has not met since its formation, and local entrepreneurs have expressed frustration at the government’s delay in addressing constraints to the growth of existing companies. The GON has undertaken to improve business conditions as part of the Millennium Challenge Threshold Agreement, and progress on the stalled reform agenda will be required before Niger can progress to full MCC Compact status.

The Investment Code offers advantages to sectors that the government deems key to the country's economic development: energy production, mineral exploration and mining, agriculture, food processing, forestry, fishing, low-cost housing construction, handicrafts, hotels, schools, health centers, and transportation.

Barriers to investment include the limited domestic market, high transportation costs, and a cumbersome and slow government bureaucracy. Given Niger's low literacy rate, a trained labor force and service providers are not widely available.

Conversion and Transfer Policies

Niger maintains a foreign exchange system that is free of restrictions on payments and transfers. Investment capital and returns to capital can be transferred to and from Niger via local banks and international financial intermediaries. Niger is a member of the CFA (Communaute Financiere Africaine) zone ("franc zone") and the West African Economic and Monetary Union (WAEMU). Euros and dollars are convertible for any amount of CFA at local banks. In order to transfer or convert more than CFA 2 million (approximately USD 5,000) to dollars or euros, an authorization for foreign exchange is required from the Ministry of the Economy and Finance. The international investor community has not complained of difficulty in the transfer of funds.

Expropriation and Compensation

The Investment Code guarantees that no business will be subject to acts of nationalization or expropriation, except when deemed "in the public interest" as prescribed by the law. The Code requires that the government compensate any expropriated business with just and equitable payment. No expropriations have taken place in recent years and given the government policy of promoting private industry, none are expected.

Dispute Settlement

While Niger has a court system to, inter alia, protect property and commercial rights, the administration of justice can be slow. The Investment Code also provides for the settlement of disputes and indemnification either by arbitration or recourse to the international center for settlement of disputes on investment, which was created in 1965 by the World Bank.

Niger is a member of OHADA, the Organization for the Harmonization of Business Law in Africa (Organisation pour l’Harmonisation Afrique des Droits des Affaires). The OHADA Treaty aims to harmonize business laws in 16 African States by adopting common rules adapted to their economies, setting up appropriate judicial procedures, and encouraging arbitration for the settlement of contractual disputes. The Treaty includes regulations concerning business and commercial law, such as the definition and classification of legal persons engaged in trade, proceedings with respect to credit and recovery of debts, means of enforcement, bankruptcy, receiverships, and arbitration.

Performance Requirements and Incentives

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding foreign direct investments. Incentives do, however, increase as the size of the investment and number of jobs created increase.

The Investment Code offers generous, VAT-inclusive tax exemptions, depending on the size of the business. Potential tax exemptions include: start-up costs; property, industrial, and commercial profits; services and materials required for production; and energy use. Exemption periods range from 10-15 years and also include waivers of duties and license fees.

Right to Private Ownership and Establishment

By law and in practice, foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. Private entities can freely establish, acquire, and dispose of interests in business enterprises. Legally established private sector companies have the same access to markets, credit, and other business operations as do public enterprises (parastatals). As noted above, foreign ownership of land is permitted, but requires authorization from the Ministry of Territorial Management and Community Development.

Protection of Property Rights

Niger is a member of the West African Intellectual Property Organization (OAPI), which establishes the legal framework for protecting intellectual property and approves requests for registration. Protection is initially granted for 10 years and is renewable for up to another 10 years.

As a signatory to the 1983 Paris Convention for the Protection of Industrial Property, Niger provides national treatment under Nigerien patent and trademark laws to foreign businesses. Niger is also a member of the World Intellectual Property Organization (WIPO) and a signatory to the Universal Copyright Convention. In practice, however, the government lacks the capacity and resources to enforce copyright violations, and counterfeit CDs and videocassettes are readily available in most cities. Trade secrets can be adequately protected within individual business agreements in Niger.

Despite limited resources, the Niger Copyright Office and Niger Customs make regular, if infrequent, efforts to enforce copyright laws. In August, 2008, they arrested counterfeiters and seized audio cassettes, CDs, DVDs, and a disc burner. Given the profitability of copyright infringement, such episodic enforcement efforts are not a significant deterrent.

Transparency of Regulatory System

The current Investment Code, last revised in 2000, reduced bureaucratic obstacles to foreign investment and enlarged the scope of industries accorded special incentives to include air transportation and the construction and equipping of hotels. The government now promises to approve an investment three months from the date of application. Nevertheless, investors should be prepared for delays caused by the process of acquiring inter-ministerial approvals.

While efforts continue to make the tax laws more transparent, investors find it useful to specify financial obligations, such as tax liability, in individual business agreements.

An updated Petroleum Code, based on international standards, was adopted in 2007. In 2006 the government also revised the Mining Code to offer specific incentives beyond those listed in the investment code: a five-year income tax holiday for large mines (two years for small mines) and exemption from customs duties on imported equipment for use in mineral exploration or mining operations.

A multi-sectoral regulatory agency began operation in 2004 and has oversight over telecommunications and basic utilities (water and electricity) pricing.

Efficient Capital Markets and Portfolio Investment

The GON's policies do not limit the free flow of financial resources. Credit is allocated on market terms, and foreigners do not face discrimination in obtaining it. However, generally only well-established businesses obtain bank credit, as the cost of credit in Niger is high. Nigerien banks offer only a limited array of financial instruments: letters of credit and short to long-term loans.

Political Violence

A previously unknown group, the Mouvement des Nigeriens pour la Justice (MNJ), emerged in February 2007. The predominantly Tuareg group has issued a number of demands, mainly related to development in Niger’s north. It has attacked military and other facilities and laid landmines, particularly in the north. The resulting insecurity has devastated Niger's tourist industry and deterred investment in mining and oil. The GON has labeled the MNJ bandits, criminals, and traffickers, and refuses to negotiate with the group until it disarms. Students seasonally demonstrate against the Government in protest either against economic changes or their unpaid scholarships.

Corruption

Official corruption occurs, and the Government publicly acknowledges that it is a problem and is making efforts to address it. The problem of corruption is compounded by a poorly financed and trained law enforcement system and weak administrative controls. Other major underlying causes of corruption are rampant poverty, low salaries, the politicization of the public service, the influence of traditional kinship, ethnic, and family ties on decision-making, a culture of impunity, and a lack of civic education. Continued pressure from foreign donors, civil society and NGOs led to some progress in the fight against corruption. Foreigners are instructed not to pay bribes to any policemen, border guards, or other government officials. Bureaucratic processes are slower than American standards, but this is due more to inefficiency and lack of information technology than to corruption.

Bilateral Investment Agreements

Niger's bilateral investment agreement with the United States dates from September 1962. Foreign investment in Niger, however, is predominantly French or has some French participation. The Investment Code makes no distinction between investors' countries of origin. The GON welcomes foreign direct investment, regardless of source. Niger is a member of the Economic Community of West African States (ECOWAS), the West African Economic and Monetary Union (WAEMU), and the Lome Convention. There is strong opposition in Niger to ratifying the Economic Partnership Agreement currently under consideration by a regional committee made up of ECOWAS plus Mauritania. In late 2006, Niger qualified for the Millennium Challenge Corporation's (MCC) Threshold Program, and MCC program implementation is underway following the March 2008 signing of the Threshold Agreement. Niger’s MCC efforts are focused on promoting girls' education, fighting corruption, and improving the business environment.

OPIC and Other Investment Insurance Programs

While Niger is eligible for coverage under OPIC programs, OPIC has not been involved in any Niger investment to date. Sectors for potential investment guarantees include: gold and other mineral mining and processing, petroleum production, fruit, vegetable and meat processing, semi-finished hide production, and small-scale manufacturing. The U.S. Export-Import Bank (Ex-Im) has a number of programs in place specifically geared towards helping sub-Saharan Africa manufacturers expand their business by financing U.S. exports of manufacturing equipment and services. In 2006, the Ex-Im Bank credit committee awarded Niger an insured loan worth approximately USD 699,950 over the next five years.

Labor

The supply of skilled workers, technicians, and professionals is limited.

There are no more than 81,144 salaried (2005), formal sector workers, approximately 55 percent of whom are employed in the public sector. Approximately 85 percent of the country's population makes a living from agriculture, herding, petty manufacturing, artisanal production, or informal trading. Wages are low.

Labor-management relations are generally good. The National Federation of Labor Unions (USTN) is well organized and occasionally presses its salary, benefit, and other demands (mostly for civil servants and parastatal workers) with limited strikes. However, high rates of unemployment and the threadbare state of public finances limit USTN's leverage. Labor law and practice conforms to International Labor Organization (ILO) principles.

Foreign-Trade Zones/Free Ports

Niger has been a member of the WTO since 1996 and as such is committed to trade liberalization and an opening of its markets to foreign investments. Local products and traditional handicrafts of WAEMU origin enter duty free, together with a limited number of industrial products from producing enterprises approved by the WAEMU Commission. According to estimates by the IMF, only one third of the WAEMU’s intra-community trade is completely duty free due to the relatively low level of industrialization of members. Under the provisions of the African Growth and Opportunity Act (AGOA), most Nigerien non-textile and apparel exports may enter the U.S. duty free. In December 2003, Niger qualified for textile and apparel benefits provided under AGOA. Niger qualified for Category 9 of AGOA in 2006, which mostly allows the entry of hand woven fabric into the United States duty free.

Foreign Direct Investment Statistics

The government actively seeks foreign private investment and considers it key to restoring economic growth and development. In 2007, foreign direct investment substantially increased – especially in the mining sector. More than 120 mineral exploration and development permits to companies from 12 countries were awarded in 2007. The pace of new permits slowed in 2008, but the earlier permits are under active development.

Official statistics show Niger's second largest trading partner, after France, to be Nigeria. Nigeria, however, is Niger's largest trading partner when informal trade is included. South and East Asian countries also provide foodstuffs (e.g., rice from Thailand) and inexpensive manufactured goods (e.g., China, India). Niger also has trade relations with Japan, Germany, Saudi Arabia and the Gulf States, the Netherlands, the United Kingdom and, in the region with Cote d’Ivoire, Ghana, and Benin.

Foreign investments:

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.
Name Product Millions US$ Country
---- ------- ------------ -------
SonicharCoal11.0 (a)France
SomairUranium6.9 (a)France (AREVA)
CominakUranium6.3 (b)France (AREVA), Japan, Spain
BranigerBrewing3.1 (a)France
SONITELTelecom9.3 (b)China, Libya
UNILEVERSoap0.4 (a)Cote d’Ivoire, England
SEENWater2.2 (a)France
SOMINAUranium334.7 (a)China
TelecomTelecom68.4 (a)France
ImourarenUranium1,500.0 (c)France (AREVA)

(a) data are from 2007
(b) data are from 2005
(c) data are from 2008


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