2013 Investment Climate Statement
Bureau of Economic and Business Affairs
April 2013
Report

Openness to Foreign Investment

Niger is eager to attract foreign investment and has taken steps to improve the business climate. The Government of Niger (GON) has made revisions to the investment code in order to make petroleum and mining exploration and production more attractive to foreign investors. Under the Investment Code, industrial investments can enjoy some tax and customs exemptions, including in some cases exemptions from the value-added tax (VAT). The GON will need more investment from the private sector and from international financial institutions to bring the nation’s infrastructure up to the standard necessary to maintain economic growth.

The GON actively seeks foreign investment to help underwrite the development of its rich mineral and hydrocarbon resources. In an effort to focus on investing in Nigerien natural resources, in July 2012, the GON awarded nine oil production sharing contracts to five firms and signed an agreement with Chad to construct a 373 mile pipeline linking Niger to the Chad-Cameroon pipeline, which will facilitate export of Nigerien crude oil. In December 2012, the GON signed agreements with several mining companies to prospect for gold and other precious metals in the Tillabery and Maradi regions. The GON also hopes that foreign investment will help modernize Niger’s agriculture, which is the primary source of income for the majority of Nigeriens. There are business opportunities in many aspects of Niger’s agricultural sector: production, collection, transportation, treatment, processing, packaging, storage and marketing. There is great demand but few financing opportunities for the mechanization of farming that would allow for an increase in productivity, enhancing food security, a GON priority. Niger has secured pledges of US$4.8bn from international donors to finance its ambitious development plans. The pledges came at the end of a two-day conference convened by the GON in Paris to raise funds for its Social and Economic Development Plan (PDES). The ambitious plan's total budget is about US$12.2bn. Already agreed donor funding and Niger's own resources will account for US$7.5bn. The PDES includes Niger's flagship food security initiative, 3N, (Nigeriens feeding Nigeriens), infrastructure projects and ongoing public sector reforms.

The investment code allows for tax breaks, though terms are to be negotiated with the Ministry of Commerce and Private Sector Promotion on a case-by-case basis. Most investors benefit from special tax treatment and tariff protection for varying periods depending on the level and location of investment. The Investment Code guarantees equal treatment of investors regardless of nationality. Nigerien authorities have announced that the National Council of Private Investors (CNIP), which is charged with reviewing Niger’s investment climate and performance and proposing specific actions to address national investment priorities, will re-start activity soon.

The Chamber of Commerce’s Guichet Unique, or one-stop-shop, is the first step for foreign investors interested in doing business in Niger. The Guichet Unique can inform potential investors of investment incentives and the laws and regulations that govern investment. The Chamber of Commerce also has a division called the CPI, Center for Investment Promotion that welcomes, directs, advises, and assists national and foreign investors. The Investment Code offers advantages to sectors the GON deems key to economic development: energy production, mineral exploration and mining, agriculture, food processing, forestry, fishing, low-cost housing construction, handicrafts, hotels, schools, health centers, and transportation. Total foreign ownership is permitted in most sectors except energy, mineral resources, and sectors restricted for national security purposes. Foreign ownership of land is permitted but requires authorization from the Ministry of Planning, Land Management and Community Development. The Investment Code has established three different tiers of privileges for investors, listed below.

  • Tier 1: Promotional tier, for investments of 25 million CFA francs (US$35,000) or above.
  • Tier 2: Priority tier, for investments of 50 million CFA francs (US$70,000) or above.
  • Tier 3: Conventional tier, for large businesses with investments of at least 2 billion CFA approximately (US$4 million). During the investment phase, the approved investments are exempt from import duties and taxes on material and equipment needed for the project, except when available locally. The advantages provided during the operational phase include exemption from profit tax (35 per cent). Apart from these regimes, two additional incentive schemes are part of the Investment Code. These apply to companies operating in remote regions, energy, agro-industry, and low-cost housing sectors.

Disincentives to investment include the limited domestic market, high transportation costs, and a slow and cumbersome government bureaucracy. Niger's low literacy rate and weak education system limit the availability of skilled labor and service providers. English is not widely spoken. Additional deterrents to investment include limited institutional capacity for sustained growth, inadequate infrastructure, and corruption. Investors must exercise due diligence in selecting local business partners, and recognize that the sanctity of contracts - specifically with regard to dispute resolution provisions - has not always been observed.

Niger ranks near the bottom of the IFC’s “Doing Business” index, and the regulatory environment has been a barrier to private-sector growth. According to 2011 data, starting a business in Niger took 17 days and required nine different procedures.

Access to credit in Niger was improved through amendments made in 2011 to the OHADA Uniform Act on Secured Transactions. The amendments broadened the range of assets that can be used as collateral to include future assets, extended the security interest to the proceeds of the original asset and introduced the possibility of out-of-court enforcement. However, financing for projects remains difficult to obtain and hinders private sector development.

Economic Indices

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Measure

Year

Index/Ranking

TI Corruption Index

2012

113 of 176 (up from 134 in 2011)

Heritage Economic Freedom

2012

125 of 183

World Bank Doing Business

2012

175 of 183

MCC Government Effectiveness

2012

69%

MCC Rule of Law

2012

82%

MCC Control of Corruption

2012

64%

MCC Fiscal Policy

2012

49%

MCC Trade Policy

2012

62%

MCC Regulatory Quality

2012

71%

MCC Business Start-Up

2012

25%

MCC Land Rights Access

2012

31%

MCC Natural Resource Protection

2012

69%

MCC Access to Credit

2012

50%

MCC Inflation

2012

50%

Conversion and Transfer Policies

As a member of the African Financial Community (CFA) and the Economic Community of West African States (ECOWAS), Niger has benefited from a foreign exchange system that is free from restrictions on payments and transfers. Foreign capital and domestic capital are legally equal. Investments are not screened, and most sectors of the economy are open to foreign investment. Currency conversions above 2 million CFA (about US$4,000) must be approved by the government.

Expropriation and Compensation

Article 28 of the 2010 Constitution states that “everyone has the right to own property and that no one shall be deprived of his property except for public purposes subject to prior and just compensation.”

The Investment Code guarantees that no business will be subject to 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.

There were cases in which the former government of Niger reduced terms of telecommunications licenses due to failure to practice agreed level of service. In early 2010, the Minister of Communications stated that the government of Niger would reduce the duration of two mobile phone operators' licenses because of poor service. According to the Minister, the fifteen-year license awarded to the Kuwaiti telecommunications firm Zain in 2000 was cut by five years pending a return to the agreed level of service quality. A second mobile telephone company, Moov, operated by Atlantique Telecom and majority-owned by Abu Dhabi-based Etisalat, saw its fifteen-year license reduced by three years.

Niger’s parliament voted to nationalize incumbent telecoms operator Sonitel, abandoning a renewed attempt to privatize the company. The move would allow the GON to carry out investments in the company over the next five years. The GON began looking for a new buyer for Sonitel and its mobile arm SahelCom in August 2011, after a deal to sell a stake in the company to Libya’s LAP Green Network for 31 billion CFA (US$61.1 million) was scrapped the previous June. The deal was also heavily criticized by the country’s main telecoms union. The GON decided to cancel the deal and claimed the Libyan government investment vehicle had not been able to meet the terms of the agreement.

Dispute Settlement

While Niger’s laws protect property and commercial rights, the administration of justice can be slow and unequal. The Investment Code provides for settlement of disputes and indemnification by arbitration or by recourse to the World Bank’s International Center for Settlement of Disputes on Investment. However, investment dispute mechanisms in contracts are not always respected and due diligence is extremely important. Procedures are in place but are often not adhered to because of a lack of resources and corruption in the judicial system.

In 2011, an American contractor was detained by police at the behest of a disgruntled Nigerien subcontractor, in violation of contract provisions. (The contractor was released by mid-day when the complaint was determined to be civil rather than criminal.) There is an ongoing commercial dispute between U.S. firm SeaBoard against both ECOBANK and a Nigerien trader. SeaBoard has filed suit against pan-African bank ECOBANK for the loss of rice shipped from SeaBoard to a private vendor. The private vendor defaulted on its payment to SeaBoard, and before SeaBoard was able to recover the rice, ECOBANK seized the rice as payment of a debt between the private vendor and ECOBANK. SeaBoard is working with Nigerien counsel to resolve this commercial dispute. This is the first dispute of this sort between American and Nigerien companies. According to data collected by Doing Business, resolving insolvency in Niger takes five years on average

Niger has been a member of OHADA, the Organization for the Harmonization of Business Law in Africa since 1995. The OHADA Treaty aims to harmonize business laws in sixteen African countries by adopting common rules adapted to their economies, by setting up appropriate judicial procedures, and by encouraging arbitration for the settlement of contractual disputes. OHADA Treaty regulations on business and commercial law include definition and classification of legal persons engaged in trade; procedures for credit and recovery of debts; means of enforcement; bankruptcy; receivership; and arbitration. Niger is a party to the New York Convention on the Recognition of Foreign Arbitral Awards.

Performance Requirements and Incentives

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding foreign direct investments. Niger offers incentives that are dependent on the size of the investment and number of jobs created. The Investment Code offers 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 ten to fifteen years and include waivers of duties and license fees. There are no restrictions on foreign companies opening a local office in Niger, though they must obtain a business certificate from the Ministry of Commerce.

Niger has been a member of the WTO since 1996 and as such is committed to trade liberalization and opening its market to foreign investments. Local products and traditional handicrafts of West Africa Economic and Monetary Union (WAEMU) origin enter duty free, together with a limited number of industrial products from producing enterprises approved by the WAEMU Commission. Niger’s African Growth and Opportunity Act (AGOA) eligibility was reinstated in 2011 after the restoration of democracy. Under the provisions of AGOA, most Nigerien exports may enter the United States duty free. In December 2003, it was determined that Niger qualified for textile and apparel benefits provided under AGOA. Niger qualified for Category 9 of AGOA in 2006, which allows the entry of hand-woven fabric into the United States duty free.

Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises. 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. As noted above, foreign ownership of land is permitted, but requires authorization from the Ministry of Planning, Land Management and Community Development.

Protection of Property Rights

Niger is a member of the West African Intellectual Property Organization (OAPI), which sets the legal framework for protecting intellectual property and approves requests for registration. Protection is initially granted for ten years and is renewable for an additional ten years.

As a signatory to the 1983 Paris Convention for the Protection of Industrial Property, Niger provides national protection 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.

Niger’s judiciary system is understaffed and has lacked independence. Despite a legal regime that protects intellectual property rights, the government of Niger lacks the capacity and resources to enforce copyright violations. Counterfeit CDs, videocassettes and pharmaceuticals are readily available.

Transparency of Regulatory System

Investment approval should be within thirty days from the date of application but investors should be prepared for delays due to inter-ministerial processing. 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. It is important to seek qualified guidance to ensure compliance with tax and labor regulations.

In March 2011, the Extractive Industry Transparency Initiative (EITI) designated Niger as “compliant.” The GON has made improvements towards transparent management and public disclosure of revenues generated from mining activities. Niger ranked 113th in perceptions of corruption by Transparency International in 2012, a 21-place improvement over 2011.

A multi-sectoral regulatory agency (ARM) established in 2004 has oversight over telecommunications, water and electricity pricing.

Efficient Capital Markets and Portfolio Investment

There are no limits to the free flow of financial resources. Credit is allocated on market terms and foreigners do not face discrimination. However, the Nigerien banking sector is poorly developed, inefficient, and expensive. All the local banks are subsidiaries of banks based elsewhere in the region; there are no American or European banks. Bank credit to the private sector has been less than 10 percent of GDP. 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. Four major commercial banks control roughly 90 percent of deposits. The government of Niger holds shares in a number of financial institutions.

The GON will invest nearly US$620 million dollars in agriculture during the 2012-13 growing season, a figure equivalent to just over 20 percent of this year's budget. The investment is part of a program aimed at increasing irrigation to improve harvests. In 2012 the USG launched with the cooperation of ECOBANK a US$4 million revolving credit to stimulate greater lending in the agricultural sector; the African Development Bank (AFDB) followed suit with a much larger program totaling US$17 million in late-2012/early 2013 with SONIBANK (Société Nigérienne de Banques) to respond to the SME/SMIs’ need of financing in various sectors including agro-food, poultry, construction, public works, trade, transport, education and health. The French Government, through the French Agency for Development, AFD, signed with Bank of Africa (BOA) an agreement for an ARIZ (insurance for the risk of financing private investment in AFD intervention countries) Guarantee. This framework agreement allows the sharing of risks of loans granted to companies over a period of one to five years).

Competition from State Owned Enterprises

There are no laws or rules that offer preferential treatment to SOEs. The GON, recognizing that its SOE portfolio was a burden on public finances and inhibited the development of the private sector, has passed a privatization law that provides the legal framework for privatization of 12 SOEs. This includes SOEs in the telecommunication, water and electricity sectors as well as the one government-owned hotel. One of the strategic goals of the Poverty Reduction Strategy Paper (PRSP) is accelerating growth through improved competitiveness, economic diversification and promoting exports. Increased competition in the Information, Communication and Technology (ICT) market has contributed to the rapid expansion of mobile services. Other non-privatized SOEs continue to struggle and face operational and financial difficulties.

Corporate Social Responsibility

Corporate Social Responsibility has taken on new importance. The GON has focused on ensuring existing CSR obligations are met and that communities benefit. It is developing a charter on good corporate governance of oil and mineral resources that will be submitted to the Council of Ministers. In 2011 the National Assembly considered a proposal to modify Article 146 of the Petroleum Code which would increase the share of oil revenues that flowed to local communities when more than one municipality is affected by the project (for example, in the case of petroleum, the wells are near Agadem but the refinery is near Zinder).AREVA’s social policy in Niger includes programs for local economic development, education, health and emergency aid. Telecommunication company Orange Niger has integrated social, environmental and economic priorities into its operations. New investors should expect CSR to be a factor in developing their investment.

Political Violence

Niger has historically suffered from coups but they have not been associated with political violence and there has not been damage to investments. After the February 2010 coup to restore constitutional order when the incumbent President attempted to nullify it, democratic government was restored in just over a year through a series of elections that ended in March 2011. The new government took office in April 2011 and has been committed to improving governance, implementing reforms, and supporting national reconciliation. President Issoufou Mahamadou, who had been an opposition leader for 20 years and had run for president in three past elections, won with 58% of the vote. He was inaugurated April 7 and named a Tuareg leader, Brigi Rafini, as Prime Minister, signaling a determination to work towards national reconciliation and better relations with the population of northern Niger.

There is a continuing threat of terrorist activity by al-Qaida in the Lands of the Islamic Maghreb (AQIM) and associated groups, which claimed responsibility for the abduction of two French nationals from a restaurant in Niamey in January, 2011 and the attack on a natural gas installation in Algeria in 2013. Both incidents resulted in tragic loss of life. The GON’s priorities include a strong commitment to confronting and defeating the security threats. There is concern that Boko Haram’s violent tactics may spill over from northern Nigeria, although there have been no attacks in Niger. The security situation of neighboring Mali and the presence there of violent extremist groups AQIM, Ansar al-Din and MUJAO have been a serious concern for the GON. Thousands of Malians and Nigeriens living in Mali fled the extremists’ brutal rule, crossed the Nigerien border and settled in the Tillabery region. The most recent UN OCHA report declares that there are about 50,000 Malian refugees in Niger. To deal with the increased security risks arising from the situation in Mali, the GON has increased its budget for military operations and increased security patrols along the Malian border and fully supported French-led military intervention in Mali to rout the terrorist groups. In October 2011, the GON adopted a strategy for development and security in the Sahelo-Saharan zones of Niger which combines security measures with a development approach to contain conflict and insecurity.

Corruption

Niger improved 21 spots in Transparency International’s Corruption Perception Index for 2012 and was ranked 113th out of 176 countries. Fighting corruption has been a priority for President Issoufou. He set up two anti–corruption institutions: Bureau of Information, Claims and Fight Against Corruption and Bribery at the Ministry of Justice, to tackle corruption within the judiciary, and the multi–sector High Authority to Combat Corruption and Related Infractions (HALCIA). Both have been in place since October 2011. The Bureau reported that it received more than 300 complaints through its free hotline between October 2011 and June 2012, while HALCIA is currently working on over 120 cases. The High Authority will work closely with Niger’s Financial Intelligence Unit (CENTIF) to investigate suspicious financial activities. The Constitution adopted in 2010 contains provisions for greater transparency in government reporting of revenues from the extractive industries, as well as the declaration of personal assets by government officials, including the President. Key officials from the previous administration were indicted for fraud and corruption during the year.

Corruption in the executive and legislative branches is compounded by poorly financed and poorly trained law enforcement and weak administrative controls. Foreigners are advised not to pay bribes to policemen, customs officials, or other government officials. Bureaucratic processes can be slow, but this is often due more to inefficiency and lack of information technology than to corruption. The Millennium Challenge Corporation (MCC) Board selected Niger for the first time as a country eligible for a compact. The Board recognized the country's efforts in good governance, the engagement and commitment of the GON in the fight against corruption, the respect of political rights, civil liberties, freedom of information and the adoption of policy reforms to strengthen economic freedom.

Bilateral Investment Agreements

Niger signed a bilateral investment agreement with the United States in September 1962. Foreign investment in Niger has been predominantly French, but recently Chinese, Turkish and Indian investors have shown interest. Niger is a signatory of Investment Treaties with Algeria, Egypt, Germany, Switzerland, and Tunisia. As a member of the West African Economic and Monetary Union (WAEMU), Niger has asked its trade partners to deal with WAEMU regarding such agreements.

OPIC and Other Investment Insurance Programs

Niger is eligible for OPIC coverage but OPIC has not been involved in any Niger investments to date. The Export-Import Bank (Ex-Im) has a number of programs geared towards helping sub-Saharan manufacturers expand their business by financing U.S. exports of manufacturing equipment and services. Niger joined the Multilateral Investment Guarantee Agency (MIGA) in May 2012, which means that direct foreign investment into the country is eligible for the agency’s political risk insurance. Niger is also a member of the Bourse Régionale des Valeurs Mobilières (BRVM), a regional stock market located in Abidjan, Cote d’Ivoire.

Labor

Niger has ratified all eight core ILO labor Conventions. The Constitution provides formal recognition of a worker’s right to establish and join trade unions; however, more than 95 percent of the work force was employed in the nonunionized subsistence agricultural and small trading sectors. The National Union of Nigerien Workers (USTN), a federation consisting of 38 unions, represents the majority of salary earners; most are government employees, such as civil servants, teachers, and employees in state-owned corporations. The USTN and affiliated National Union of Nigerien Teachers (SNEN) profess political autonomy, but they have informal ties to political parties. There were several breakaway union confederations and independent teachers' and magistrates' unions. In addition to the Constitution and the Labor Code, there is a basic framework agreement among the USTN, employers and the Government that defines all classes and categories of work, establishes basic conditions of work, and defines union activities.

The Labor Code is based on ILO principles. It protects the right to organize and prohibits antiunion discrimination by employers; labor unions reported no such discrimination. In private and state-owned enterprises, unions widely used their right to bargain collectively with management without government interference for wages greater than the statutory minimum as well as for more favorable work conditions. Collective bargaining also exists in the public sector. The USTN represents civil servants in bargaining with the Government. Agreements between labor and management apply uniformly to all employees.

The GON adopted a new labor code in May 2012, which complies with the conventions of the International Labor Organisation (ILO). The new code introduces provisions to promote employment of disabled persons by requiring companies to set aside 5% of jobs when recruiting.

The Labor Code establishes a minimum wage for salaried workers of each class and category within the formal sector; however, minimum wages were not sufficient to provide a decent standard of living for workers and their families. The legal workweek is 40 hours with a minimum of one 24-hour rest period; however, for certain occupations, the Ministry of Labor authorizes longer workweeks of up to 72 hours.

Foreign-Trade Zones/Free Ports

Niger is landlocked, has no free trade zones and relies on the Port of Cotonou (Benin) as a primary seaport. Importers also use the ports of Lome (Togo) and Tema (Ghana), and sometimes Lagos (Nigeria). Delivery can take months due to delays at borders and internal control points along the route. The relatively low number of commercial flights to Niger means that transport costs are high.

Foreign Direct Investment Statistics

The Government of Niger considers foreign investment key to restoring economic growth and development. Foreign direct investment in Niger has increased considerably. The French uranium-mining company AREVA plays a large role in Niger’s economy as it runs several large mines in northern Niger and propels France into its position as Niger’s largest formal sector trading partner. China has increased its presence with investments in oil production and refining, construction projects, and mining. India (the Malbaza cement factory) and Canada (Samira Hill gold mine) also have major projects in Niger. Official statistics show Niger's second largest trading partner to be Nigeria. However, when the informal sector is accounted for, Nigeria can be deemed Niger's largest trading partner. South and East Asian countries also provide food (rice from Thailand) and inexpensive manufactured goods (from China, India). Niger also has trade relations with Japan, Germany, Saudi Arabia, the Gulf States, the Netherlands, Turkey, the United Kingdom, Ivory Coast, Ghana, and Benin.

The GON is counting on substantial FDI flows that should be generated by ongoing or planned infrastructures projects such as the building of the Kandadji dam to secure the country’s energy independence, the rehabilitation and expansion of irrigation systems to support the agricultural sector, the construction of the Nigeria-Niger-Algeria gas pipeline, and the construction of a new refrigerated slaughterhouse with a capacity of 40,000 tons of meat per year in Niamey. France and China’s uranium mining projects should make Niger the world’s second largest producer of uranium. Between 2010 and 2013, mining FDI is expected to reach unprecedented levels with the development of the Azelik uranium deposit (US$30 million FDI) and the Imouraren mine (US$1.7 billion FDI). The two mines are expected to bring about 37 billion CFA (US$75 million) in fiscal revenues annually and additional revenues from the sales of the Government‘s share of production (33.35 percent for Imouraren and 25.71 percent for Azelik). The estimated FDI inflows associated with the development of the Agadem oil bloc were US$1.3 billion for the oil field, US$350 million for an oil pipeline to Chad, and US$980 million for the Zinder refinery.

Foreign Investments

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Name

Product

Millions US$

Year

Country

SOMINA

Uranium

334.7

2008

China

Imouraren

Uranium

1,500.0

2008

France (AREVA)

Refinery

Oil

980.0

2008

China

Kandadji Dam

Electricity & Irrigation

257.0

2011

World Bank, BAD, OPEC, AFD

Malbaza Factory

Cement

78.0

2011

Niger, India, Norway

Salkadamna

Coal

910

2012

China

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