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In Niger, 2023 was marked by a severe political crisis that triggered regional commercial and financial sanctions and a disruption in external financing. The sanctions lasted 7 months and an estimated 7.5% of GDP in external financing was not disbursed in 2023 due to the disruptions in international development assistance. The report estimates that the crisis significantly reduced GDP growth to 2.0% in 2023 (-1.7% per capita), compared to 6.9% prior to the crisis.

The fact that GDP growth remained positive at 2.0% in 2023 in the face of considerable constraints demonstrates considerable resilience, stemming from:

1. The country¡¯s economic characteristics such as high level of informal trade (less affected by sanctions) and being oil-producing with a domestic refinery.
2. The measures taken by the authorities, for example on budget management to ensure the continuation of public-sector salary payments, and the ramping up of local electricity production in response to the cut-off of electricity imports from Nigeria.

While overall GDP per capita contracted at 1.7%, agricultural GDP per capita expended marginally by 0.12%, leading the extreme poverty rate to remain unchanged in 2023 at 48.4% (using the national poverty line), despite the increase in food prices in the second half of the year.

With sanctions lifted and access to financing gradually restored, growth could recover to 5.7% (1.8% per capita) in 2024 and average 6.5% in 2025-26. The rebound would be driven, by large-scale oil exports, while non-oil industry and service sectors, which accumulated heavy losses in 2023, face a difficult recovery. However, the outlook remains subject to uncertainty around regional dynamics and subject to significant downside risks, including a deterioration in the security situation, terms of trade shocks, climatic shocks, difficult financing conditions, sustained trade dispute with Benin and delays in oil exports.

Against this heightened uncertainty, the need to raise Niger¡¯s growth potential is critical, including by investing natural capital from oil into human capital, notably education. As such, the report dwells into the cost of improving access to quality education in Niger.

The report notes that despite recent improvements in access to public education, the system is struggling to absorb the rapidly growing school-age population, with more than 50% of children between the ages of 7 and 16 estimated to be out of school. Access to education remains a major challenge due in part to limited and poor school infrastructure, and more recently insecurity. For instance, in 2022, approximately 36% of the country's 81,947 primary and secondary classrooms were classified as ¡°Classe Paillote¡± (CPs) or Straw Hut Classroom. The demographic pressures will make increasing access to education even more difficult in the future. If net enrollment rate remains constant at 57.7% (2021), the number of new students enrolled in primary school each year is projected to increase from 102,370 in 2024 to peak at 133,511 by 2045. So, to accommodate the student population, 2500 primary and 1037 secondary classrooms need to be built an average every year over the next three decades.

The report estimates that the government¡¯s program to replace all CPs, train and hire more qualified teachers and integrate contract teachers into the civil service could cost up to 0.26% of GDP per year on average over the next three decades - in addition to current spending.

However, the current government¡¯s program will still leave a large share of children out of school. A more comprehensive policy agenda to improve access to quality education, with improving enrolment rates, is estimated to cost about 1.2% of GDP on average every year - in addition to current spending.

Currently Niger¡¯s spending on primary and secondary education is lower than the average of structural, aspirational, and regional peers based on the latest available data (see figure 2.2). By spending an additional 1.2% of GDP annually, total government spending on primary and secondary education will rise above average of the comparator countries.

There are several ways, the government can finance this additional spending on education without jeopardizing fiscal sustainability: First, improving the efficiency of spending on education will free up additional resources that can be reinvested in the sector. Second, following the start of large-scale oil production and exports, government oil revenues are expected to rise to 5% of GDP by 2030, from less than 1% of GDP currently. Part of this windfall can be used to invest in social sectors in general and education in particular. In addition, international development partners have a crucial role to play in providing financial and technical assistance to support access to quality education in Niger.

The cost of inaction is significant. According to some estimates, the opportunity cost of out-of-school children likely ranges from 5.4 to 18.2% of GDP in Mali, 4.1 to 17% of GDP in Burkina Faso, and 8.3 to 14.1% of GDP in Cote d¡¯Ivoire. Moreover, the lack of education opportunities for a growing young population can negatively impact the security situation of the country.