This is Niger, a landlocked country in West Africa which is home to just over 25 million
people with amongst the worst levels of human development in the world.
In terms of living standards only neighbouring Chad and South Sudan are
measurably worse than the United Nations Human Development Index,
and unfortunately these dire circumstances are only likely to get worse as the country
finds itself in the middle of a bitter coup that is threatening to spiral into an all-out regional
war with Niger at the centre. This is something that the country cannot afford.
War is terrible no matter what, but with a population as vulnerable as Niger's in a region
that is already struggling with violent outbreaks and crippling instability,
something like this has the potential to set the country back decades.
As with a lot of things, one of the best ways to understand the tensions surrounding the
developing situation in Niger is to understand the economics of the country.
After all, economics is first and foremost the study of how people interact with things of value,
and despite the oppressive poverty in Niger, it is abundant in a lot of things that a lot
of very powerful institutions around the world value.
Sure, the country does have some natural resources like the world's 7th largest
reserves of uranium, which are obviously of keen interest to a lot of countries
around the world for one reason or another. But perhaps more importantly than that,
Niger is at the centre of some major regional and global issues that have the potential to
drastically influence everything from economic prosperity in northern Africa,
to cooperation in the EU, global investment ambitions in China,
the price that we are all going to pay for electricity,
and even the effectiveness of sanctions on Russia put in place as a response to their invasion of
Ukraine. Understanding the economics behind an issue this complex can at the very least
be a fantastic insight into how one change in such an interconnected global economy
can change dozens of other things that on the surface look totally unrelated.
So, how do Niger's economic struggles accommodate the coup that has destabilised the entire region?
How is this instability impacting major economic powers around the world?
And finally, could the fallout of a potential war in Africa undo all of the progress these
economies have made in recent decades? Once we have done all of that, we can put Niger,
one of the world's poorest countries, on the economics explained national leaderboard.
Niger has unfortunately been marred by intense political instability since it became its own
nation in the 1960s after claiming independence from being a former French colony. Since then,
governments have been deposed and reinstated with an alarming frequency.
The current ruling regime, or at least the ruling regime in the process of being removed
from power currently, is unofficially called the 7th republic, which actually makes it sound better
than it really is because in between the 6 republics that came before that, there were
also 4 military regimes. The government currently being overthrown has been in power since 2010,
and even in that time has dealt with some other attempts to overthrow them,
and elections with questionable outcomes.
Political instability is not the only thing working against the country either,
it is landlocked, with its only access to the world's oceans for trade being
separated by thousands of kilometers of the world's most challenging terrain.
While in absolute terms Kyrgyzstan and Tajikistan are technically further away from the world's
oceans, they are connected through much better transport infrastructure to major markets like
China, and even sit along existing trade routes between Asia and Europe.
Niger and neighbouring Chad are the most isolated countries from global trade in the world,
because their only connection to the world's oceans, by extension markets to buy and sell
goods, looks like this.
The only reprieve the country has is the Niger river, which is mostly navigable by small
container ships, but it drains to the atlantic ocean through the Niger delta, which large
seaworthy vessels cannot navigate. So anything shipped up and down this river needs to be
unloaded, put onto a truck and then reloaded onto another ship before it gets to its end
destination. This adds significant costs and delays to moving anything in and out of the
country. So even basic imported goods are a massive luxury that end up costing more than
they would even in extremely high-income advanced economies.
It also makes almost any exports impossible, because by the time they go through this extensive
shipping process and get to their own destination, it would end up costing more in shipping than
the money saved by leveraging the low-cost labour force in Niger.
The only exports that Niger has been able to successfully commercialise
are extremely valuable and cost-dense raw materials like gold and uranium,
because even if it costs thousands of dollars to ship these across thousands of miles of desert,
it is still profitable when they are worth millions of dollars per ton.
These exports may seem incidental on a global scale, amounting to only 3.7 billion US dollars
in total, but they are vitally important to some of the most significant economies in the world at
the moment. Niger as an ex-French colony primarily exports its uranium ore to France, a country with
the highest adoption of nuclear energy in the world. Niger in total supplies 25% of the EU's
total demand for uranium to be used as fuel in nuclear power plants across the continent,
at the very same time, these countries are struggling with their energy needs after
cutting off Russian oil and natural gas. These countries can find alternatives,
despite what may be expected, uranium is actually quite cheap to handle and transport since not
much is needed and it's not really as dangerous as people think while it's an unrefined ore.
Even still, the coup in Niger also coincided with news that a major uranium mine in Canada
would be shut down, so the price for this fuel has shot up raising more concerns about the
energy costs in a market already struggling with energy costs. The challenges to normal trade and
international involvement for Niger don't just stop at the pure expense of getting stuff into
and out of the country either, the long intricate connection to global markets causes other problems
for the country as well. The Niger river is a lifeline but it terminates in neighbouring Nigeria,
which has in recent history maintained strong and amicable relations with Niger,
but that relationship has always existed with the understanding that the relatively much more
powerful country could cut Niger off from the outside world at any time.
This is a power that they are choosing to exercise at this very moment,
since Niger, Nigeria and a host of other west African countries are part of a group called
ECOWAS, which is an economic and political union kind of like a west African version of the EU.
ECOWAS was set up with the intention to promote political stability between member states
and it has suspended membership to countries like Mali, Guinea and Burkina Faso following
their own military coups. After the events of last month with Niger's government being
forced out of control, the country was also suspended from membership, which means that
the new military government will not be granted trade access through the Niger river, effectively
cutting off the one economic lifeline that an already desperately poor country had.
Foreign investors that could develop new industries knew of this potential risk.
So the fact that Niger was already a politically unstable economy that was
at the mercy of another country that itself was not necessarily a bastion of robust democracy
to control its one commercially viable trade route, which is still cripplingly expensive and
can also be shut down by floods, droughts and natural erosion was just not a risk worth taking.
That's a lot of risks for not a lot in return.
The country is even abundant in oil, but up until about 10 years ago no foreign companies even
bothered to develop the infrastructure needed to extract it because of the risks that their
investments would be seized by a new government and the expense of getting oil out from such
an isolated region. We have spoken a lot on this channel about countries that develop an
oil industry and then become overly dependent on it at the expense of the rest of the economy.
It's a process so common it has its own name, the resource curse or dutch disease.
But it is very rare to find an economy that is in such a desperate situation that it fails to
even build an oil industry to exploit the reserves it has just sitting there.
That was, up until recently, starting to change though.
The country had started pumping a modest amount of oil which was mostly used to fuel
local communities that was a fantastic opportunity for the economy.
Of course fossil fuels are not ideal to build an economy off because of the damage they do
to the environment, and all other things being equal it would be better for an economy starting
from scratch today to pursue renewables. But that's unfortunately a luxury that a
country as poor as Niger can't really afford.
The negative externalities are worth it to give such impoverished people access to
energy. The correlation between energy consumption and economic output is almost a perfect one-to-one.
Giving an economy more energy allows people to light their homes, fuel their cars,
transport goods, power construction machinery, and run services like healthcare.
Niger has historically relied very heavily on Nigeria again,
to not only be its only access point to global markets, but also to provide it with electricity.
The weakness of this system is currently on display as Nigeria is also cutting off
electricity to the country in response to the coup, causing cities to go into rolling blackouts.
Now in this particular instance that may very well be in service of the greater good,
but long-term it would be a great benefit to Niger to be energy-independent,
especially since its fossil fuel reserves make that easily possible.
Before this current political instability, the plan was even to expand production and
start exporting oil through a pipeline connected through their other neighbor, Chad.
This was proposed to move 60,000 barrels of oil a day,
providing the country with a huge boost to export revenues, and was going to be funded
by yet another global superpower that has become involved in this relatively small economy, China.
China's Belt and Road Initiative is a plan to open up trade routes and provide
infrastructure to dozens of countries across Asia, the Middle East, and Africa.
The plan for China was to invest into countries that didn't have very well-established economies,
so they could provide low-cost manufacturing to the world that China used to provide before
people became too wealthy. The plan was also to open up trade routes so that China had more
countries to buy natural resources from, and sell their export goods too.
Beyond all of that, this whole project would be funded by state-owned banks and development
companies, so it would be a useful way to spread the country's political influence around the world
in, to be fair, much the same way as advanced western countries do with their multinational
corporations.
For over a decade now, the China National Petroleum Corporation, a Chinese state-owned
oil company, has been planning to build a 600-kilometer pipeline into Niger through Chad
to connect to existing pipelines in the region.
This would come at a proposed cost of around 5 billion US dollars, which would let Niger
export their 60,000 barrels of oil a day without any dependency on Nigeria.
Unfortunately, and something that is becoming somewhat of a trend, a coup in Chad meant
that this project was put on hold because of deteriorating relations between the two
countries.
In its place, an even more ambitious pipeline was proposed that would run from the oil fields
in Niger directly to the Atlantic through Benin.
This pipeline would be significantly longer and cost significantly more, but the China
Petroleum Pipeline Engineering Company, a subsidiary of the China National Petroleum
Company that was behind the last proposed pipeline, was still willing to fund the project.
Construction has begun, but it was halted due to COVID-19, and now it has been halted
again because Benin is an active member of ECOWAS, so just like Nigeria, they are also
cutting the country off until their current political situation is resolved.
This pipeline could move 90,000 barrels of oil a day, potentially doubling the country's
exports with just one piece of infrastructure, but now it is stalled and unlikely to be resumed
anytime soon while these issues play out.
Opportunities like this, with the potential to take advantage of the easy wins that could
improve the quality of life of people that need it most desperately, are squandered all
the time, simply due to instability.
Eventually, it just becomes easy to get oil from existing suppliers, but even if major
global powers end up ceasing economic cooperation with Niger, it does not mean that the political
situation is going to be easy to ignore.
As we have seen, military coups destabilize surrounding countries and hurt their opportunities
for economic development as well, which is why the existing members of ECOWAS are pushing
back so hard against the new group claiming power in Niger.
If this goes on, current and currently suspended members of the group are threatened to go
to war with each other, which is going to be good for nobody.
Even beyond additional conflicts making the whole situation in these countries even worse,
it has the potential to cause a humanitarian crisis with people fleeing to Europe, which
is already an issue straining relationships within the EU.
The countries are also home to a long list of particularly undesirable militant groups
which thrive during periods of conflict.
On top of all of that, the final and perhaps most concerning global group at play in this
country is the Russian mercenary organization, Wagner.
Economies where the wealth of a nation is not equitably spread amongst the people of
a nation are always going to have difficulties holding onto power.
An easy solution for some of the region's less than democratic leaders is to pay this
group to keep their country in line in exchange for natural resources.
But for now, unfortunately, they may be the only people that stand to benefit anything
from this.
Okay, now it's time to put Niger on the economics explained national leaderboard.
Starting as always with size, given the country's lack of any competitive industries and mostly
informal economy, it only has an output of 14.9 billion US dollars, roughly equal in
size to North Korea.
Even that modest figure is likely to take a significant hit in the fallout of this current
unrest, but we don't have the figures for that yet, so for now, Niger gets a 3 out of
10 as one of the smallest economies in the world.
That relatively small output is spread out over a population of 25.2 million people.
That figure is growing rapidly as the country has one of the highest birth rates in the
world, creating the opposite problem to what a lot of advanced economies have with their
aging populations.
Niger has too many children to look after.
Either way, that rapidly expanding population means that Niger has a GDP per capita of just
590 dollars.
It's worth mentioning again that in countries this poor, GDP per capita for years can be
a little bit misleading.
The average person in Niger is producing more than 590 dollars worth of value every year,
but they will be producing it for themselves, their family, and their villagers as informal
farmers and workers that are mostly self-sufficient.
GDP only gets counted on stuff produced for other people to buy, and since a lot of communities
in Niger only produce stuff for themselves, a lot of production and agricultural output
is not counted in this formal figure.
Now despite that technicality, Niger is still a desperately poor country, so it still only
gets a 0 out of 10.
Stability and confidence is obviously terrible.
Even Chinese state-backed foreign investment, which tends to operate in even the riskiest
of regions, has struggled to develop a simple oil pipeline in the country due to constantly
shifting political tensions.
Since independence, the average regime has lasted less than a decade in Niger, and shifting
power has often come at the expense of relations with its neighbors, to which it is almost
entirely reliant for even basic services.
Obviously, Niger gets a 0 out of 10.
Growth has actually been quite strong in the last decade.
Formal economic output has doubled as the country has maintained enough stability for
mines and trade routes to be properly established.
This output has also been helped by the rapidly increasing population, so growth in output
per citizen is a little bit less impressive, and obviously it wasn't starting from a
high benchmark, and it's unfortunately likely to be set back significantly as the current
situation develops, but for now, a doubling in output in the last decade means it gets
an 8 out of 10.
Finally, industry.
Obviously, the country is desperately lacking in any kind of formal industries, and even
sectors that are usually a slam dunk in normal countries like crude oil extraction have struggled
to gain a foothold in Niger.
The country gets a 2 out of 10, only scoring an extra point because it does have some natural
resources.
Altogether, that gives Niger an average score of just 2.6 out of 10, putting it down here
on the economics explained national leaderboard.
When you look at developing and underdeveloped economies like Niger, it can be difficult to
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Thanks for watching mate, bye.