Niger: Crouching camel, hidden dragons

As extractives revenues slump, Niger’s 2014 EITI Report shines new light on contentious issues.

Squeezed by lower commodity prices in the past three years, the importance of transparency in resource-rich countries like Niger has only grown. Amidst the global crunch, Niger’s EITI reporting starts to open up issues related to the management of their resources. 

Fiscal crouch

Following two years of double-digit growth, the government’s extractives revenues slumped by 28% in 2014, to USD 315 million according to Niger’s 2014 EITI Report. The share of extractive industries in total government revenues contracted from 36% in 2013 to only 23% in 2014.

Since uranium accounts for over half of its exports, the sharp 23% drop in its prices between 2013 and 2014 certainly played a role. Domestic factors compounded the challenges, with the output of the mining and oil and gas sectors contracting by 2% and 4% in volumes respectively during this period. 

Uncovering dragons

The contraction in oil refining was more than twice as large as that in crude oil production, with a 9% drop in volumes in 2014, reflecting challenges in Niger’s midstream sector. Opened in 2011 as a 60/40 joint venture between China National Petroleum Corporation (CNPC) and the government of Niger, the refinery in Zinder (Société de raffinage de Zinder – SORAZ) has an installed capacity of 20,000 barrels per day (bpd), of which half is earmarked for exports. Domestic sales are channelled through the state-owned Société Nigérienne des Produits Pétroliers (SONIDEP) at regulated tariffs.

The refinery’s output grew more than tenfold between 2011 and 2013, before its 2014 dip. The lower output affected exports, with a more than 95% drop in refined products exports according to the EITI Report. The refinery recorded losses of USD 21 million in 2014, according to Menas Associates, and USD 94 million in 2015, according to local press reports. The refinery’s margins were affected by gradual reductions in the domestic sales price from USD 70 a barrel in early 2015 to USD 47 in February 2016 and a three-month technical shut-down from July 2015, according to the IMF. With the refinery accounting for over 20% of the government’s extractives revenues in 2014 according to the EITI Report, the impact on public finances has been stark.

Opening up

Following an audit of the refinery in 2013, the government established a technical committee to investigate the impact of international pricing on the local oil and gas market. Its proposals to the government in 2016 included a review of pricing at every stage of the value chain to improve the refinery’s efficiency. The government has also announced plans to replace expatriate workers at the refinery with Nigerien nationals and conclude a USD 880 million refinancing of the refinery’s construction loan on more beneficial terms, according to the IMF. While already producing new data on the refinery’s operations, Niger’s EITI reporting could play an even greater role in supporting reforms by shining more light on intermediate transactions along the oil and gas value chain.

Access the Niger 2014 EITI Report.

For more information about the EITI process in Niger, please visit the country page on eiti.org or consult the national EITI website.