WORLD BANK GROUP AFRICA REGION, PRIVATE SECTOR UNIT 33683 Summary of 2005 Sectoral Growth and Export Promotion Strategies for Niger's Agricultural Products EPTEMBER S Background others). Because it is a land-locked country, regional inte- gration plays a significant role in Niger's trade relations. 13 With a $200 per capita GDP in 2003, Niger is the second Focusing on onions, yellow nut grass, cowpeas, live- poorest country in the world. Sustained economic growth stock and meat, and leather and hides, the study on Sec- UMBER N is critically needed for the country's poverty reduction toral Growth and Export Promotion Strategies assessed E strategy. Niger's uranium deposits once gave it substantial potential demands for selected agricultural and pastoral OT N leverage in international markets and provided a steady products in the subregional market and analyzed ways to source of government revenue. But the country has lost enhance supply response within Niger to adequately meet such leverage with the decline in world prices in the 1980s. demand, particularly external demand. Other than uranium, agricultural crops (such as onions and seeds) and livestock (such as sheep, goats, cattle, and Demand Potentials in Foreign Markets horses) are also major exports for Niger. Agriculture generated 42 percent of GDP in 2003, In the subregional market,Niger already has an established mainly from cattle, onions, and cowpeas. At least for the export position in products such as onions, cowpeas, yel- past decade, growth in agricultural exports has partly low nut grass, and live animals. e country is yet to be a helped to stabilize total exports by offsetting the decline significant exporter of meat, leather, and hides, but poten- of uranium exports since 1995 (Figure 1). In recent years, tial demand exists at the subregional level. Potential de- export receipts for products such as onions and cowpeas mand also exists in processed products based on currently have been rising. e major advantage of cash crops is that exported primary commodities. Examples include meat, they lend themselves to both rain-fed farming (cowpeas) leather, and hide, as well as development of onion-based as well as irrigated farming (onions, cotton, peppers, and food products such as soup stock. Yellow nut grass could be a substitute for malt for beer brewery, which might gen- erate more broadly based demand from various regions Figure 1: Niger's Export Trend: 1995­2003 of the world. Products from Niger face competition from subregional partners for some products. For example, the Agriculture Mining & Mineral Total Netherlandshasemergedasadominantexporterof onions US$) in the subregion's coastal countries such as Côte d'Ivoire. 250 400 (million 350 Supply Chains of Selected Export Products 200 Exports 300 Figure 2 illustrates the supply chains of selected prod- 250 150 ucts (crop and livestock) exported from Niger to one of 200 US$) its neighboring countries: Nigeria (Kano or Lagos), Côte 100 150 Mining/Mineral d'Ivoire (Abidjan), Benin (Cotonou), or Ghana (Accra). and 100 (million From these data, several observations can be drawn: 50 50 Export · Limited value added takes place in Niger. Except 0 0 Agriculture 1995 1996 1997 1998 1999 2000 2001 2002 2003 otalT for onions, the purchase of original commodities for Figure 2: Exporting Cost Structure of Selected Products in Niger 100 100% 90% 80 80% 70% 60 60% 40 50% 40% 20 30% 20% 0 10% ­20 0% Onion Cowpea Cowpea Cowpea Yellow Sesame Cattle Sheep Goat Sheep Cattle Sheep (Abidjan) (Kano) (Accra) (Cotonou) Nut Grass (Kano) (Lagos) (Lagos) (Lagos) (Cotonou) (Accra) (Abidjan) (Cotonou) Misc. Transit Expense Transportation Profit Misc. Transit Expense Transportation Profit Tax (border/foreign) Original purchase Quality assurance Tax (border/foreign) Original purchase Quality assurance Tax (domestic) Handling/packaging Storage Tax (domestic) Handling/packaging Storage resale abroad constitutes a significant portion for each example, labor cost accounts for almost half of the total type of product (over 60 percent of final value). Most production cost of onion production in Niger, but only 30 values are added outside of Niger. percent in Burkina Faso and Côte d'Ivoire (see Figure 3). Conversely, structural costs, such as cost to maintain farm · Regulatory burdens are huge. Significant costs relate facilities, are only 10 percent of the total cost in Niger, but to taxes paid in Niger as well as in foreign countries, 30­40 percent in other two countries. is outcome is relat- such as duties and transit taxes. Miscellaneous transit ed to the issue of poor agricultural facilities and equipment expenses include incidental expenses during transit as within Niger's agricultural and livestock sectors. Niger's ag- well as fee payments at border patrols. ricultural sector in general faces a serious challenge of low and stagnant productivity.Although agricultural productiv- · Transportation and transit costs are significantly high for some destinations. Transport costs to Abi- djan, Accra, and Cotonou are relatively high. Particu- Figure 3: Production Cost Structure of Onions larly for exports to Abidjan, the presence of multiple borders (through Burkina Faso and Ghana) apparently Structural cost Taxes Inputs Labor makes the transit more costly as observed in onion and 100% sheep exports. Transportation costs and other transit- 90% related expenses total nearly 30 percent of total values. 80% 70% Issues behind Value Chains 60% 50% 40% ere are several issues that effect value chains in Niger, 30% including productivity constraints, value dissipation, and a 20% weak bargain position over pricing. 10% 0% Productivity constraint. Production of some agriculture Niger Burkina Faso Cote d'Ivore Total Cost: 13.1 Total Cost: 34.2 Total Cost 75.4 sectors studied in Niger exhibits high labor intensity. For fcfa/kg fcfa/kg fcfa/kg ity (measured by the value added per worker) has increased to sell them there after a long cross-border trip and a long over the past twenty years among low and middle income absence from home. Also, the technical disadvantage of do- countries, Niger's agricultural sector has not observed any mestic producers versus foreign traders who buy at local significant increase in productivity. As shown in Figure 4, markets in Niger often leads to an asymmetric bargaining agriculture value added per worker in Niger is approxi- power over the prices at local markets in Niger. As seen in mately two-thirds of that in Sub-Saharan African countries the case of onions, farmers in Niger with poor preserving on average and one-third of that in low and middle income capacity for their products must discount the future value countries (down from one-half in 1985). much more than foreign traders who are equipped with bet- ter conservation capacity. Figure 4: Labor Productivity in Agriculture Institutional Constraints for Export Growth Niger Low & middle income Sub-Saharan Africa For Niger to be able to increase and sustain economic 700 growth,it must address several constraints to export growth. 600 ese include: worker 500 per price) · Lack of support infrastructure and facilities. Sup- 400 added port infrastructure and facilities are insufficient, but are constant 300 especially so in the agriculture sector, affecting storage, value 2000 200 cold chains, transportation equipments, and road infra- (US$ structure, particularly in rural areas. e lack of access 100 Agriculture to credit poses severe constraints to farmers in Niger. 0 · Weak market information. ere is an acute deficien- 1985 1989 1993 1997 2001 cy in information on the various subregional markets. Access to information on international markets outside Value dissipation. Although Niger's climatic and soil con- of the subregion, such as Europe, is even more challeng- ditions are favorable for year-round production of onions, ing. Insufficient knowledge on product demands and the heat and lack of appropriate storage facilities with technical standards and norms constrains their capacity conservation technologies make the rate of onion spoilage to penetrate into foreign markets. quite high in Niger. e share of total value loss of onion · Lack of contractual arrangements. e lack of formal sales due to spoilage before they reach market is estimated contractual arrangements in trading activities often re- to be above 30 percent of total production in Niger. For sults in increasing implicit costs of trading in the sense some individual producers, the rate of spoilage can go that it lowers predictability of the outcomes (such as above 60 percent of the harvested amount. As for livestock sales price). Sales prices are not foreseeable with many products, the practice of trekking animals to the market, risks,and unexpected costs are factored in the final pric- rather than using modern transportation tools, reduces the ing. quantity of sales at the market due to animal weight loss. · Weak product recognition abroad. Many types of ex- For example, a 10-day trek to a market across the border ports from Niger enter the neighboring countries to be to Nigeria depreciates the value of animals significantly in re-exported to the third party countries. Lacking prop- terms of weight and skin quality. er labeling to identify domestic products makes Niger's producers invisible and makes it difficult for them to Weak bargaining power over prices. Niger's traditional in- develop new supplier­buyer relationships. formal form of export transactions-- without contractual · Trade financing scheme. Access to financing presents arrangements, efficient modes of transportation, or proper a major bottleneck in facilitating export transactions. market information--weakens the bargaining power of in- e country lacks a rural or agricultural development formal traders at foreign markets. In the case of livestock banking system to provide needed credits to producers cross-border exports, herders who trek animals to Nigeria and exporters. are often obliged to sell animals at very low prices at close · Bottlenecksattheborder.In-countryandout-country of market days because it would be prohibitively costly not road patrols pose significant bottlenecks in the logistical process of transporting exported products. Inefficient tant in promoting processing industries, identifying market and less transparent customs clearance with risk of hav- niche both in terms of product diversification and market ing their products detained for prolonged periods of (customer base) diversification, operationalizing marketing time raises traders' transaction costs. strategies, and providing areas for foreign direct investment. · Distortional taxes and subsidies. A government Integration of production and trading is also important to policy to place high tariffs on imported agricultural in- generate more value-adding activities within Niger. puts (such as pesticide) or to subsidize domestic inputs (such as fertilizer) distorts prices and leads to shortage Direction 3: Modernize trade transaction system and hone of agricultural inputs in Niger-- a problem that affects export strategy. Some agrobusiness firms in Niger operate the cowpea sector in particular. under more modernized export transaction system based on contractual arrangements. Such systems need to be widely Strategic Directions for Sectoral Growth and shared with the agriculture sectors. Availability of market Export Promotion information, linkages with buyers, and initiating contractual arrangements with buyers are key elements for increasing Four strategic directions need to be addressed if Niger is exports. A system for proper product labeling also needs to facilitate sectoral development and promote its exports to be instituted. A modernized export system would al- more effectively: low more efficient coordination or network building among agents (producers, input providers, traders, potential cus- Direction 1: Increase productivity in the agricultural sector. tomers, and so on) and would allow more concerted export To increase supply response to the market demand, sectoral strategy-making among them for outreaching and stabiliz- productivity needs to be increased to address such deficien- ing the customer base. cies. Also, local associations of crop and livestock producers are generally weak. ere is a need to assist them organize Direction 4: Provide favorable investment climate and co- and strengthen their capacity as a first step to boost the ex- operate with subregional partners. e weak private sec- port subsector. tor base in Niger necessitates that the government play a significant role as a donor, an arbitrator, and a facilitator Direction 2: Expand value-adding activities with broader during the initial course of development. e government's participation of the private sector. New value-adding activi- strategic policy actions are to be expected.At the same time, ties can be introduced by developing processing industries the government should review its performance in provid- based on Niger's major commodities such as onions or live ing favorable investment climate for the private sector and animals.Introducingmorevalue-addingactivitiesintherural institute necessary reforms. Seeking cooperation with sub- sector is particularly relevant in the country's poverty reduc- regional partners in improving the environment for produc- tion strategy. Private sector development is critically impor- tion and trading is also an essential aspect for Niger. is note is part of a series of summaries of analytical work of the Africa Private Sector Unit. is note is authored by Yutaka Yoshino, based on a report entitled Sectoral Growth and Export Promotion Strategies for Niger's Agricultural Products (June 2005). is report was written by a team led by Jean-Michel N. Marchat, and including Yutaka Yoshino, based on two parallel studies on supply and demand of Niger's selected agricultural and livestock products, conducted by Remileku Rakey Cole and Chebih Cheikh Melainine. For more information, contact Jean-Michel N. Marchat email at jmarchat@worldbank.org or via telephone on 202 473 2792. A copy of the report is also available from www.worldbank.org/afr/aftps