By Antonio Graceffo
The leaders of Niger’s coup have suspended the Constitution, demanded the removal of foreign troops, and threatened to ban uranium sales to the West. Neighboring countries, like Burkina Faso and Mali, which have close ties to the Kremlin, have heralded the coup, echoing the words of coup leaders, that now the wealth of the nation will remain with the people, rather than benefiting Western colonialist powers.
The reality, however, is that the country is now under military rule and the economy will get worse, not better. Supporters of the coup ask how a country, which is rich in uranium, coal, and gold, could be so poor.
Many other resource-rich nations are also poor. Venezuela has oil; the Democratic Republic of the Congo has diamonds; and Angola has both oil and diamonds. And yet these countries are all poor. Like Niger, many countries suffer from what is called the resource curse or the paradox of plenty. The reasons why resource-rich countries are often poor include lack of productive capacity, mismanagement and corruption, dependency and volatility of commodity prices, lack of diversification across industries, and undeveloped infrastructure and human capital. These are all largely matters of domestic governance, rather than the actions of Western nations. And historically, coups have not managed to fix these problems.
Niger Snapshot
Niger is located in the Sahel region of West Africa. It has a population of 25.25 million. And its capital is Niamey. Niger gained its independence from France in 1960 and endured a period of single-party rule and military governance, marred by frequent coups, until 2021. It marked a significant turning point in its history when it achieved its first peaceful transition of power to President Mohamed Bazoum, who was democratically elected. On July 26th, 2023, elements of the military seized control of the nation, deposing the president. Coup leaders claim that they have the people’s best interests at heart, given the country’s worsening security situation, failing economy, and unequal distribution of wealth. Before the coup, Niger was one of the poorest countries in the world, with a per-capita GDP of about $584 per year. Around 28% of the population is unemployed and 41.4% lives in poverty.
Allegations of inequality are supported by the data. Niger’s Gini coefficient, a measure of wealth inequality, is 50.8, where 100 represents a perfectly equal society. Life expectancy in Niger is 62 years of age, compared to a global average of 72.8. The average adult in Niger has about two years of formal education, whereas the global average is approximately nine.
The Resource Curse
The first problem with natural resources is that the countries that possess them usually do not have the technology or capital to extract the resources or the markets to sell them. Resource extraction operations cost a great deal of money to set up. This is why resource-rich countries almost always have foreign partners who provide investment capital, to establish the mining and refining industries and to take the resources to market. The bulk of the profits go to the foreign investors, while the host country receives a percentage. This is why the narrative that Western countries exploit resource-rich countries is hard to shake. At a glance, yes, France may be making more money on uranium than Niger, but France put up all the capital, took all the risks, and has to wait years to recoup the initial investment. Given the general instability in Africa, with frequent coups, civil wars, and terrorist attacks, waiting for an investment to pay off is extremely risky.
The next issue is corruption. Local politicians can enrich themselves by awarding mining contracts to foreign entities. Looking at Transparency International’s list of most corrupt countries and comparing with lists of resource-dependent countries, there is a definite corollary. South America, Asia, and Africa are high in resource dependence and are generally higher in corruption and poorer than North America or Western Europe. The U.S., Canada, and Australia are exceptions to the rule of resources being correlated with poverty and corruption. Other rich countries such as Singapore, South Korea, Taiwan, and Germany have very few natural resources in comparison. Saudi Arabia, Kuwait, and the United Arabic Emirates are both oil-dependent and rich, but most OPEC nations are poor, such as Iraq, Iran, Venezuela, Equatorial Guinea, and Congo.
Countries become resource-dependent because resources are the low-hanging fruit. The government can easily make money by selling resources, and thus is not motivated to invest in other projects and businesses that would generate greater revenue in the future. This creates a number of problems. First, it makes the ups-and-downs of the entire economy dependent on the prices of resources, which may vary dramatically over the period of just a year. If demand for a particular commodity drops, the country’s economy goes with it, as does its currency value. Lower currency values make it difficult for countries to pay their foreign debts, which have to be paid in dollars. Niger’s debt-to-GDP ratio is 57%. When Niger’s currency, the West African CFA franc, goes down in value, the country needs more of them to buy dollars to make interest payments.
Even the most valuable natural resources have to be processed, and then made into products. Each step, from raw material to finished product, adds value, meaning the natural resources, drawn from the ground, are the least valuable step in the chain of production. A ton of iron ore is worth about $107 when it is extracted from the ground. In order to use it to make a car, the iron has to be refined into steel, valued at about $700 a ton. This refining is generally not done in low-income or developing countries, but rather in middle-income and richer countries like China, Japan, India, Russia, South Korea, and the United States. Next, Japan, South Korea, or the U.S. will use about half a ton of steel to make a car that will sell for an average of about $33,000. And the resource-rich country that provided the iron ore will receive some fraction of $100.
This leads to the final point about why resource-rich countries are usually poor. In order to earn more money, countries must move up the value chain. Japan makes cars and is much richer than the countries that produce iron. Singapore has almost no raw materials but earns a great deal of money selling technology and banking services to companies around the world. As a result, the average Singaporean earns over $72,000 per year, which is more than what the average American makes. It also means the average Singaporean earns almost as much in one day as the average Nigerien earns in a year.
To move up the value chain, the governments of Japan, South Korea, Taiwan, and Singapore invested heavily in infrastructure, particularly technology. They also invested in human capital so that their own people would be able to do the higher value-added jobs. The average Japanese person has12.4 years of education, South Korea 12.1, Taiwan 13.9, and Singapore 11.5. As stated earlier, the average Nigeran has just two years, and would not be suited to working in higher value-added jobs.
Effects of the Coup
The United States, France, EU, and other Western nations that condemned the coup have cut off financial aid to Niger. The coup leaders closed the borders, shut down government institutions, suspended the Constitution, and ordered foreign troops to leave.
The reason the United States, France, and Western countries had troops there was to conduct counterterrorism operations against groups active in the region, such as Boko Haram, the Islamic State, and an affiliate of al-Qaida Jama’at Nusrat al-Islam wal-Muslimin (JNIM). Now, it is expected that Niger will replace the Western troops with Russia’s Wagner Group as a security partner. Wagner has had a record of human rights abuses and crimes against humanity in Mali, the Central African Republic, and Sudan. Additionally, the coup leaders have threatened to halt gold and uranium exports to France and the West, in favor of Russia. If Niger is no longer selling exports on world markets, they will be forced to accept whatever discounted price Russia offers.
The coup is unlikely to address the problems that continue to keep Niger poor: lack of productive capacity, mismanagement and corruption, dependency and volatility of commodity prices, lack of diversification across industries, and undeveloped infrastructure and human capital. Consequently, the average Nigeran will see their already-low standard of living decrease.
This article originally appeared in Highbrow on December 30, 2023
