© 2021 International Bank for Reconstruction and Development The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover photo: Niamey © Danita Delimont / Alamy Stock Photo. 2 This Urbanization Review was prepared by a core team led by Olivia D’Aoust (Urban Economist) and Sabine Beddies (Senior Urban Specialist) that included Abel Bove (Senior Governance Specialist), Mathieu Cloutier (Young Professional), Aboudrahyme Savadogo (Consultant, Poverty), Michael Winter (Consultant, Municipal finance), Nahida Sinno (Consultant, Local Governance), Jeffrey Racki (Consultant, Local Governance), Connie Kok Shun (Senior Program Assistant), and Hadidia Djimba (Program Assistant). The team would like to express its gratitude to Her Excellency Aïchatou Boulama Kané, Minister of Planning, Iro Souley, Director, Development Programming (Ministry of Planning) and Adamou Abdoul Farouk, Head of Division, Development Programming (Ministry of Planning) for their interest in and support of this study. The study was informed by stakeholder discussions held in Niamey in October 2018 and in March 2019. The team thanks participants for valuable inputs, including Adamou Abdoul Farouk (Ministère du Plan), Mahmane Samoussi Djariri (DGH /MHA), Issaka Adamou Nourou Dini (Présidence Niamey Nyala), Sabou Oumarou (DG/IGNN), Soumana Hamidou (DGA/MHA), Meaki Johoa (INS), Hountondji P. Clement (Ministère des Domaines de l'Urbanisme et du Logement, DPE), Abdou Nouhou (Ministère des Domaines de l'Urbanisme et du Logement, DPE); Mouctar Mamoudou (Président d la Délégation Spéciale, Ville de Niamey), Salon Djataou Soumaila (Délégué Special Ville de Niamey), Tidjani Elhadj Sama (DGI), Moutari A. Dambaba (Conseil National de l'Ordre des Architectes), Issaga Hamadou (Institut de Recherches en Sciences Humaines IRSH/UAM), Balra Illoschi Mahaman Salissou (Directeur Urbanisme MDU/L), Abdou Doda Issa (IGS / MDU/L), Abdou Chaibou (DGU/PL/MDUL), Abdallah Mahamadou (DI/PGRC DU), Ibrah Hachimou (PGRC - DU), Salifou Kane Mahaman Tassiou (Ministère du Plan), Moussa Aboubacar (DGAT MDC/AT), Boubacar Oumarou (DEP/MT), Mme Bazi Hadidjatou (DN/PR/MESU/DD), Issiaka Hamadou (Institut de Recherches en Sciences Humaines IRSH/UAM), Balla Illotchi Mahame Salissou (Directeur Urbanisme MDU/L), Abdou Doda Issa (IGS/MDU/L), Abdou Chaibou (DGU/PL/MDUL), Abdallah Mahamadou (DI/PGRC DU), Moussa Aboubacar (DGAT MDC / AT), Boubacar Oumarou (DEP / MT), Mme Bazi Hadidjatou (DN/PR/MESU/DD), Maitre Adamou Harouna Daouda (Chambre des Notaires), Issa Nassourou (BEEEI/MESU/DD), Hassan Daddy Gaoh Karim (DGDT/DGEF), Soni Mochi (DGDT/DGEF), Saidou Hadidou (DGDCT/MISP/D/ACR), Abdou Mahamane (Ministère de la Population, Direction Nationale), Rahida BARO (Ministère de la Population, Direction des Etudes et de la Programmation). The team worked under the guidance of Sylvie Debomy (Practice Manager) and Meskerem Brhane (Practice Manager), Somik Lall (Lead Economist) and Joelle Dehasse (Country Manager) and wishes to thank Siaka Bakayoko (Adviser and former Country Manager), Johannes G. Hoogeveen (Lead Economist), Brahim Ould Abdelwedoud (Senior Urban Development Specialist), Mathieu Cloutier (Young Professional), Taibou Maiga (Sr. Water Supply and Sanitation Specialist), Mamadou Landho Diallo (Economist, VSP fellow), Hamsa Hefny (Consultant), Emilie Jourdan (Senior Governance Specialist), Mona Luisa Niebuhr (Program Officer) and Emilie Oulaye (Consultant, Fragility Conflict and Violence), Moritz Meyer (Economist and peer reviewer), Fabienne Mroczka (Sr Financial Management Specialist and peer reviewer) and Salim Rouhana (Senior Urban Specialist and peer reviewer) for valuable inputs, comments and discussions. 3 Contents Introduction ........................................................................................................................... 5 Chapter 1 Niger, a country like no other ........................................................................... 7 Rapid urban population growth, low and stalling urbanization ............................................ 7 Urbanizing in a fragile context ......................................................................................... 14 Niger will not be able to cope forever ................................................................................. 3 Chapter 2 Opportunities and Challenges of Urbanization ................................................. 6 Urban resident fare better, but Niger lags behind in terms of human development ............ 6 Current urban population growth rates have already revealed some of the challenges facing urban governments............................................................................................................ 9 Niger’s economy is limited to primary and nontradable sectors ....................................... 16 Chapter 3 Is Niger ready for Urbanization? .................................................................... 20 Rural – Urban linkages and spillovers ............................................................................. 20 Benefits and trade-offs of spatially informed investments ................................................ 24 Baseline - “business-as-usual” (scenario 0) ................................................................. 24 Faster migration (scenario 1) ....................................................................................... 25 Urban investment (scenario 2) ..................................................................................... 28 Urban financing (scenario 3) ........................................................................................ 28 Chapter 4 Land, Governance and Finance ..................................................................... 30 Land rights and urban planning are quasi non-existent.................................................... 30 A sound institutional framework, but slow progress towards decentralization .................. 31 A favorable legal decentralization framework, mandated under the 1999 Constitution, has been adopted in the early 2000s .................................................................................. 31 Efforts towards decentralization policy implementation are underway .......................... 34 LG access to financial resources central to the operation of the decentralization policy and the sound service delivery performance of urban areas is not yet effective ........... 36 Capacities at the local levels are weak......................................................................... 44 Chapter 5 Policy implications and Recommendations .................................................... 46 Making decentralization work better ................................................................................ 47 Different investments in different types of regions ........................................................... 54 A strategy for the way forward ......................................................................................... 56 References ......................................................................................................................... 58 4 The Niger Urbanization Review aims to improve our understanding of urbanization and local governance in Niger by analyzing the current and potential contribution of urbanization to the country’s long-term national development and the institutional and financial capacity of local governments to manage the urbanization process. Urgent attention is needed to manage Niger’s rapid urban population growth. A substantial and urgent policy change is needed to enable cities to function, provide employment and services, and contribute to Niger’s long-term development. Reforming land markets, enhancing municipal finances, improving planning of new developments and enforcing master plans is more critical than ever as the urban population is expected to double over the next 10 years. Urban investments are urgently needed for Niger to benefit from urbanization, which is projected to accelerate as rural – urban migration accelerates. What Nigerien cities do now will determine their shape and efficiency not just for years to come, but for decades or even centuries and determine Niger’s future development. This review seeks to inform how urban areas can leverage the concentration of population to deliver services more efficiently and provide the enabling environment required to support the transformation of Niger’s economy, creating more productive off-farm jobs as set out in the best-case scenario of the National Social and Economic Plan 2017-2021. The report addresses three main questions: 1 (1) What role do urban centers play in Niger’s development process? How are they interlinked with the rural economy, and how can these be strengthened to increase the creation of off farm jobs? (2) What are the constraints faced by local governments in delivering on their mandate to deliver basic service? (3) What can be done to strengthen institutions and improve service delivery? Which interventions are needed to improve LGs’ performance? Who needs to intervene, what kind of action needs to be taken, when and where? Urban centers can play a pivotal role in the delivery of essential services for their populations and associated hinterlands and in realizing the potential of their emerging role as foci for economic development. The Government has recognized that for urban areas to effectively fulfill their role as service providers and for them to be able to respond to emerging economic opportunity, it is essential to introduce systems of decentralized, accountable local governance together with devolving appropriate functional assignments to local governments.2 While Niger has embarked on reform efforts towards decentralization and devolution of power to the local level since the 1990s, progress made towards the implementation of these reforms has been limited. A key element of reform, in transforming the developmental role of urban areas, will be the establishment of effective institutional and fiscal systems, to 1 The recommendations will constitute the analytical underpinning of for a future the Urban Local Government Support Project and feed into the preparation of the Governance of Extractives for Local Development Project. 2 Ministère du Plan (2017). 5 enable them to function at levels consistent with the mandates assigned to urban local governments. Niger’s other priority should be to support migration towards opportunities. This starts by giving people the necessary portable assets (land rights, skills, health) that would allow them to move out of farming as opportunities arise and to contribute to the urban economy. Policy priorities should vary spatially – between Niamey; the South of the country, where most of the people live and the potential for cross-border co-operation is promising; the Sahara which is sparsely populated but were most mining activities happen; and fragile border areas. The review is divided into five chapters. Chapter 1 looks at the patterns of urbanization in Niger, and how they contrast with the experience in the rest of the world. Chapter 2 goes through opportunities and challenges brought on by urbanization, looking at living standards and the structure of the economy across settlement patterns. Chapter 3 examines rural-urban linkages before discussing different urbanization scenarios for the period 2015-2035. Chapter 4 looks at the existing institutional and fiscal framework and its impact on urban management in general and on capital investments in particular. Lastly, the firth chapter provides an overview of policy implications and offers operational recommendations for a possible way forward. 6 Population settlements are concentrated in the South and are characterized by the emergence of well-distributed local centers that function as service providers to their rural hinterlands. As in most other African countries, the population living in urban areas is growing rapidly. With an estimated population of 22.3 million, Niger has one of the highest population growth rates in the world (3.8 percent annually). At current and expected future rates of growth, the total number of people residing in urban areas will increase from 3.5 million at present to close to 20 million by 2050 (Figure 1.1) - an average of about 500,000 new urban dwellers per year. Niamey is growing fast. Latest projections estimate that it will double in size by 2030.3 Other urban centers are growing equally fast if not faster. Such growth will increase cities’ demand for public services, housing and other physical infrastructure, and amenities. Figure 1.1 Niger urban population growth from 1950 to 2050, and urban share of the population Within the framework of rapid population growth, due to the large rural base the urbanization rate appears modest, despite rapid increases in the urban population.4 While urban population growth was 4.18 percent in 2017, close to the highest among comparator countries, rural population growth (3.75 percent) is also relatively high which, when taken together, indicates a slow urbanization rate – the share of the population living in urban areas has remained low since the 1980s with very little population shift to urban areas, slows down the urbanization process (Figure 1.1). Thus Niger remains at a relatively low level of urbanization (16 percent in 2017, the lowest share on the continent – see BOX 1 for how urban is defined in Niger) and its total population is and will continue to be dominantly rural for the foreseeable future. However, these demographic trends in effect disguise the very rapid 3 UN-DESA (2018). 4Urbanization refers to the evolution of the share of people living in urban areas relative to the total population. It is important to distinguish it from urban population growth, which is the increase in the urban population. 7 growth of urban areas, at the risk of diverting attention from addressing the important role urban areas play as centers for absorbing major population shifts, and as economic development drivers. BOX 1. WHAT IS URBAN? In the Code Général des Collectivités Territoriales (CGCT), urban local governments can be either communes or Villes and are defined as local government jurisdictions that include a core urban settlement with a population of, respectively, more than 5,000 and more than 100,000. Left unsaid, however, is how those jurisdictions are drawn up (as geographical territories) and thus the extent to which they actually include not only the population of their core urban settlements, but also rural communities and populations in the immediate hinterlands of those urban areas. Simply because a particular local government jurisdiction is classified as an urban commune (or a Ville), then, says little about the extent to which it is urbanized. There are officially four Villes: Niamey, Maradi, Zinder and Tahoua and 36 urban communes (out of 251). In contrast to previous national censuses, for Niger’s 2012 population census enumeration area s were classified - on the basis of their physical attributes – as urban or rural. While previous estimates of Niger’s urban population were based on simply classifying the population of urban jurisdictions as being urban, data from the 2012 census allows a more disaggregated (and accurate) estimate, based on the classification of enumeration areas. Table Box 1. below shows the difference in the two ways of estimating Niger’s urban population. Table Box 1. Different estimates of Niger’s urban population (2012) Using local government classification Using urban/rural classification of (urban/rural) enumeration areas Urban/rural Population % of total Population % of total population population Urban 5,312,999 31.0% 2,778,337 16.2% Rural 11,825,708 69.0% 14,360,370 83.8% Totals 17,138,707 100.0% 17,138,707 100.0% Source: INS (2015). Etat et structure de la population du Niger en 2012 Many of Niger’s urban local governments are far less urbanized than their administrative classification implies (Table Box 2, and map below). Indeed, many of Niger’s urban local government jurisdictions are probably made up of largely rural areas and consist of substantial rural populations. The World Development Indicators have Niger urbanization rate at 16.35 percent in 2017. The statistics used in this report are therefore corresponding to the enumeration areas classification. Table Box 2. Urban population share of the population by “urban” local governments Type Regional Total Urban % No. Name Region of CT capital population population urban 1 Niamey Ville Niamey X 1,016,646 978,029 96 2 Zinder Ville Zinder X 320,491 235,605 74 3 Maradi5 Ville Maradi X 263,123 267,249 102 4 Tessaoua CU Maradi 172,305 43,409 25 5 Tanout CU Zinder 153,936 20,339 13 6 Aguie CU Maradi 152,163 17,397 11 7 Birni N'Konni CU Tahoua 149,219 63,169 42 8 Tahoua Ville Tahoua X 147,982 117,826 80 9 Illela CU Tahoua 141,648 22,491 16 10 Magaria CU Zinder 130,424 25,928 20 11 Madaoua CU Tahoua 126,760 27,972 22 12 Agadez CU Agadez X 116,990 110,497 94 13 Bouza CU Tahoua 101,332 10,368 10 5 ForMaradi, the census data and the data from the https://www.citypopulation.de/Niger-Cities.html are not fully aligned. This results in an urbanization rate of greater than 100 percent; it can probably be assumed that this is 100 percent. 8 14 Guidan Roumdji CU Maradi 95,567 17,525 18 15 Filingue CU Tillaberi 92,015 12,224 13 16 Mayahi CU Maradi 90,424 13,157 15 17 Dosso CU Dosso X 88,350 58,671 66 18 Loga CU Dosso 82,374 6,771 8 19 Mirriah CU Zinder 79,906 28,407 36 20 Tchintabaraden CU Tahoua 79,823 15,298 19 21 Arlit CU Agadez 78,909 78,651 100 22 Maine Soroa CU Diffa 78,162 13,136 17 23 Abalak CU Tahoua 74,557 21,842 29 24 Goure CU Zinder 73,597 18,289 25 25 Madarounfa CU Maradi 71,724 12,220 17 26 Dogondoutchi CU Dosso 71,588 36,971 52 27 Tera CU Tillaberi 71,353 29,119 41 28 Dakoro CU Maradi 70,818 29,293 41 29 Ouallam CU Tillaberi 68,063 10,594 16 30 Keita CU Tahoua 67,215 10,361 15 31 Matamey CU Zinder 64,826 27,615 43 32 Gaya CU Dosso 63,197 45,465 72 33 Tchirozerine CU Agadez 63,090 9,571 15 34 Say CU Tillaberi 58,100 13,546 23 35 Diffa CU Diffa X 55,163 39,960 72 36 Birni N'Gaoure (Boboye) CU Dosso 52,537 14,430 27 37 Tillaberi CU Tillaberi X 47,474 22,774 48 38 N'Guigmi CU Diffa 47,017 23,670 50 39 Kollo CU Tillaberi 32,101 14,746 46 40 Bilma6 CU Agadez 4,032 4,016 100 Totals 4,815,001 2,568,601 53 6Bilma is an urban commune despite a population lower than 5,000. It is an oasis town located in the desert dunes. 9 Geography determines to a large extent where people live in Niger. In 2018, the desert regions of Agadez and Diffa which account, respectively, for 50 and 13 percent of the country land mass, were home to only 3 and 4 percent of the population.7 It is not surprising to see that Niger’s population and activities are concentrated in the South of the country, away from the Sahara Desert, which is arid and only suitable for nomadic and transhumant livestock, and for irrigated crop production in Oases (Figure 1.2). Population density in the Southern part of the country, covering 25 percent of the territory and where 96 percent of Nigeriens live, average about 60 inhabitants per km2, twice the average of West Africa (29 inhabitants per km2).8 Niger has a well-balanced system of towns and cities. Urban areas’ relative size distribution has remained stable over time, as in many parts of the world. Relying on the global definition of urban proposed by Africapolis and utilizing Niger’s 5,000 resident threshold as the basis for classifying a settlement as urban, Niger has a range of settlement sizes, all of which have grown substantially over the last several decades. The underlying patterns of cities’ growth follows the “rank-size rule” order, by which the rank of a city in the hierarchy and its population are linearly related9; and this relationship is stable over time even as incomes and populations grew (Figure 1.3).10 While Niamey seems to have grown faster in the last decade, the share of the urban population living in the capital has remained at about one third since the 1960s, as other settlements have emerged. Figure 1.2 Niger's population is concentrated in the South, and in mining sites near Agadez 11 Regional 2012 Capital Census Niamey 978,029 Maradi 267,249 Zinder 235,605 Tahoua 117,826 Agadez 110,497 Dosso 58,671 Diffa 39,960 Sources: World Bank staff computations based on WorldPop 2015; Road network from Jedwab and Storeygard (2016); INS (2015). 7 INS (2018). 8 SWAC/OECD (2018). 9 Gabaix (1999). 10 World Bank (2009). 11 Agadez is also a transit point for contraband. 10 Figure 1.3 Niger urban relative size distribution has remained stable over time Source: World Bank staff computations based on SWAC/OECD (2018). Each data point represents an agglomeration area of population size of 10,000 or more in 2015; 5,000 in other years. Settlements of different sizes could further complement one another. Niamey, secondary cities, market towns and villages are all linked together through their respective roles in the economy. None operate in isolation. Urban-rural linkages may be stronger for smaller towns than big cities, given the formers’ closer proximity and more similar conditions to rural areas. The primary city and capital, Niamey, is more diversified in both economic activity and the provision of services and amenities. Maradi is a transport, trade and agriculture hub; Zinder specializes in food processing; Tahoua is a trading town for merchants from the North’s drier pastoral zone and farmers from the Southern cultivated zones; and Agadez is a market town and center for the transportation of the uranium mined in the region. Urban-rural linkages are expected to strengthen as the economy develops. It is important to distinguish between the two components of urban population growth: natural urban population growth – driven by fertility and mortality rates, and migration from rural to urban areas to identify entry points for policy action. In Niger, urban population growth is mostly driven by natural population growth, which contributes to 66.5 percent of the increase in the urban population (Figure 1.4).12 12The last three years of urban communes’ population growth was disaggregated into natural growth and migration components. The census data provided the relevant information. 11 Figure 1.4 Share of urban population growth from migration and natural population growth Source: World Bank staff computations based on INS (2015). Niger fertility rates remain among the highest in the world, in both urban and rural areas. Even if urban fertility rates have been decreasing, they remain higher than in the rest of the continent, contributing to Niger fast growing population, in both urban and rural areas (Figure 1.5). 12 Figure 1.5 Fertility rates are stalling at high levels Source : Bocquier and Schoumaker (2018). In only 15 percent of urban communes, urban population growth is mostly driven by migration. The six cities attracting relatively more migrants are Niamey – the capital, which provides more economic opportunities; the two mining towns of Arlit, which has economic opportunities for migrants, and Tahoua which serves as a trading town for merchants in the North’s drier pastoral zone and farmers from the Southern cultivated zones. Similarly, Gaya, located at the border of Benin and Nigeria, has developed strong trade links with similar towns in Benin (Malanville) and Nigeria (Camba) (Figure 1.4). Demographic pressures that will continue to feed the expansion of the small urban areas will be a dominant source of urban growth and could play a significant role in the way urbanization is achieved in Niger. The total number of agglomerations reaching more than 10,000 people has undergone a sharp increase over the past fifty years. In the 1970s, the number of urban agglomerations with over 10,000 people in the country was 6 (Table 1.1). In 2015, this number had increased to 68, which places Niger at the median of the comparator group of 50 African countries.13 The emergence of these new agglomerations is linked to a process of in situ urbanization, whereby demographic pressures drive the growth of existing localities to exceed 10,000 inhabitants. This process of in situ urbanization, which transforms rural settlements and their populations into urban settlements14 without much geographical relocation of the residents, has likely led and will continue to lead to the re-classification of rural settlements as urban communes. It also highlights the role of small towns and secondary cities within the urban network, and the increasing fluidity between rural and urban environments. 13 SWAC/OECD (2018). 14 Urban agglomerations are defined by Africapolis (SWAC/OECD) as settlements with more than 10,000 inhabitants that have a continuously built-up and developed area, with less than 200 meters between two buildings. This definition is in line with the definition of urban communes adopted by the Government of Niger that designate urban communes as any core urban settlement with a population of 5,000 or more. 13 Table 1.1 Classification of urban centers in Niger by size from 1970 to 2015 1970 2015 Distribution of urban % of total % of total Number of Number of population by urban center urban urban urban centers urban centers size population population 10,000 to 30,000 4 36% 51 25% 30,000 to 100,000 1 18% 12 16% 100,000 to 300,000 1 47% 3 16% 300,000 to 1,000,000 0 0% 1 11% 1 to 2 million 0 0% 1 33% Total urban population 215,538 3,270,216 Source: SWAC/OECD (2018). In Niger, urbanization is happening in an increasingly fragile context as the security situation in the region is deteriorating, farm sizes are diminishing, and competition for grazing lands is intensifying as global warming is drying the Sahel. It is estimated that a total of 360,000 – or 5 percent of 1990 Nigerien population – left their country between 1990-2015 due to land degradation from the impacts of climate change, recurrent food crises and endemic poverty, among other reasons.15 Population shifts have been facilitated by the creation of the ECOWAS zone as a space for the free movement of persons and goods. In 2013, 2 percent of Nigerien sent remittances to Niger which contributed to 2.3 percent of Niger’s GDP. International migration flows are hard to track, in particular within ECOWAS.16 Fragility in Mali and North-East Nigeria has led to the rise of forcibly displaced people, as the level of insecurity increased at the borders. More recently, fragility has forced displacement in certain areas of the country. Between November 2018 and March 2019, nearly 5,000 fatalities and more than 1,200 violent events were reported in the Sahel (Figure 1.6).17 The rise of conflicts and armed attacks in countries neighboring Niger (Mali, Nigeria and more recently Burkina Faso) are now the largest driver of population movement, and contributed to the increases in both the number of internally displaced people and in the number of refugees entering Niger from Mali and Nigeria. 15 Wouterse et al. (2018); IOM (2010). 16 Unrecorded international migration flows, and the large share of circular migration could explain the very low internal mobility captured in available data, which suggests that 90 percent of people (interviewed) still live where they were born. Further work could focus on improving our understanding of internal and international migration patterns, both circular and permanent. 17 Countries comprising the Sahel are Senegal, Mauritania, Mali, Burkina Faso, Niger, Nigeria, Chad, and Sudan. ACLED press release of 28 March 2019: Political violence skyrockets in the Sahel according to latest ACLED data (Jones, 2019). 14 Figure 1.6 Violent events January to November 2020 Source: World Bank Staff based on ACLED. Raleigh et al. (2010). Nigerien institutions are conducive to supporting effective socio-economic responses to the forced displacement crisis, given that refugees are required to be treated equally under the law with respect to key socio-economic rights: property ownership, security, access to the courts, access to basic services, and freedom of expression and movement. In the local language, “refugee” is not a word. Still, recipient areas are struggling to accommodate the new comers.18 The impact of global warming on rural-urban migration is not clear. Africans across the Sahelian belt are moving to cities searching for better opportunities as arable land becomes drier. Youths are leaving their homes in rural areas and moving to cities. Environmental change is assessed as being one of the primary causes of migration on the continent, since most of the population depends on agriculture and natural resources, which are the prime assets affected by climate change.19 Recent research however pointed out that rising temperatures may slow down the urban transition in poor countries like Niger because of liquidity constraints while it would accelerate it in middle income countries.20 But climate could lead to forced migration as temperature changes have increased the intensity and frequency of natural disasters such as droughts and flooding. In Niger, ten major droughts and nine flooding events were recorded over the last 30 years. Record precipitations in 2010 and 2012 exacerbated the high flood exposure. In 2012, floods led to critical damages to infrastructure and housing in cities. Population growth, climate change, environmental degradation, insufficient planning and weak local government capacity make Niger increasingly vulnerable to climate shocks. As local authorities often struggle to meet the needs of their own residents, unexpected inflows of displaced people will put further pressure on service delivery and land prices and might affect the job market in the cities, while 18 Niger is one of the countries which benefited from a grant of the World Bank refugee sub-window. The Refugees and Host Communities Support Project (PARCA) has been effective since March 26, 2019. 19 European Council on Foreign Relations (2017). 20 Peri and Sasahara (2019). 15 concurrently increasing competition over scarce resources in rural areas. Climate related migration could in that case act as an additional threat to Niger fragile stability. Migration during the dry season risks being affected by climate and violence risks.21 Circular migratory flows go back to the pre-colonial period and involve repeated moves between an area of origin and one or more destination areas. Rural populations, poor men in particular, regularly seek seasonal work beyond where they reside during the dry season. Low agricultural productivity from the scarcity of arable land, the low mechanization of agriculture, the scarce and irregular rains, the high prices and lack of access to improved seed and fertilizers have pushed farmers to migrate when the dry season hits. Subsistence farmers tend to search for non-agricultural employment in adjacent rural areas and do not travel too far. 22 Global warming and violence are likely to push farmers to move further, while increasing conflicts in certain areas are likely to restrict mobility. Migratory flows used to benefit economic development along the migration corridors. Between February and June 2016, over 300,000 migrants from countries in West Africa – mostly young men – passed through Niger to reach Libya and Algeria.23 Some then tried to reach the European coast. Niger is part of ECOWAS and citizens from member countries can therefore freely stay in Niger, as can residents from Chad and Cameroon, with whom Niger signed similar agreement. The Northern part of the country has thus relied on the irregular migrant industry to replace the tourism sector, which disappeared as insecurity rose in the region. As Europe began strengthening its migration policy to stem irregular entries of people, Agadez’s residents started bearing the cost. Smugglers routes have changed towards less known, more dangerous paths leading many to die in the desert. The ones who make it on a boat are more likely to be intercepted and migrants handed over in detention centers run by Libyan militias. If liberated, they head back South and their first destination is Agadez, where they seek UN resettlement and Niger is left to deal with them (See Box 2 for more details). Alternative interventions are therefore needed to provide economic opportunities for locals and migrants alike. 21 See also The Economist (May 23, 2019) - How climate change can fuel wars https://www.economist.com/international/2019/05/25/how-climate-change-can-fuel-wars 22 Mercandalli and Losch (2017). 23 IOM - https://rodakar.iom.int/country/niger 16 BOX 2. AGADEZ, THE SMUGGLING CAPITAL OF AFRICA? NOT ANYMORE. In 2011, after the fall of the Libyan leader Muammar Gaddafi, the long-locked borders and smuggling routes between Libya and Niger reopened, and the small city of Agadez became the smuggling capital for arms, drugs and even humans in the sub-Saharan region. Agadez is one of the primary transit points for migrants hoping to make their way to Europe through Libya. Mixed Migration Routes through Niger: Source: International Organization for Migration 2017 On each Monday, an exodus of hundreds of travelers takes place. The travelers follow the weekly military convoy, traveling in columns for safety, however, the probability of encountering thugs, getting lost or having a break down is high. According to the International Organization for Migration (IOM), over 170,000 migrants passed through Agadez in 2016, and more than 6,000 newcomers arrive each week, with the majority being men and accompanied minors. Throughout this risky journey in the Sahara, many of these migrants are kidnapped by bandits or traffickers and are subjected to physical or sexual assault. According to Regional Mixed Migration Secretariat (RMMS), many die of hunger, dehydration or from getting affected by disease, and the majority disappear without anyone knowing. The ones who fail come back to Agadez, fleeing Libya’s detention centers as boats are increasingly been intercepted along Africa’s shores following the strengthening of Europe an immigration policies - “pushing its borders far further south”.24 Most migrants are Sudanese, and unlike bordering Malian and Nigerien, are not automatically granted refugee status. As of March 2019, about 2,000 asylum seekers remain in a camp 10 kilometer from Agadez. 25 In the summer of 2016, the Nigerien government has enforced new restrictive measures against the migrants’ smugglers – also known as les passeurs – that control the movement of people. Soldiers were posted throughout the dessert, smugglers got arrested and jailed, and Agadez routes were blocked. To date, some passengers are still trapped in Agadez. These repressive measures taken 24 Munshi and Peel (2019). 25 UNHCR Niger team. by the government have led to the emergence of new routes by the human-traffickers in In-Gall, with people passing through Tahoua, Tchintabaraden, and Abalak. These new routes have caused a significant increase in both the prices and the risks connected with border crossing. However, according to the Nigerien Ministry of Interior, in the 1 st semester of 2017, almost 101 people were arrested and brought to trial, 1,762 escorted out of the country, 7,681 sent back to the border, 66 vehicles seized, and at least 12 international trafficking organizations taken down. This has significantly impacted Niger’s economy. According to Rhissa Feltou, mayor of A gadez in 2011, this law has excessively affected a vital economic sector by limiting free circulation within the Economic Community of West African States (ECOWAS); and it has shifted the economy from a retail system into a criminal system, fostering illegal trafficking and trade through an increasing number of new routes and the introduction of new strategies. Source: IOM, RFI, UNHCR. BOX 3. NIGER BETWEEN CRISES AND RESILIENCE More than 90 percent of youth aspire to non-agricultural jobs while the majority of them in fact work in agriculture (Box 3 Figure). Their potential frustration, rising inequalities, and deficiencies and/or disparities in public service provision could lead to conditions that facilitate further jihadist recruitment initiatives in the region. Box 3 Figure. Occupational aspirations vs. actual attainments Source: World Bank (2017c) based on ECVMA (2014). Despite vulnerable external security situation and rising internal tensions, Niger has not thus far seen as much targeted attacks as Nigeria, Mali and Burkina Faso have. To address security challenges and prevent further deterioration of the conflict situation in regions at risk, the Government can continue to capitalize on the factors that helped the country to manage to avoid sliding into violent conflict, inter alia: (i) fostering a sense of inclusion and social cohesion among the various social groups such as the Tuareg population; (ii) striking the right balance between development, diplomacy and security by adopting integrated approach to security and development; (iii) tackling socio- economic grievances; and (iv) promoting the use of the unique early warning and mediation mechanism created in 2011 and managed by the Haute Autorité à la Consolidation de la Paix (HAPC).26 26 For more details, see United Nations & World Bank (2018) p. 201. 2 As a member state of ECOWAS, Niger also benefits from ECOWAS’ Early Warning and Response Network (ECOWARN), since its operationalization in 2003. ECOWARN serves as a tool for monitoring prevention and decision making that is the first of its kind in Africa, wherein civil society organizations and a regional intergovernmental body work together to engage in data collection and analysis, and the drafting of up-to-date reports on possible emerging crises, ongoing crises and post- crisis transitions. ECOWAS, indeed, stands out among the regional organizations, for its successes in conflict mitigation and peacekeeping in West Africa. 27 In July 2017, Burkina Faso, Chad, Mali, Mauritania and Niger - which form the G5 Sahel - created a multinational force known as the G5 Sahel Joint Force to combat armed groups, transnational crime and human trafficking in the region. The G5 has also developed a Priority Investment Program (PIP) to structure the dialogue with partners around key regional investments that will accelerate recovery and boost economic growth in the region. The six priority sectors identified by the G5 Sahel states include: youth employment; rural development and food security; energy and climate; governance; decentralization and access to basic services; and security. Economic and demographic trends are expected to change over the next two decades. Rising rural land scarcity suggests that agricultural production growth, which has traditionally depended on land expansion more than productivity gains, may become difficult to maintain (Figure 1.7). The amount of agricultural land available for farming and grazing halved in rural per capita terms during 1990-2015 (from 4.9 to 2.7 hectares), and the amount of per capita arable crop land has also fallen (from 1.6 to 1.0 hectares).28 Even if agricultural land continues to expand at current rates, which is unlikely, it would still be outpaced by rural population growth (i.e., with crop land falling to 0.6 hectares per rural inhabitant by 2050). Falling farm sizes and heightened competition for grazing lands, global warming, and insecurity in neighboring countries may encourage farmers or young family members to leave agriculture and/or migrate to urban centers in Niger rather than emigrate. The deterioration of the security situation in neighboring countries is limiting the mobility of people within the ECOWAS zone, leaving little alternative to farmers than to seek opportunities in Nigerien urban areas. Population projections reflect this possibility. The share of the population in urban areas increased only slightly during 1990-2016 (i.e., from 15 to 16 percent), but is projected, under conservative estimates, to accelerate in the coming decades (i.e., to 21 percent by 2035 and 28 percent by 2050). A large share of migrants will therefore be pushed out of agriculture rather than pulled by productivity gains in cities. The impact of faster urbanization on economic development and poverty in Niger is unclear. Niger has not experienced rapid urbanization in the past. High urban population growth rates have already revealed some of the challenges facing national and urban governments. Capital investment in cities lags behind urban population growth. While the incidence of poverty remains far lower in urban than in rural areas, more than 70 percent of the urban population live in cramped and poorly-built quarters and lack access to improved water and sanitation.29 27 United Nations & World Bank (2018). 28 FAO (2018). 29 World Bank (2018a). 3 It is therefore unclear whether urbanization will reduce national poverty or if poverty will simply shift to urban areas. A spatial computable general equilibrium (CGE)30 model developed for this report examines how alternative urbanization scenarios would affect key economic and poverty outcomes by 2030. The results of projections are discussed in Chapter 3, after Chapter 2 reviews the opportunities and challenges of urban areas in Niger. 30 Randriamamonjy and Thurlow (2018). 4 Figure 1.7 Agricultural expansion (in yellow) has dramatically increase 1975 2000 2013 Source: U.S. Geological Survey Earth Resources Observation and Science (USGS EROS) Center 5 On all counts of living standards, Niger stands at the bottom of the distribution. Poverty is among the highest in the world, with 77 percent of the population living below the international $3.2 PPP poverty line in 2014. It ranked 155 out of 157 among countries on the World Bank Human Capital Index (HCI) in 2018.31 Only 92 percent of children will survive to age 5 and 42 percent of children under five years are stunted.32 Stunting in early life adversely impacts children’s cognitive development.33 A child who starts school at age 4 can expect to complete 5.3 years of school by her 18th birthday. Factoring in what children actually learn, expected years of school is only 2.6 years.34 But urban residents fare better. International evidence suggests that cities are powerful engines for improving living standards and reducing poverty, and Niger is no exception. Through improvement in amenities, urban areas bring benefits to their resident beyond monetary value. Density makes the provision of services cheaper. Cities and urban communes provide better levels of access to public services (electricity, water, sanitation) as density decreases the unit cost of provision (Figure 2.1). Even the urban poor benefit from better access to services such as tap water, improved sanitation, and electricity relative to the non- poor in rural areas.35 Figure 2.1 Access to services is better in urban areas Source: World Bank staff computations based on INS (2015). Cities comprise the 8 big cities of the country, where the population is above 30,000 people. Towns comprise urban communes where the population ranges between 5,000 to 30,000 people. Small urban comprise urban communes with less than 5,000 people. Rural towns are rural communes where the population is above 30,000 people. Rural towns are rural areas where the population ranges between 5,000 and 30,000 people. Villages are rural areas with less than 5,000 people. 31 The Human Capital Index (HCI) summarizes productivity determining factors into a simple index including under the five mortality rate, the rate of stunting among children below the age of 5, adult survival rates, the expected number of school years completed by 18 given enrollment rates adjusted for quality based on harmonized test scores (Kraay 2018). 32 WHO thresholds set a 30 percent prevalence of under 5 children stunted as very high (de Onis et al. 2018). 33 Victora et al. (2008). 34 World Bank (2018b). 35 Nakamura, Paliwal and Yoshida (2018). 6 Children born in urban areas can become more productive adults. When thinking about human capital and its link to development, consider the trajectory from birth to adulthood. A child who does not survive will never become part of the working force. For those who survive and reach school age, they may not start school, nor complete the full curriculum, and learning is not guaranteed. When reaching 18, the lasting effects of poor nutrition during childhood may limit her physical and cognitive aptitudes as a worker. The HCI can be interpreted in terms of relative productivity36. In Niger, the index is 0.32, meaning that if health and education conditions persist, a child born today will reach only 32 percent of his productivity potential, which is benchmarked to full health and complete education. Computed across gender and area of residence in Niger, children born and growing up in urban areas are more productive than their rural counterparts: workers are estimated to be 12 percent more productive in urban versus rural areas.37 This is true for both girls and boys. Figure 2.2 Human Capital Index across regions .4 .3 Human Capital Index .2 .1 0 Male Female Male Female Male Female Rural Other urban Niamey Source: World Bank staff computations based on DHS 2012 The relatively better level of education and empowerment of women in cities, compared to the rural areas, favors lower birth rates and lower natural population growth. In most of Africa’s cities, urban fertility rates are between 2 and 4 children if women have more than 9 years of education (lower secondary) (Figure 2.3). Among Nigerien women residing in urban areas who completed lower secondary, fertility rates are 3.9 children. In Niamey, women have, on average, 8.4 years of education; in other urban areas its 7.8. Even in countries with very high fertility rates such as Niger, urban educated women desire fewer children, marry later, and use modern contraceptive methods. 36 The HCI is based on an accounting framework using returns to education and health to convert respective indicators into productivity differences (Kraay 2018). 37 Note that global return parameters and national test-scores were applied so it is likely to be a lower estimate if quality of education is better in urban areas. 7 Figure 2.3 Urban and educated women prove that transition is possible Source: World Bank staff computations based latest DHS surveys, Schoumaker 2017. Poverty is falling faster in the capital city of Niamey and other urban areas. Unlike in rural areas, the number of poor has been declining in urban areas. For instance, the absolute number of poor in Niamey fell from 200,000 in 2005 to about 58,000 in 2014. Unlike rural areas, urban areas did not add to the absolute number of poor (Figure 2.4Figure 2.4).38 Since rural-urban migration has been low over the last two decades, it suggests that children born in urban areas did not add to the number of poor. This contrasts with the rest of Sub-Saharan Africa, where the number of urban poor has increased in recent years.39 Overall, welfare is higher in urban communes. The average poverty rate in urban communes is 30 percent, relative to 50 percent in rural communes (Figure 2.5). Even if consumption needs are met, poverty is multi-dimensional and does not fully capture living conditions. 38 World Bank (2017c). 39 Nakamura, Paliwal and Yoshida (2018). 8 Figure 2.4 Poverty rate are declining faster in Niamey than elsewhere; the number of poor is also declining in urban areas Poverty incidence (percent, 2005-2014) Number of poor (millions, 2005-2014) Source: World Bank (2017a), using QUIBB 2005, ENBC 2008, ECVMA 2011 and 2014. Poverty estimated at national poverty rates from INS. Figure 2.5 Urbanization is welfare improving Source: RGPH 2012 et ECVMA 2014. Dark red borders delimit urban communes. A high share of the urban population lives in informal settlements. Seven out of ten urban dwellers live in a house missing at least access to improved water and sanitation, enough living space, durable material for its roof, walls or floor, or does not have secure tenure (Figure 2.6). The lack of space and formality in these settlements poses technical problems for constructing sanitation facilities and collecting waste. While some alternatives do exist, such as non-conventional sewage collection systems (small bore sewers), there is currently limited financial and human resource capacity in the public sector to develop and manage them. 9 Figure 2.6 A large share of the urban population living informal settlements 100 % 90 80 70 60 50 40 30 20 10 0 Source: UN-Habitat (2018). Progress has been made in urban areas in terms of access to services, but deficiencies persist. While access to improved water in urban areas is one of the highest in countries with similar levels of urbanization, access to sanitation remains low at 40% in urban areas. Similarly, access to electricity remains low across the nation – with about 65% of the urban population having access to electricity in 2016. Figure 2.7 Access to sanitation remains low while access to improved water is among the highest The provision of urban services does not keep up with population growth. Without accelerating investment in urban areas, urban benefits will vanish. While Niger expanded access to improved water supply and sanitation (Figure 2.8), the absolute number of people without such access has increased (Figure 2.9). While access to improved water in urban 10 areas had increased from 60 percent in 1990 to close to 88 percent in 2000, it has since stalled. The fact that most water supply points are not on household premises disadvantages the poor who have to invest excessive time fetching their water.40 Close to 60 percent of the urban population lack any access to improved sanitation. Figure 2.8: Share of urban population without Figure 2.9: Number of urban residents without access to improved water and sanitation access to improved water and sanitation (percent) (millions) Source: JMP UNICEF (2015). When density turns into crowding, the demons of density awaken. Progress on providing access to improve water and sanitation is not keeping up with the rapid pace of urbanization. Cities with poor and inadequate water and sewerage infrastructure are prone to the spread of diseases.41 Almost 10 percent of the global burden of disease worldwide could be prevented with improvements in water, sanitation and hygiene systems, and better water resource management worldwide.42 Precarious hygiene conditions, coupled with inadequate access to water, has led to multiple episodes of cholera in the country. BOX 4. ZOOMING ON NIAMEY Niamey is reasonably well concentrated around its city center relative to other cities in West Africa. It is better positioned than Bamako and Conakry which are more fragmented, lowering the opportunities for spatial proximity (BOX 4 Figure 1). Cities with fragmented urban form tend to limit opportunities for interactions and make the delivery of urban infrastructure and services costlier. Urban form affects Niamey’s potential for interaction. Interactions matters greatly for reaping the benefits of cities – it is one of the drivers of higher productivity. Well-connected cities make it easier for workers to connect to jobs, and to share information and learn from each other leading to knowledge spillovers. The potential for interaction is given by a simple measure of connections calculated at the scale of each city. The measure of connections for each city is computed and assessed alongside a set of comparator cities (chosen based on their urban population). Niamey’s potential for interaction is significantly higher than the average of comparator cities – this is unsurprising given its concentrated urban form (BOX Figure 1). On the contrary, due to its linear shape, Conakry achieves a low score compared to similar-sized cities, while Bamako is close to the average. 40 World Bank (2017d). 41 Glaeser (2011). 42 OECD (2001). 11 BOX 4 Figure 1 Differences in urban fragmentation BAMAKO CONAKRY NIAMEY Population: 2.5 million Population: 1.9 Population: 1 million million Source: LandScan 2012 At the same time, most people in Niamey walk, with 69 percent of trips made on foot, and the remainder by private cars, minibus and motorized two-wheelers (BOX 4 Figure 2). In many cases this is because people cannot afford any means of motorized transport on a regular basis. As walking implies a somewhat limited geographical range of movement, it also limits access to opportunities, jobs and services that can be reached within a reasonable time frame in contexts where transport mode choices are constrained. Assuming a person walks for one hour, they would be able to reach opportunities that lie within a 28-square kilometer radius (assuming a generous 3km/hour speed along a straight line). BOX 4 Figure 2 Most of people in Niamey walk Sources: Olvera et al (2012), Godard (2011) Niamey shows close to 100 percent access to electricity, with electricity supply systems working most of the time as compared to other African capitals (BOX 4 Figure 3). 12 BOX 4 Figure 3 Access and reliability of electricity is the highest in Niamey relative to other capital cities Source: Rozenberg and Fay (2019) Little investment was done in the housing sector in terms of the provision of housing, roads and basic services. To illustrate, for the period from 1974-1998 the Government provided less than 1,000 housing units across the country while the needs are estimated at 40,000 units per year, 5,000 out of which for the city of Niamey alone. Moreover, in the city of Niamey, the lack of the delivery of serviced plots led to the emergence of informal settlements that remain under- equipped (BOX 4 Figure 4). BOX 4 Figure 4 Spatial development of Niamey with the main informal areas until 2008 Source: Issaka and Cassidy, 2018 As part of his ambitious plans for a Nigérien “renaissance”, the President has established a special program for Niamey – Niamey Nyala. Niamey Nyala aims to make Niamey into an international and highly livable city by working across several areas: sanitation and waste 13 management, rehabilitation and upgrading of several specific parts of the city, construction and upgrading of the city’s road network, establishing a new industrial zone, and greening. The primary responsibility for program coordination lies with a High Commissioner, although implementation of the various projects associated with Niamey Nyala is undertaken by ministries and (to a lesser extent) by Niamey Ville. Public Space in Niamey Despite having better health and education outcomes in urban versus rural areas, Niger performs poorly on service delivery compared to other African countries. Education outcomes in urban areas are among the lowest in 9 countries.43 The minimum teaching equipment and infrastructure requirements are not met, teachers are often absent, resulting in only a few pupils achieving minimum skill levels in languages and mathematics - the average test score in urban areas is 33 percent (Table 2.1). Table 2.1 Education and health service delivery in urban areas Niger Nigeria Togo Uganda Kenya Education Absence from classroom (%) 31 23 35 50 43 Minimum teaching equipment (%) 39 48 31 95 94 Minimum school infrastructure (%) 35 n/a 20 67 58 Pupil learning (test score language & 33 n/a n/a 66 73 math (%)) Health Absence from health facility (%) 34 37 42 52 38 Diagnostic accuracy (%) 39 37 50 72 71 Minimum equipment (% medical 77 29 58 88 87 equipment per health facility) Minimum infrastructure (% facilities with electricity, clean water and 54 30 30 73 58 improved sanitation) Source: Service Delivery Indicators, selected countries, share among public facilities in urban areas.44 43 Countries surveyed under the Service Delivery Indicators Program are: Kenya, Madagascar, Mozambique, Niger, Nigeria, Senegal, Tanzania, Togo and Uganda. 44 Niger 2014, Togo 2014, Tanzania 2014, Senegal 2014. 14 The urban poor also face high living costs. As more than half of consumption is related to food, the poorest in both urban and rural areas hardly consume any education and health services (Figure 2.10). Urban Nigerien pay an 11 percent premium on food prices compared to countries at similar income levels.45 Figure 2.10 Share of food in household expenditure in urban Africa Source: Nakamura et al. 2016, based on the Survey-based Harmonized Indicator Program (SHIP) by the World Bank's Africa Region-Poverty Reduction and Economic Management Statistics Practice Group. Niger is based on the National Survey on Household Budget and Consumption (ENBC) 2007. The condition of the road network is a serious constraint to developing links between agricultural endowments and urban markets. Road density is one of the lowest in the West Africa region, which is not surprising given that two-thirds of the country (the North) is a desert. In addition, the percentage of paved over total roads remains one of the lowest in the region. Unpaved roads frequently flood and become practically impassable during the wet seasons and as result, poor conditions isolate a number of communities.46 According to the Rural Accessibility Index, over two thirds of the rural population had no access to all-season roads in 2003 and thus were isolated from urban centers, related markets and basic services. It is estimated that improving the condition of paved and unpaved roads would increase in-country trade, resulting in a 1.71 percentage increase in economic growth. Moreover, achieving connectivity with good-quality paved roads provides rural road access to 37 percent of the most productive agricultural land.47 45 Nakamura et al. (2016) based on ICP data. 46 USAID (2017). 47 Domínguez-Torres et al. (2011). 15 Figure 2.11 Percentage of paved roads over total roads Source: Land Portal (2018). Under such circumstances, cities lose the potential agglomeration benefits that the concentration of economic activities has to offer. Improving land use regulation, coordinated with increasing housing, services, and transport infrastructure investments will be necessary to respond to increasing demand if all Nigeriens are to benefit from increasing urbanization. Niger’s economy was dominated by nontradable sector jobs in Niamey and Maradi in 2017. Formal firms produce mostly locally consumed, or non-tradable goods and services (Figure 2.12). These constraints compound the challenges Niger faces in transforming the structure of its economy – a transformation which experience in other countries has demonstrated requires conditions that foster the reallocation of economic activity from the agricultural sector towards the more productive industrial and business service sectors. Producing mostly nontradable goods and services, Niamey and Maradi have been trapped at low levels of economic growth, since producing for local markets limits returns to scale. The consumer base of one city, however large, is much smaller than a regional or global market.48 Specializing in nontradables for local consumption leads to diminishing returns (both for technological reasons, and because prices are set locally and decline as supply increases).49 48 Lall et al. (2017). 49 Venables (2018). 16 Figure 2.12 Share of jobs in the nontradable and tradable sectors Source: Integrated World Bank Enterprise (WBE) surveys, 2015 – 2018. The drivers of the preponderant share of non-tradable goods and services in Nigerien cities are structural and deserve further investigation. Among the reasons to be explored are the natural resource curse, the inability of the formal labor market to the lack of absorb so many new, unskilled entrants, who then enter the informal sector, and a poor business environment. Among the constraints mentioned by firms, the practices of the large informal sector and the lack of adequate access to finance and electricity are the three biggest concerns. As national GDP growth over 2001-2012 was mostly driven by mining, there was almost no shift in employment away from agriculture. The majority of Nigeriens (75.8 percent of total employment in 2016) works in agriculture. Even in urban areas, 46 percent of households have at least one member engaged in agricultural activity, reaching 91 percent of all households across the country.50 Mining contributes the most to GDP and growth but, as is the case with the non-tradable sector, does not create jobs. As shown in Table 2.2, total employment grew at 2.7 percent per year, while agricultural employment grew almost as fast at 2.6 percent. As a result, agriculture’s share of total employment fell only slightly – from 82.8 to 81.4 percent. Although industry was the main driver of national GDP growth, it lagged in job creation. This reflects the dominance of capital-intensive mining as a source of industrial growth in Niger. 50 World Bank (2017c). 17 Table 2.2 Growth and employment in Niger, 2001-2012 2001 2012 Annual growth (%) GDP ($ millions) 3,839 9,458 8.5 Agriculture 1,640 4,350 9.3 Industry 490 1,559 11.1 of which Mining 50 297 17.5 Services 1,709 3,549 6.9 Agriculture GDP share (%) 42.7 46.0 - Employment (1000s) 3,287 4,424 2.7 Agriculture 2,720 3,602 2.6 Industry 120 145 1.7 of which Mining 13 18 3.4 Services 446 677 3.9 Agriculture employment share (%) 82.8 81.4 - GDP per worker ($) 1,168 2,138 5.6 Agriculture 603 1,208 6.5 Industry 4,084 10,749 9.2 of which Mining 7,633 31,210 13.7 Services 3,831 5,242 2.9 Source: Own calculations using official GDP estimates (UNSD 2018) and employment estimates from the 2001 and 2012 Censuses of Population and Housing (RGPH). Despite agriculture’s relatively strong performance over the last decade, farm productivity remains low and most of Niger’s rural population are still subsistence farmers or pastoralists. Extremely low farm incomes, coupled with remoteness, may have made it difficult for rural households to release labor to the rural nonfarm and urban economies. The inter-generational shift out of agriculture is slow, with a low probability for Nigeriens whose fathers were farmers to transition out of farming (estimated at one to twelve for women, and one to nine for men).51 Average labor productivity is lower in agriculture than in industry or services, and so the migration of workers to more productive sectors helped raise national average GDP per worker. The total gain in productivity can emerge from gains both within sectors (through technological change for example) and from workers moving across sectors. Such structural transformation is strongly associated with long-term development. BOX 5. DECOMPOSING LABOR PRODUCTIVITY To look at structural transformation, it is possible to disaggregate changes in economywide labor productivity into two components: (i) within-sector productivity gains; and (ii) gains caused by workers moving between sectors. When workers move, in aggregate, from low to high productivity sectors or when job creation is faster in more productive sectors, then structural change contributes positively to national labor productivity.52 While income per worker increased between 2001-2012, less than a tenth of this increase was due to positive structural change. Moreover, most of the structural change involved a shift out of industry into services, rather than a shift out of agriculture. Agriculture 51 World Bank (2017c). 52 McMillan et al. (2014). 18 still accounted for well over half of the total increase in national labor productivity, but this was because productivity rose substantially amongst those workers who remained in the sector. This explains how Niger has experienced rapid economic growth without meaningful structural transformation. While some workers moved out of agriculture into more productive jobs, the pace of transformation has been extremely slow. Most workers are employed in the agricultural sector. In 2011, 83 percent of workers identified themselves as being primarily farmers. The sector’s share of employment fell by only 0.3 percentage points per year over the 11-year period (see AGR in the Figure 2.13, where size of the circles represents the sector’s initial contribution to total employment). Although agricultural employment grew slower than services, the sector’s large initial size meant that it still accounted for three quarters of all jobs created in Niger. Industrial workers have higher labor productivity, on average, but the share of employment in manufacturing (MAN) and construction (CON) declined, and mining (MIN) increased only slightly. Most nonfarm employment growth occurred in trade and transport (TRD) and government services (GSV) – the latter includes education and health. Figure 2.13 There was no shift out of agriculture in Niger between 2001 and 2012 Source: Official GDP estimates (UNSD 2018) and employment estimates from the 2001 and 2012 Censuses of Population and Housing (RGPH). Note: The vertical axis shows sectoral productivity relative to economy-wide productivity. A positive value means that a sector generated above-average value-added per worker in 2001. The horizontal axis shows the percentage point change in employment shares between 2001 and 2012. A negative value means that a sector’s share of total employment fell, even though employment in the sector may have grown in absolute terms. Relative labor productivity is the log deviation in sectoral GDP per worker from economy-wide GDP per worker. Circle size indicates employment share in 2001. AGR is agriculture; MIN is mining; MAN is manufacturing; CON is construction, electricity and water; TRD is trade and transport services; FBS is finance and business services; GSV is government, education and health; and OSV is community and other services. Population pressures will be felt as farm sizes decline, and farmers find it more difficult to derive livelihoods from agriculture alone. A major concern is whether faster urbanization – forced or otherwise – will be conducive to poverty reduction in both urban and rural areas. This depends on how urban-rural linkages evolve and how urban areas prepare for faster urbanization. 19 Except for mining, the linkages between agriculture and non-agriculture are strong in Niger. Many of the activities happening in trade and transport services are downstream activities within the agriculture-food system and are responsible for three-fifths of all nonfarm jobs created. Urban areas have played an important role in national job creation. Most of the structural change that did occur between 2001 and 2012 was driven by a shift into trade and transport services. Despite their small share of the population, cities and towns have contributed significantly to Niger’s development. They created 19 percent of all jobs during 2001-2012 – much higher than their 14 percent employment share in 2012 (Table 3.1). Moreover, 4 out of 5 of all new nonfarm jobs were created in urban areas, and so most of the positive structural change that has occurred in Niger is likely to have taken place within urban centers. Table 3.1 Rural and Urban Job Creation, 2001-2012 Employment, 2012 Increase, 2001-2012 1000s % 1000s % National 4,424 100.0 103 100.0 Farm 3,602 81.4 80 77.5 Nonfarm 822 18.6 23 22.5 Rural 3,802 85.9 84 80.9 Farm 3,488 78.8 79 76.5 Nonfarm 315 7.1 5 4.5 Urban 622 14.1 20 19.1 Farm 114 2.6 1 1.0 Nonfarm 507 11.5 19 18.0 Source: RGPH 2001 and 2012. Urban and rural economies do not operate in isolation of each other. Linkages may be stronger for smaller towns than big cities, given the former’s closer proximity to rural areas, and these linkages are expected to strengthen as the economy develops. A rise in agricultural production is likely to generate greater demand for nonagricultural inputs (e.g., fertilizers and transport), and manufacturing growth has the potential to generate demand for agricultural products (e.g. raw inputs for food processing). To measure urban – rural linkages, a typology of urban communes was created based on geographical location – Niamey, border and inland urban areas. This analysis first separates the country into rural and urban communes using the demarcation in the 2012 population census. Then, applying the typology, urban communes were divided into three groups: Niamey, “Border Towns”, and “Inland Towns”. “Border towns” lie along the southern border, with the major southern road running through Maradi and Zinder and connecting Tera in the west and Goure in the east. “Inland Towns” include, amongst others, the larger urban centers of Tahoua, Agadez and Arlit (see Figure 3.1). 20 Figure 3.1 Cities, Border Towns, Inland Towns, and Rural Areas Niamey (Capital City) Border town communes Inland town communes Rural communes Tillabéri Maradi Zinder Téra Birnin Gouré Konni Dosso Magaria Gaya Source: RGPH 2012. The different locations have different socio-economic profiles. In terms of consumption, Niamey ranks highest, followed by inland towns which have more industrial production than border towns, which in turn are more specialized in services. Consumption is the lowest in rural areas, where poverty is prevalent. Inland towns contribute slightly more to GDP than border towns (Table 3.2). Education levels are the best in Niamey, but still well below other capital cities with only half of the workers having completed primary education and another 20 percent without a secondary education degree. Border towns deserve attention given their market potential if both sides of the border co-operate. For example, the border between Nigeria and Niger is particularly favorable for cross-border flows, due to the large network of cities and markets located on both sides. For instance, the total population of Gaya in Niger and the city of Malanville in Benin, which are 7 km from one another, is expected to grow from 95,000 to 130,000 between 2015 and 2030. The town of Maradi in Niger could grow from 200,000 to 300,000 while Katsina in Nigeria, less than 100km away, could see its population grow from 330,000 to 530,000 – and both could form a market of close to 1 million people if well-connected.53 53 OECD/SWAC (2017b). 21 Figure 3.2 "Border agglomeration": the 90,000 people living in Gaya and Malanville are highly dependent on each other Source: OECD/SWAC 2019 based on OpenStreetMap 2018 Urban communes account for a disproportionate share of GDP. Niamey, for example, contains six percent of Niger’s population, but contributes 25 percent to national GDP. Average per capita consumption in urban communes and Villes is, not surprisingly, higher than the rural average. Consumption levels are lower in border towns ($283) than in Niamey ($753) or inland towns ($436). This is because most high-value services, such as the government, are in Niamey, and most mining incomes are accrued in inland town communes. In contrast, border town communes are more dependent on low-value services, such as informal trade and transport, and it is here where most of the urban poor reside (Table 3.2). Much of the growth in trade and transport services from rural areas may have come from supplying the capital city with agricultural products generated in rural areas. Households in Niamey consume ten percent of all agricultural products, but Niamey itself produces less than one percent of national agricultural output. Rural areas account for 98.2 percent of national food crop supply, but only 85.4 percent of food crop demand (Table 3.2). Niamey is a “net importer” of agricultural products from rural areas, which translates into rural areas supplying Niamey with trade and transport services. Most processed foods are, however, imported from abroad, with only inland towns being modest net exporters. Rural producers and households are net importers of services from urban areas, such as banking and finance. These production and consumption linkages mean that growth in one sector can have spillover effects in other sectors. 22 Table 3.2 Characteristics of Urban and Rural Economies, 2015 Rural Inland Border Niamey Niger areas towns towns city Population (1000s) 15,284 813 1,066 1,077 18,240 Share (%) 83.8 4.5 5.8 5.9 100 Poor population (1000s) 10,493 101 290 70 10,955 Share (%) 95.8 0.9 2.6 0.6 100 Consumption per capita ($) 224 436 283 753 268 Poverty headcount rate* (%) 68.7 12.4 27.2 6.5 60.0 Workers (1000s) 5,278 179 225 293 5,976 Finished secondary school or higher (%) 3 16 13 30 5 Not finished secondary school (%) 6 14 12 19 7 Not finished primary school (%) 91 69 75 51 88 Regional GDP per capita ($) 248 705 468 1,502 356 Regional GDP per worker ($) 719 3,194 2,216 5,511 1,085 Sector GDP shares (%) 100 100 100 100 100 Agriculture 64.7 4.2 2.9 1.2 38.8 Industry 9.5 61.8 28.4 21.1 18.5 Services 25.8 34.1 68.7 77.7 42.8 Regional GDP shares (%) 58.5 8.8 7.7 24.9 100 Agriculture 97.7 0.9 0.6 0.8 100 Industry 30.2 29.5 11.8 28.5 100 Services 35.3 7.0 12.3 45.3 100 Total consumption shares (%) 100 100 100 100 100 Agriculture 66.5 31.5 30.5 34.2 56.4 Processed foods 12.8 10.2 8.9 5.4 11.1 Industrial goods 20.0 31.4 27.6 22.4 21.7 Services 13.5 37.1 41.9 43.4 21.9 Product consumption shares (%) 70.0 7.3 6.2 16.6 100 Agriculture 82.6 4.1 3.3 10.1 100 Processed foods 80.4 6.6 4.9 8.0 100 Industrial goods 64.6 10.5 7.8 17.1 100 Services 43.2 12.3 11.7 32.8 100 Source: SAM and CGE model. Notes: *The poverty line is set at the upper threshold of the third per capita consumption quintile Complex production and consumption linkages exist between rural areas, towns and cities in Niger, with sharp differences between Niamey, border and inland town communes. These structural characteristics and economic linkages will determine the benefits and trade-offs resulting from urbanization and the implications of adopting a more urban-oriented investment strategy, which should take into account the differences between different urban centers. Like many countries, Niger faces a trade-off in allocating limited resources between rural and urban populations to finance public investments to support development. On the one hand, Niger’s early stage of development may suggest that investing in rural areas (and agriculture) is most effective, especially given high poverty rates. On the other hand, 23 investing in urban infrastructure to improve livability may be more conducive to economic transformation, and may be especially pressing given projections of rapid urbanization. Urbanization in Niger is likely to begin accelerating. The implication of three alternative scenarios, during which urbanization accelerates, will be benchmarked against a baseline situation in the following sections. • Scenario 0. “Business-as-usual” models Niger growth path during 2015-2035. • Scenario 1. “Faster Migration” will look at the economic implications of more rapid rural-to-urban migration at current investment patterns. • Scenario 2. “Urban Investment” will match faster migration with larger public investments in urban areas. This scenario assumes that government resources are fixed, and so higher urban investment reduces rural investment. • Scenario 3. “Urban Financing” will match faster migration with higher urban investment, financed by improved urban taxation, and no reduction of rural investment. Baseline - “business-as-usual” (scenario 0) The baseline assumes that future economic growth in Niger broadly replicates the historical trends observed during 2001-2012. The national population is projected to grow at 3.7 percent per year, and slightly faster within inland towns (Table 2.4). Total labor supply expands at the same rate, implying no change in the national dependency ratio. Rural crop land area expands at 1.3 percent per year based on 2001-2012 trends.54 The baseline scenario only provides a counterfactual scenario against which other, more likely, scenarios can be compared. Table 3.3 Baseline “Business-as-Usual” Scenario, 2015-2035 Rural areas Inland towns Border towns Niamey city National Annual GDP growth (%) 5.92 9.39 9.83 10.71 8.14 Labor 3.60 4.70 3.92 3.94 3.67 Crop Land / Livestock 1.30 0.00 0.00 0.00 1.28 Private capital 6.40 6.75 7.59 8.31 7.07 Public capital 3.68 3.68 3.68 3.68 3.68 TFP 1.72 3.65 3.70 4.52 3.16 Annual migrant flow (1000s) -4.87 2.89 0.82 1.17 0.00 Inflow 0.00 3.11 1.06 1.17 5.34 Outflow -4.87 -0.22 -0.25 0.00 -5.34 Share of workforce (%) -0.06 0.93 0.23 0.25 0.00 Population growth rate (%) 3.65 3.91 3.72 3.74 3.67 Source: CGE model results. Note: TFP growth includes exogenous growth, and congestion and agglomeration effects.55 54 FAO (2018). Private capital accumulation rates are determined within the model based on past investment levels. Public investment is assumed to grow alongside population growth, implying that baseline public capital per capita is constant. Urban productivity growth is not constrained by congestion effects in the baseline. The assumption that public investment grows at the same rate as population could be thought as optimistic, as congestion and frequent electricity outages in Niamey have been witnessed, not-withstanding the arrival of refugees. 55 Following Henderson and Wang (2005) who assume agglomeration spillovers are a positive function of population density. 24 Wage differentials between rural and urban area trigger a shift, with rural workers relocating to cities. Based on 2015 wage differentials, the predictions are a net annual outflow of 4,630 rural migrant workers per year during 2015-2035, with about half of these migrants moving to inland towns where population growth was higher during 2001-2012. This is relatively low compared to other African countries.56 There is also an outflow of migrants from inland and border towns to Niamey. Migration causes urban population growth to slightly exceed that of rural areas, which is consistent with the gradual pace of urbanization in recent years. Poverty declines in the baseline scenario.57 Poor households’ per capita welfare increases by 2.6 percent per year in the baseline scenario, causing poverty to fall over time. While poverty decreases, inequality widens, as the average household welfare grows faster, at 3.3 percent per year. Agricultural growth is slower in the baseline than in recent trends, and thus captures anticipated declines in farm sizes and growing rural land pressures. This baseline or ‘business as usual’ scenario is consistent with Niger’s recent growth and demographic trajectory and predicts that the urban population share will rise slightly to 16.6 percent by 2035. However, what if Niger urbanization accelerates? Faster migration (scenario 1) In such a situation, rural-to-urban migration accelerates above historical rates, and the urban share of the population reaches 19.6 percent in 2035.58 Wage differentials and migration flows in the Baseline and Faster Migration scenarios show that larger migrant inflows increase job competition in urban centers and reduce labor availability in rural areas, causing the ratio of urban-to-rural wages to fall (Table 3.4). Table 3.4 Wage Differentials and Migration Flows, 2015-2035 Baseline Urbanization scenarios scenario Faster Urban Urban migration investment financing Average wage ratios, 2035 Urban / Rural Areas 7.01 3.84 3.98 4.11 Cities / Inland towns 3.45 4.49 4.30 4.49 Cities / Border towns 3.78 3.43 3.29 3.33 Annual net migrant flows (1000s) Rural areas -4.87 -45.03 -43.91 -46.58 Inland towns 2.89 22.63 21.62 23.37 Border towns 0.82 6.96 7.00 7.52 Niamey 1.17 15.45 15.28 15.68 Urban population share, 2035 (%) 16.57 19.64 19.57 19.74 Source: CGE model results. 56 The same model was applied to Malawi and Mozambique where migration out of rural areas was at 4 to 8 times more important, confirming once again the low share of Niger’s internal migrants. 57 Welfare is measured by real per capita consumption, and “poor households” are defined as those in the lowest three national quintiles. 58 This is a deviation from historical trends which roughly tracks the urbanization projections from UNDESA (2018) and official population projections from the national statistical agency. 25 Faster migration accelerates national economic growth. Cumulatively, the economy in 2035 is about five percent larger than it would have been without the three-percentage point increase in the urban population share. This positive growth-effect is entirely the result of faster rural-to-urban migration as the total population and workforce force are unchanged from the baseline. All additional growth occurs in urban centers, with the economies of Niamey and Inland Towns becoming, respectively, 10.5 and 12.1 percent larger by 2035. The share of employment in agriculture declines as workers migrate to urban centers and nonagricultural sectors (Figure 3.3). More jobs are created in Niger’s industrial sectors, as new urban residents demand more manufactured goods, and urban GDP growth generates demand for investment and construction. Figure 3.3 Structural Change in the Faster Migration Scenario, 2015-2035 Source: CGE model results. Note: Relative labor productivity is the log deviation in sectoral GDP per worker from economy-wide GDP per worker. Circle size indicates employment share in 2001. AGR is agriculture; MIN is mining; MAN is manufacturing; CON is construction, electricity and water; TRD is trade and transport services; FBS is finance and business services; GSV is government, education and health; and OSV is community and other services. Urban-to-rural linkages become strong enough to outweigh the loss of rural labor, causing agricultural GDP growth to increase slightly in response to rural-urban migration. Initially, the faster migration scenario reduces rural labor supply and slows agricultural GDP growth, while urban producers benefit from higher labor supply and lower wages. However, faster urban growth also generates backward linkages to agriculture, since higher urban incomes generate demand for agricultural goods produced in rural areas. Ultimately, urban-to-rural linkages outweigh rural labor loss, and agricultural GDP growth increases slightly (Table 3.5). Agricultural GDP in the Faster Migration scenario is 0.7 percent higher in 2035 than in the baseline. This is a modest impact, implying that agriculture’s prospects are largely unaffected by urbanization. While the rural nonfarm sector does contract, overall rural GDP is falling in the new scenario. 26 Table 3.5 Economic Growth Results, 2015-2035 Total GDP Baseline Urbanization scenarios share in annual (% deviation from baseline in 2035) 2015 growth rate Faster Urban Urban (%) (%) migration investment financing Annual GDP growth 100 8.1 5.4 6.5 7.4 Agriculture 38.8 5.3 0.7 -13.2 -1.3 Industry 61.2 9.4 6.9 12.6 10.0 Manufacturing 4.5 9.0 3.5 3.5 4.5 Other industry 4.7 9.9 5.8 11.4 3.6 Services 42.8 9.4 8.9 15.1 12.5 Rural areas 58.5 5.9 -1.5 -15.4 -6.1 Inland towns 8.8 9.4 12.1 19.1 17.4 Border towns 7.7 9.8 5.6 28.8 18.9 Niamey 24.9 10.7 10.5 19.6 15.4 Source: CGE model results. But as the increase in the urban population exceeds the increase in urban GDP, urban welfare decreases relative to the baseline scenario (Table 3.6) Urban households are therefore left worse off, especially the urban poor, many of whom are new migrants arriving from rural areas. It should be re-emphasized that this is relative to the baseline, i.e., poor urban households are still better off in 2035 than they are in 2015, even with an “urbanization of poverty”. Table 3.6 Household Welfare Results, 2015-2035 Per capita Baseline Urbanization scenarios consumption annual (% deviation from baseline in 2035) in 2015 growth rate Faster Urban Urban ($) (%) migration investment financing All households 268.2 3.3 3.9 -0.8 3.0 Rural areas 224.1 2.7 4.4 -5.1 2.3 Urban centers 496.3 4.4 -8.1 -5.4 -7.6 Inland towns 436.3 4.9 -17.3 -14.5 -15.0 Border towns 282.5 4.6 -4.3 4.7 4.5 Niamey 753.4 4.1 -5.8 -5.7 -9.5 Poor households 135.1 2.6 1.5 -5.9 0.2 Rural areas 134.2 2.4 4.2 -5.2 2.5 Urban centers 155.5 4.4 -35.4 -26.9 -33.4 Inland towns 203.2 4.1 -58.8 -53.4 -58.0 Border towns 130.7 4.2 -13.7 -2.4 -6.2 Niamey 188.8 4.8 -40.5 -32.8 -44.9 Source: CGE model results. Note: Welfare is measured using real per capita consumption. The Faster Migration scenario suggests that, without increased public investment in urban infrastructure, urbanization does not generate sufficient economic growth to absorb new migrants without deteriorating urban welfare. Niamey and inland towns face the largest migrant inflows and hence the greatest challenge in absorbing new migrant 27 workers. The next scenario examines whether allocating more public resources to these urban areas could prevent urban welfare from deteriorating. Urban investment (scenario 2) The Urban Investment scenario replicates the Faster Migration scenario but allocates more public investment to urban centers at the expense of rural areas.59 As this scenario holds overall government spending constant, increases in urban investment reduce investment in rural areas, causing a 1.2 percentage point decline in agriculture’s productivity growth.60 The substantial reallocation of public resources drives overall faster urban economic growth and increased absorptive capacity of urban labor markets. Niger’s economy is predicted to be 6.5 percent larger than in the baseline scenario. Industrial and service sector GDP growth is higher than it was in the Faster Migration scenario, but agricultural GDP growth declines dramatically from -0.7 percent per year in the Faster Migration scenario to -13.2 percent per year in the Urban Investment scenario (Table 3.5). Increasing urban investment by reducing rural investment is counterproductive, as it worsens outcomes for poor households and does little to address the “urbanization of poverty”. Slower agricultural growth leads to higher real food prices. As food purchases are a major share of poor urban households’ consumption baskets, higher food prices lower their real incomes, despite the increase in urban wages and job creation caused by faster urban economic growth (Table 3.6) This is because public capital cannot fully address the inability of urban areas to absorb low- educated rural migrants into the urban workforce. This finding is consistent with traditional development models that argue that raising agricultural productivity benefits the urban poor by reducing food prices.61 It suggests that while increasing urban investment is necessary to improve urban welfare, particularly in smaller towns, it should not come at the expense of rural agricultural investments, which is the third scenario. Urban financing (scenario 3) The Urban Financing scenario replicates the Urban Investment scenario, but finances urban investments through improved taxation in urban areas without reducing rural agricultural investments. As total government spending is fixed, and rural investments remain unchanged from the baseline scenario, a new funding source is needed; this scenario proposes to raise direct taxation on Niamey’s enterprises and households62. This progressive taxation is considered justified as producers and non-poor urban households in Niamey – the main beneficiaries of Niger’s current development trajectory – pay taxes in return for their benefits. Tax rates do not increase in other towns given that poverty rates are high in these areas, and their tax base is limited. 59 Urban investment levels are increased until urban public capital invest per capita remains unchanged from baseline levels. This means that there are no negative congestion effects to offset positive urban agglomeration effects. This will lead to faster urban economic growth, which increases the absorptive capacity of urban labor markets. 60 Agricultural spending to TFP growth elasticity is set at 0.15, which was estimated by Benin et al. (2009) using data from 18 African countries. 61 Diao et al. (2010). 62 Improving taxation includes eliminating tax exemption and enlarging the tax base, among others. 28 Niger’s economy could be 7 percent larger by 2035 under this scenario. Such predicted increase would be driven by urban communes, where income generated increases by more than 15 percent (Figure 3.4). The average household would also be better off. Figure 3.4 Simulated growth from the urban financing scenario 2015-2035 Source: SAM and CGE model. Despite stronger agricultural growth relative to the Urban Investment scenario, and rural welfare improvements, the Urban Financing scenario highlights the inability of urban areas to create enough jobs to absorb the current and future numbers of job seekers. Although rural areas benefit from higher urban demand without paying the cost of higher urban investment, agricultural GDP still falls relative to the baseline (Table 3.4), while rural GDP falls less in this scenario (Table 3.5). Urban households, especially the urban poor, however, are still left worse off (Table 3.6). This suggests that the inability of urban areas to create enough jobs for new migrants is a binding constraint – over and above the adverse effects of either inadequate public investments in urban areas or higher food prices from slower agricultural growth. The structural constraints to urbanization and urban job creation in Niger cannot be fully addressed with an urban-financed investment strategy. Even when investment increases in urban areas and rural production and food prices are not affected, it is still not enough to prevent poverty from worsening in urban areas. This is because the rural population is growing so rapidly that even small shifts in urbanization rates flood urban centers with job seekers. At the same time, dependency ratios are high and urban labor markets are dominated by nontradables services. There are deep structural constraints to urban job creation – improving education levels and promoting private sector development are essential. Addressing the structural constraints to urbanization is key if Niger is to prepare itself for the increased urbanization that is expected in the coming decades. The next section assesses the current land, institutional and financing arrangements of local governments, as the underlying causes of the structural constraints to urbanization. 29 Because of the low-level of urbanization, information concerning urban tenure in Niger is limited and land tenure rights are focused on rural areas. Niger’s Rural Code63 dates from 1993 and is the most recent land legislation in the country. The Rural Code has four major objectives: (i) increase rural tenure security; (ii) better organize and manage rural land; (3) promote sustainable natural resource management and conservation; and (4) better plan and manage the country’s natural resources.64 Land administration is inefficient and cumbersome, and insecure land rights affect livelihoods and hamper urban planning and investments. There are two major characteristics of the land administration system in Niger. First, the tenure system is dual (statutory and customary) and is covered by overlapping laws. Many of Niger’s formal land laws and policies recognize customary land rights but there remains a distinct gap between statutory policies and customary practices. Most of Niger’s land is unregistered, governed by customary law, and vulnerable to transfer by the state or privatization. Customary rights are recognized within sectoral policies to varying degrees but are generally limited to use-rights. Second, the capacity of land administration authorities is weak, and there are limited formal land rights because of unreliable information processing or data storage. The National Committee on the Rural Code is the entity in charge of implementing the Rural Code. To create an environment of joint management of natural resources, the Rural Code also established the Land Commissions (COFOs) mandated to manage rural land tenure in a decentralized fashion before the decentralization process was launched. The Rural Code limited the ability to expropriate land for public use by the state. However, a significant number of disputes emerged after the Code was passed, as it recognizes the registration of customary rights, but does not stipulate which rights can be effectively recognized. The performance of COFOs is limited by weaknesses related to their internal structure and operating procedures. COFOs were formed at three levels: department, commune, and village. At the communal and departmental level, COFOs bring together all land actors, from the administrative and customary authorities to the technical services and rural producers. All of the country’s 36 departments have departmental COFOs and 145 communes out of 265 urban and rural communes have communal COFOs.65 COFOs, however, suffer from a number of weaknesses including lack of training, limited equipment, and weak operating and financial capacities to fulfill their mandate. Urban land rights are regulated by the state and are allocated in the form of use of rights, but local tenure commissions can temporary suspend rights of owners who use land irresponsibly or neglect or abuse it. The Government has been in the process of revising land tenure and legislation since 1986 but has not succeeded in its attempts through legislation to shift from unclear customary rights to clear property rights and to increase tenure security.66 Instead, there are now layers of often contradictory land rights. These conflicting land policies coupled with population growth and environmental degradation have led to 63 Principes d’Orientation du Code Rural, Ordinance 93-015 of 2 March 1993. 64 USAID Country Profile 65 Kandine (2010). 66 Picarelli (2015). 30 escalating tensions over resource access. Certain groups of people, including women, displaced persons, and migrants, have particularly limited access to land. BOX 6. URBAN PLANNING IN NIAMEY Since the development of the City Masterplan in 1984, no planning tool has been put in place or implemented in Niamey and even when regulations exist, they are seldom implemented. Niamey suffers from fragmented urban governance, with a multitude of actors intervening, often without coordination. The continuous problem of funding faced by the commune has led to uneven levels of investments across the various neighborhoods of the city, whereby some areas have been equipped with minimum acceptable infrastructure (garbage bins, public lighting, drainage, etc.) while other still lack basic services. This causes a feeling of abandonment in certain segments of the population, who often refuse to pay duties such as the road tax because they deem that they cannot pay for a service which is not rendered, whereas public authorities argue that the roads are not well maintained/invested in because the populations are not paying their duties. This illustrates how the commune is caught in a vicious circle of weak revenue mobilization that exacerbates the financing challenges it faces. Source: Issaka and Cassidy, 2018. Niger’s urban areas, as public spaces, are governed and managed by both central and local government. Central government ministries and agencies are responsible for delivering key infrastructure (e.g. trunk roads) and public utilities (e.g. electricity, water), while local governments take responsibility for a variety of other public goods and services (e.g. waste management, urban streets and drainage, etc.). The extent to which Niger’s urban areas are both livable and economically capacitated depends on the actions and interventions of both central and local government. This section of the report looks at local urban government: how it is structured, how it operates and how it finances its actions and interventions. A favorable legal decentralization framework, mandated under the 1999 Constitution, has been adopted in the early 2000s Following a long post-independence period of centralized (and sometimes authoritarian and military) rule, Niger’s move towards a more decentralized mode of formal governance b egan in the early 1990s as part of the overall process of democratization. Disrupted by political turmoil in the late 1990s and early 2000s, decentralization picked up some momentum with the holding of nation-wide local elections in 2004. Fresh local elections were held in 2011 (at more or less the same time as national elections); since then, and as a result of delays in organizing new local elections67, commune and region councils have either had their electoral mandates extended or been replaced by special delegations, nominated by the Government.68 Niger has adopted a legal framework that allows LGs to operate in a relatively favorable institutional environment (Figure 4.1). In the 1999 Constitution, decentralization was added to the functions of the Ministry of Interior. The Constitution provides for the establishment of autonomous LGs, and the Code Général des Collectivités Territoriales (CGCT), promulgated in 2010, spells out the broad powers and characteristics of LGs. The CGCT, like many other such LG laws in francophone West Africa, provides a framework for downward accountability 67 Councilors and mayors are elected for a five-year mandate. New elections should have taken place in 2016. 68 The most notable case being that of the Ville de Niamey, where the elected mayor and local council were suspended in mid-2017 and replaced by a Special Delegation. 31 of local governance and assigns wide-ranging responsibilities, including the provision of infrastructure and delivery of basic services to the LGs. Figure 4.1 Scoring of institutional frameworks for local governments (> score = more enabling) Source: UCLG & Cities Alliance (2015). The country’s urban institutional structure adopted by the CGCT is also conducive to achieving urban development goals. The country has a three-tier administrative structure, with a dual form of governance: (i) deconcentrated authorities at the regional level with 8 regions (headed by a Governor appointed by the president) and 63 departments (headed by a “préfet”); and (ii) decentralized authorities at local level represented by 255 elected LGs , comprising 215 rural communes, 36 urban communes, 4 Villes.69 This structure, with urban areas managed as large, single tier LGs, has positive implications for urban planning, for economies of scale, and for finance. 69 These are special status urban communes in which the core urban settlement has a population of 100,000 or more. Apart from their size, Villes differ from regular urban communes in that they consist of two or more “communal arrondissements” - - administrative sub-units of their Villes without budgeting or revenue-raising powers. For electoral purposes, each arrondissement is the constituency for a number of arrondissement councilors, some of whom are elected to the Ville’s council. The latter, once constituted, selects a mayor and his/her deputies from among its members. In total, there are four Villes – Niamey, Maradi, Zinder and Tahoua. 32 Figure 4.2 A three-tier administrative structure Central Government 8 Regions Deconcentration 63 Departments 215 rural communes Decentralization 255 LGs 36 urban communes 4 villes BOX 7. TYPES OF URBAN GOVERNMENTS Urban LGs in Niger are of two types: Regular urban communes: in principle, urban communes are jurisdictions within which there is a single settlement with a population of at least 5,000. The urban commune can cover not only the urban settlement, but also other villages or nomadic groups located or typically resident in that settlement’s hinterland. Commune councils are elected on the basis of the commune’s overall constituency. Most regular urban communes are either regional or departmental capitals. Special status urban communes, known as Villes: these are communes in which the core urban settlement has a population of 100,000 or more. Apart from their size, Villes differ from regular urban communes in that they consist of two or more “communal arrondissements”, administrative sub -units of their Villes without budgeting or revenue-raising powers. For electoral purposes, each arrondissement is the constituency for a number of arrondissement counc ilors, some of whom are elected to the Ville’s council. The latter, once constituted, selects a mayor and his/her deputies from among its members. In total, there are four Villes – Niamey, Maradi, Zinder and Tahoua. The 2010 CGCT includes provisions for the transfer to LGs of nineteen competencies70 ranging from urban planning to agriculture. In addition, central government can devolve/transfer additional functions or greater responsibilities for or in specific sectors to local government, provided that commensurate resources are made available to the latter. No distinction is made between the functions of rural communes, urban communes and Villes (which are special status urban communes), despite the many, significant, differences between them. 70 The competences under Article 163 of CGCT include: (i) land; (ii) economic development; (iii) urban planning; (iv) housing; (v) education; (vi) skills development and training; (vii) health, hygiene and sanitation; (viii) social development; (ix) livestock; (x) agriculture; (xi) fishery; (xii) storm water drainage; (xiii) environment and natural resources; (xiv) finances; (xv) roads; (xvi) communication and culture; (xvii) youth and sports; (xviii) tourism and crafts. 33 BOX 8. BROAD FUNCTIONAL RESPONSIBILITIES OF LGs IN NIGER (ARTICLE 30, CGCT) Commune development policies: commune development plans and other plans; establishing, supporting and monitoring development and social assistance activities within the commune; environmental protection; natural resource management. Creation and management of public infrastructure/investments in the following areas : primary education, non-formal education, primary health, water supply, slaughterhouses, markets and transport depots, public places, sports, streets, street lighting and feeder roads, drainage and waste treatment, cemeteries. Establishment and management/support of local public services : urban transport, parking, social assistance, health cooperatives, micro-finance. Public hygiene: collection, transportation and disposal of liquid and solid waste; storm water drainage. Management of land tenure, land use and urbanization : land use, public lands, urban and spatial planning. Management of local government affairs: finances (budgets, accounts, revenues, borrowing, grants), administration, services and human resources. Efforts towards decentralization policy implementation are underway Given the large number of functions to be transferred to LGs, the Government has introduced a phased approach. In 2016, the Government published two decrees supported by nine “arrêtés” (ministerial orders) to initiate the transfer of competencies by focusing on four sectors (Phase 1) – education, health, water/sewerage/drainage, and environment (which includes sanitation/solid waste). Table 4.1 summarizes the functions assigned to LGs under this first phase of decentralization. Table 4.1 Competencies transferred to LGs as part of the phased decentralization approach Sector Competencies (as per Decree 2016 075/PRN/MISP/D/ACR/MEP/A/PLN/EC/MH/A/MESU/DD/MSP/ME/F/ME/P/T/MFP/RA issued on January 26, 2016 Primary Construction and maintenance of kindergartens, community gardens, primary schools, education literacy and non-formal education centers; Equipment for school infrastructures, literacy centers, non-formal education centers; Acquisition and management of school supplies, material and edutainment; Recruitment and management of contract teachers. Education, Establishment of Regional Steering Committees for professional internships; vocational Establishment of a regional fund for professional internships and vocational integration and of young people; technical Management of orientation and professional integration platforms for young graduates. training Health Construction, maintenance and management of regional hospitals, mother and child centers and other specialized regional centers; Staff management made available; Presidency of the Regional Health Committee; Organization of the free healthcare system. 34 Water Implementation of policy documents, strategies and programs for the water and sanitation sector; Application of legislative and regulatory texts concerning the field of hydraulics and sanitation; Implementation of information, awareness, communication, education and support programs for the population; Management of public water supply services in pastoral areas on the basis of contracts and public service delegation of drinking water; Use of the investment budget made available for pastoral water infrastructure; Implementation of interregional relations within the framework of integrated water resources management; Preparation of annual activity reports and periodic reports on the status of pastoral pumping stations; Preparation of terms of reference and tender documents for pastoral pumping stations; Monitoring and control of the construction work of pastoral pumping stations; Collection and transmission of information for the determination of water indicators; Realization of feasibility studies related to the mobilization of surface and underground water resources. Environment Development of fisheries management actions and stocking of ponds and reservoirs; Design of information tools, public awareness and promotion of ecotourism; Development of forestry, wildlife, fisheries and beekeeping production and promotion of related sectors; Development and implementation of restoration and management plans for restored sites; Communication for a change in the behavior of the population in terms of pollution, nuisance and disaster risk prevention; Creation of regional and departmental protected areas; Adoption of specific texts for the sustainable management of resources transferred in accordance with the texts in force. Source: DGDCT, 2018 The Government adopted in 2018, a 4-year Plan to transfer the four sectors to the LGs. In recognizing the complexity of the transfer process, it became apparent that detailed transfer arrangements were required to effectuate implementation of the transfer. The Plan addresses transitional arrangements for the shifts to the LGs that include human resources, funding and phasing of functional assignments. The plan is supported by an indicative 4-year envelope of US$ 1.13 billion for LGs to implement the transfer. Table 4.2 Indicative 4-year envelope to be transferred to LGs under the Plan (in million US$ equivalent) 2018 2019 2020 2021 Total LGs 160 310 326 331 1,127 Source: DGDCT, 2018 Under the 4-year Plan, each of the four sector ministries is required to prepare a roadmap. The roadmaps are to provide details of all key elements related to planning, implementing and operating services relevant to the sector, including oversight and accountability provisions. The Government is currently taking stock of the implementation of the 4-year Plan for 2018 to identify implementation gaps and progresses. To-date, two sectors appear to be the most advanced: a. Primary education has transferred the management of contractual teachers and school infrastructures to LGs. In line with the Education Plan, the Ministry of Primary Education transferred three of the five responsibilities to LG in early 2019: (i) the 35 recruitment and management of contractual teachers; (ii) school mapping planning; (iii) the construction and maintenance of kindergartens, preschools, primary schools, and non-formal primary education centers, with the technical support of ANFICT and financed by the new education Fund (Fonds commun pour l’éducation). The two remaining competences to be transferred are (i) the equipment of school, literacy centers, non-formal education centers; (ii) the acquisition and management of school supplies, teaching and learning materials. b. The Ministry of Hydraulics transferred water point service to local councils. The roadmap of the Ministry of Hydraulics is consistent with the 2010 Water Law which outlines the distribution of responsibilities in the Water and Sanitation sector—with a principle of subsidiarity aligned with the country’s decentralization process, the Operational Strategy for the Promotion of Hygiene and Basic Sanitation (Stratégie Opérationnelle de Promotion Hygiène et Assainissement de Base—SOPHAB and the sector program on Water, Hygiene and Sanitation (Programme Sectoriel Eau Hygiène et Assainissement 2016-2030—PROSEHA). The process adopted is aimed at ensureing the availability and sustainable management of water resources and sanitation for all. By the end of 2018, all water point services had been mapped, and both ownership and management transferred to LGs. c. Transfers of competences for the Ministries of Health, Vocational Training, Secondary Education and Environment are still underway. Despite the relatively well-conceived legal framework, the process of transfer appears to be taking longer than expected for a number of reasons. In fact, the scale and complexity of the transfer process represents a major challenge, and the adoption of realistic roadmaps towards a progressive devolution of the competences to the local level represents a significant challenge. Of the four functions comprising the first phase of devolution, there is concern that they (i) represent the most financially and technically demanding capacities; (ii) involve complex coordination with line agencies, which themselves may be reluctant to devolve their roles; (iii) are associated with a lack of clarity on what respective roles should be assigned between the center and the LGs; and (iv) are severely constrained by lack of adequate, systematic and predictable financial resource transfers (while projected allocations are significant, actual transfers are still to be made). LG access to financial resources central to the operation of the decentralization policy and the sound service delivery performance of urban areas is not yet effective The intergovernmental fiscal transfers system, while supported by appropriate laws and regulations central to the operation of the decentralization policy and the sound service delivery performance of urban areas, is not yet functioning effectively and the LGs remain severely resource-constrained. LGs’ expenditure on economic infrastructure, essential to support economic transformation, remains low in urban centers. Between 2015 and 2016 expenditures on roads, drainage, market facilities, etc,, with the exception of Niamey, averaged about CFA 450 per capita (US$ 0.78 equivalent). Surprisingly, in 2015 and 2016, larger LGs such as Maradi, Tahoua and Zinder seemed to have spent even less on economic infrastructure than smaller LGs (Figure 4.3). 36 Figure 4.3 Urban LGs capital expenditure by sector71 Source: DGDCT’s local government finance database & Niamey’s administrative accounts Under the decentralization framework, LGs have two funding sources to finance their functional responsibilities. Under the decentralization framework initiated by Government, LGs are financed through revenue generated from their own sources (OSRs) and from a system of central government transfers. The resource base and attendant operating arrangements for OSRs is modest and relatively unreliable and is heavily dependent on central government management and control of many of its local revenue sources. Significant reform will be required over an extended period of time to tackle OSRs systems. Therefore, in the early years of the decentralization program, the central transfers will continue to play a major role. Government has recognized this, and the decentralization legal framework establishes two types of grants to LGs: (i) an operating grant – (Fonds d’Appui à la Décentralisation, FAD); and (ii) an equalization grant designated for investment purposes (Fonds de Péréquation, FP). The two grants are operated by the National Agency for Local Government Finance (ANFICT, Agence Nationale de Financement des Collectivités Territoriales) created under the decentralization law in 2008. 71Capital spending data: 2015 data is for 23 urban communes and 3 Villes; 2016 data is for 24 urban communes and 2 Villes. 37 Figure 4.4 Two grants for LGs under the decentralization framework Since the introduction of the grant system in 2014, the transfer process has encountered difficulties including the relatively small size of the grant, a gap between allocations and amounts actually disbursed, and tardy disbursements. While data is only available through 2016, it appears that the level of resources transferred is very modest and inadequate to meet essential service delivery requirements. In the case of the FAD, for 2015 and 2016, per capita disbursements averaged US$ 1.6. In the case of the FP, it averaged US$ 2.1. By way of comparison, in Egypt per capita transfers amounted to around US$ 11.6, in 2016. In Benin, per capita transfers hovered around US$ 5 in 2016. As shown in Table 4.3, actual disbursements to LGs are typically well below initial allocations. In 2014 and 2015, total FAD fund releases represented, respectively, 66 percent and 27 percent of the annual budget allocations. The same pattern more or less applies to FP fund releases, which represented 66 percent and 25 percent of the budgeted allocations for 2014 and 2015. This was apparently due to cash flow problems in the State Treasury and insecurity in many regions. Moreover, even when made, transfers are not disbursed in a timely fashion (e.g., no transfers were made as of October 2016 for the 2016 allocations), which has implications for LG ability to execute the works. Table 4.3 FAD and FP total allocations (CFA) Fonds d’Appui à la Décentralisation (FAD) 2014 2015 2016 2017 2018 Initial allocation (CFA 1,500 3,500 990 500 3,000 millions) Per capita allocation 88 206 58 29 176 (CFA) Disbursement (CFA 968 929 n/a n/a n/a millions) Per capita disbursement 57 55 n/a n/a n/a (CFA) Fonds de Péréquation (FP) 2014 2015 2016 2017 2018 Initial allocation (CFA 3,000 2,100 950 500 3,500 millions) Per capita allocation 176 124 56 29 206 (CFA) Disbursement (CFA 1,954 520 n/a n/a n/a millions) 38 Per capita disbursement 115 30 n/a n/a n/a (CFA) FAD and FP 2014 2015 2016 2017 2018 Initial allocation (CFA 4,500 5,600 1,940 1,000 6,500 millions) Per capita allocation 265 330 114 59 382 (CFA) Disbursement (CFA 2,922 1,449 n/a n/a n/a millions) Per capita disbursement 172 85 n/a n/a n/a (CFA) Source: UCLG (2016); Institutions & Développement (2017); ANFICT data collected by authors The allocations under the grant system also appear to lack transparency. Up until 2016, FAD and FP allocations by ANFICT appear to have been based on a pre-determined allocation to different categories of LGs (Regions, Villes, urban communes, rural communes), with the total for each category then being divided up among each LG in that category. From 2017 onwards, however, FAD and FP allocations have been made on the basis of a more complex formula which distributes: (i) 50 percent of the total funding pool as before (fixed percentages for each category then divided up into equal shares for each LG within that category); and then (ii) the remaining 50 percent of the total funding pool on the basis of a formula which takes into account several factors (population, geographic area, etc.).72 FAD or FP allocations are not conditioned by LG performance and while allocations seem to be determined by a formula, it is unclear what other factors may come into play when disbursements are made. Table 4.4 FAD and FP allocation shares between categories of local government (until FY 2016) Type of local government FAD FP Regions 32% 24% Villes 8% 6% Urban communes 22% 14% Rural communes 38% 56% Total 100% 100% Source: ANFICT FAD and FP transfers account for a very small proportion of total revenues among all urban LGs and are some of the lowest ratios relative to other low-income countries (Figure 4.5). FAD and FP allocations do not constitute a large share of revenues for urban LGs, although their relative importance is more substantial for urban LGs (excepting the 4 Villes). In 2015, the per capita FAD and FP transfers represented 15.8 percent of total revenues of urban communes versus 5.6 percent of total revenues of the Villes. In 2016, this allocation however dropped to 6.5 percent of total revenues of urban communes and was maintained at 5.8 percent of total revenues of the Villes (Table 4.5). 72It is not clear exactly what criteria are used to divide up the formula-based allocations to each local government. 39 Figure 4.5 Intergovernmental transfers in percent of total local revenues in selected countries Source: Financing Sustainable Urban Development in The Least Developed Countries, 2017 Table 4.5 FAD/FP per capita allocations compared to total revenues per capita 2015 2016 FAD/FP FAD/FP Per Per capita Per Per capita per per capita FAD and capita FAD and Type of ULG capita as capita as total FP total FP % of % of revenues allocations revenues allocations total total (CFA) (CFA) (CFA) (CFA) revenues revenues Niamey 9,648 330 3.4 9,255 114 1.2 Villes 5,931 330 5.6 1,981 114 5.8 Urban 2,093 330 15.8 1,762 114 6.5 communes Source: ANFICT Own source revenues rely on out-of-date collection methods and are insufficient. In Niger, like in other countries in West Africa, local revenue collection is by and large operated by central government on behalf of the LGs. Tax and other fee-based rates are generally determined by the central government, while the urban LGs are responsible for the administration of a small share of the revenues such as charges on the use of public space and advertising taxes (Table 4.6). LG revenue administration, as it stands in Niger, is rarely reviewed or updated in any systematic way and its efficiency is seldom assessed. Moreover, there are indications that mining royalties that are not currently received at the local level represent a significant potential revenue source for at least LGs located in regions where the economic base is related to these industries (e.g. Diffa, Zinder, Agadez, Tillabéri). To illustrate the scale of the deficiencies in OSR collection, the example of Cotonou in Benin (a city smaller in population size than Niamey) can be telling. In 2016, the OSRs per capita in Cotonou were almost twice as much as in Niamey (CFA 16,912 per capita in Cotonou vs. CFA 9,236 per capita in Niamey). 40 Table 4.6 Local government – sources/categories of revenue (b) (a) (c) (d) Categories in Category of revenue Examples Comments DGDCT database Own-Source Impôts locaux Municipal (head) tax OSRs are the revenues Revenues (OSRs) Taxes indirectes Local advertising tax administered and Taxes User fees and charges collected directly by remunératoires (e.g. registered copies) ULGs Recettes non- Rental of commune fiscales property Shared revenues are Gifts and legacies those taxes and other Vente terrains Sale of commune assets revenues collected by (including urban land) the State but shared (at Shared Revenues Impots retrocedés Property tax varying rates) with local Business taxes governments Mining royalties Transfers and grants Produits divers Equalization grants (FP) Transfers and grants Recettes fiscales Decentralization support are direct subsidies Subventions grants (FAD) allocated to local Decentralization support governments by the grants central government Occasional subsidies NB: Column (b) refers to the revenues categories used in the DGDCT local government finance database. Table 4.7 ULG OSRs – variations (as % of total revenues) OSRs Shared Sale of Transfers Year ULGs Other Total revenues urban All OSRs & grants OSRs* land All ULGs 36.8 18.6 37.4 56.0 7.2 100.0 Niamey 54.6 3.4 39.4 42.8 2.6 100.0 2015 Villes 18.2 39.4 29.8 69.2 12.5 100.0 Communes 16.8 31.3 40.2 71.4 11.8 100.0 All ULGs 46.5 11.0 39.3 50.3 3.2 100.0 Niamey 56.1 4.0 39.2 43.2 0.7 100.0 2016 Villes 51.0 9.4 39.6 49.0 - 100.0 Communes 21.8 28.4 39.5 57.9 10.3 100.0 NB: * = local taxes, indirect taxes, user fees/charges, non-fiscal revenues Source: ANFICT 41 Figure 4.6 Urban LGs: OSRs, shared revenues & grants/transfers (as % of total revenues) Source: ANFICT Revenue sharing arrangements are complicated, extremely opaque and can be seen as highly inequitable. Revenue sharing is of particular importance and represented more than 45 percent of OSRs in urban LGs in 2016. Yet, the LGs are unable to accurately forecast how much they can expect to receive, which makes it difficult for them to plan and budget every year. More than half of the urban LGs are informed of budget allocation, and then typically do not receive what was allocated (Figure 4.7). Furthermore, LGs do not have any information on how much was collected by the national tax directorate and thus are in a weak position when it comes to insisting on receiving the revenues collected on their behalf. Between 2010 and 2015, the four Villes absorbed approximately 95% of all the revenues shared with LGs in Niger; the remaining 36 urban communes received only 5 percent of all shared revenues (although together they account for almost two-thirds of the total population of all urban LGs). Figure 4.7 Budget allocations are uncertain Informed of budget allocation Amount allocated received Source: Local Government Census 2018. 42 Table 4.8 Shared revenues and natural resource royalties Shares among SNGs Local Type of tax Sharing basis (CG/SNG) Governments Regions (Villes, Communes) Property tax73 50% CG, 50% SNG 10% 40% Business license 60% CG, 40% SNG 10% 30% Professional tax (type of 100% SNG 20% 80% business license) Licensing tax 100% SNG 20% 80% Recording rights 80% CG, 20% SNG 5% 15% 85% CG, 15% for LGs in the Mining royalties region in which royalties are - 15% raised CG = central government SNG = sub-national government Source: AECOM International (2017), Evaluation des Finances Publiques du Niger selon la Méthodologie PEFA 2016 To date, LGs in Niger have limited access to borrowing. Article 238 of the CGCT makes provision for LGs to borrow – but also states that this can only be done in line with specific conditions, to be spelled out in an awaited decree. To date, apart from debt accrued by Niamey in 2015, borrowing alternatives seem to be limited for LGs in Niger, particularly in light of their poor credit-worthy status. This is not surprising given that the revenue potential of local taxes in Niger is relatively low and that strengthening the revenue base and improving municipal management are fundamental prerequisites for access to capital markets. While financing expenditure through medium-term borrowing is limited, some Villes have managed to accumulate outstanding arrears. As of March 2018, Niamey appears to owe suppliers and contractors sizeable amounts of cash in the form of accounts payable (unpaid invoices). It would also appear that throughout 2016 and 2017, Niamey was seriously in arrears with respect to salary payments. There is evidence that other Villes seem to be in the same situation. The financial constraints push LGs to sell urban land to generate additional revenue. Urban communes derive around 30 percent of all their revenues from urban land sales. Among the regional capitals, Diffa, Agadez and Dosso, in particular, have generated very substantial (per capita) revenues from marketing urban land. In principle, revenues from urban land allocation are expected to be set aside (as revenues for capital investments – recettes d'investissement) in order to finance the establishment of basic services in newly developed urban areas. In practice, it is impossible to determine whether this is what actually takes place; it is highly likely, however, that these revenues are not used exclusively to finance extensions to piped water supply systems and to electricity grids in the residential or other areas for which land allocation fees have been levied. Land allocation revenues are almost certainly being 73 In the FY 2018 national budget, property tax was reformed and broken down into three separate taxes, of which only two are shared between central and sub-national governments. It is not yet known what the financial consequences of this change will be for sub-national governments, although the National Tax Directorate predicts that the overall amounts accruing to local governments will be smaller than in previous years. 43 used to finance general local development expenditures (such as education or health) and, in all likelihood, some recurrent expenditures. This is challenging, given that the “urban land bank” for each commune or Ville is finite74 and that, sooner or later, land allocation revenues will dry up (as they appear to have done in Niamey and Zinder). The introduction of a 4-year Plan in 2018, while seeking to provide prerequisite resources to implement the transfer of the four sectors, has added additional complexity to the fiscal system. It is unclear whether the resources under the Plan are purely to support the transition or represent the framework for future fiscal transfers. 75 If the Plan is intended to serve purely as an interim arrangement facilitating the implementation of the reforms, then there needs to be clearer linkages between the LG grant system and the Plan. If the funding structure under the Plan is intended to comprise an integral part of the LG fiscal structure, then it will be important to revisit the grant structure more broadly. Specifically, the scale of the resources under the Plan crowd out those assigned through the grants and have consequences for such issues as LG decision making on investment priorities and related questions of accountability and local ownership. This concern arises from the assessment of the limited information available on the Plan, which suggests that it operates primarily on a conditional grant basis, under the control of the line ministries. Capacities at the local levels are weak Local governments in Niger face significant capacity constraints. According to the law, communes should be staffed with at least a Secretary General, a “receveur-comptable” (in charge of accounting and taxes), a person in charge of public individual registries, and an assistant. Yet this leaves aside technical capacity to manage the construction and operation of services and infrastructure. Overall, LGs are generally not endowed with highly skilled staff (able to take on major infrastructure projects, handle complex service delivery functions or regulate out-sourced service providers). They rely largely on manual processes and on long- established (and often outdated) practices (Figure 4.8). Figure 4.8 Recording of expenditure and revenues is largely done on paper Source: Local Government Census 2018 The lack of adequate technical support exacerbates internal capacity constraints faced by communes. In addition to the staff that they directly employ and pay, LGs are also – in principle – able to call on support from de-concentrated line departments. However, their ability 74 Assuming that urban local government jurisdictions are not enlarged. 75 This question deserves further investigation. 44 to draw down on the staff, skills and knowledge of line departments is limited. This is compounded by the highly centralized nature of the Nigerien State. “De-concentrated” line departments are, in reality, highly centralized in terms of decision-making, such that local level technical departments have little latitude to respond to local needs. Moreover, most of the government’s financial and human resources are concentrated in Niamey. Specifically, more than 90 percent of government’s budget is spent at the central level, of which nearly all of it stays in Niamey, and more than 65 percent of government employees are based in Niamey. Urban planning relies on key instruments that could be updated to take into account local priorities voiced by citizens or by the private sector. These instruments known as “Schémas Directeurs d’Aménagement d’Urbanisme” (SDAU), in the case of Villes, and “Plans Urbains de Référence” (PUR), in the case of urban communes are undertaken jointly by urban local governments and the Ministère des Domaines et de l'Habitat (Ministry of Lands and Housing). Regional development plans for the 7 regions have also been prepared and validated. An integrated development plan for Niamey is also under preparation. All Villes have one, and all but two urban communes have a development plan but some need to be updated.76 A further assessment of the planning, execution and absorptive capacities of LGs is needed. LGs have some track record in implementing investments but still lack a medium-term outlook for their local planning and budgeting. LGs invest in the construction of new roads/drains or the upgrading/rehabilitation of existing roads and drains. In Maradi, for example, the Ville’s largest investment project in 2017 was the asphalting of a 2 kilometer stretch of an existing road, costing around CFA 82,000,000 (approximately US$ 160,000), financed out of the Ville’s capital budget and implemented by a local contractor. In Birni N’Konni, the commune’s largest investment project in 2017 was the replacement (and installation) of a large number of concrete drain grates (or covers) in the town, costing about CFA 18,000,000 (approximately US$ 40,000). Local public financial management systems are weak and present accountability and fiduciary challenges. LGs rely almost entirely on simple, manual, accounting methods in order to manage their finances. Only 20 percent of LGs submit their administrative accounts, due to weak budgetary monitoring. Furthermore, in the Villes, financial management is complicated by the fact that communal arrondissements operate as semi-autonomous finance units – each communal arrondissement has its own municipal secretary and its own receveur, whose accountability to the Ville’s municipal secretary and receveur is unclear and/or fraught. More importantly, LG annual financial accounts are not subject to any regular financial audit, due to weak capacities of Cour des Comptes.77 In principle, a variety of central government inspections78 of local government take place every year – but such inspections are both irregular and un-systematic. In addition, no external financial audits of local government financial statements are undertaken. 76 Local government census (2018). 77 Ministère du Plan (2017). 78 By the Inspecteur Général de l’Etat, the Inspection Générale des Finances, and the DGDCT. 45 Refocusing national policies is needed to change Niger’s development trajectory as rapid population growth, combined with persistent low agricultural productivity, climatic change and environmental degradation are exerting unsustainable pressure on food supplies, natural resources and public services. In addition, traditional annual migration patterns across the region in search of temporary employment opportunities, linked to seasonal agricultural cycles, have been disrupted, largely due to security concerns, adding further pressure on the rural sector. Taken together, despite the rural character of the country, these forces can be expected to contribute to accelerated urbanization; they however also underline the importance of enhancing the role that the cities can play in the emerging economy. International experience suggests that if Niger’s economy is to grow and diversify, and to offer a future for its citizens, the role played by the urban centers will be one of the key elements necessary to achieve significant transformation. In their National Social and Economic Plan 2017-202179, under the fourth strategic priority related to improved governance, peace and security, the Government included a Sub-program specifically tailored to reinforcing governance at the local level through: (i) supporting local sustainable development; (ii) modernizing the civil registration system; and (iii) improving the knowledge about the territory. Under this Sub-program, the Government is seeking to (i) strengthen the institutional and organizational framework of local government; (ii) implement effectively and fully the provisions of the CGCT; (iii) transfer resources at the local level commensurate with the responsibilities transferred to LGs; (iv) strengthen the mechanisms for mobilizing and managing own resources by LGs; (v) reinforce the capacities of ANFICT; and (vi) develop participatory development planning and management tools. It also aims at improving control by the Cour des Comptes and accountability to the citizens. As cities use a citizen-centered approach to public service provision, introducing policies that seek to enhance the role of urban settlements in Niger’s development strategy, they could help strengthen local initiatives and decision making. This would increase local incomes and local government fiscal autonomy, enhance access to information, ensure a better alignment of the incentives of service providers with results (performance- based financing), and embrace service delivery by whoever can do so (including private sector, nongovernmental organizations, civil society organizations and the public sector). This would enhance ownership, sustainability, and move the focus of decision makers and development agencies away from a centralized, state-led development model. However, the transition faces challenges, despite the favorable settlement pattern that comprises well-distributed centers which can serve as key urban building blocks that are capable of fulfilling greater economic roles, including addressing: (i) deficiencies in all services, but most notably in economic infrastructure; (ii) resource constraints, both from poor local revenue generation, but also from lack of adequate resource transfers from the center (in the absence of the roll out of the 4-year Plan) 80; (iii) the unsustainability of local revenue generation due to its dependence on the sales of land; (iv) unpredictable swings in annual transfers from the center; (v) lack of clarity, at least operationally, on the assignment of 79 Ministère du Plan (2017). 80 This calls for a reform of the sharing arrangements between local and central government, but also raises the question of the sustainability and equity of reforms in the light of the fact that some local governments may benefit from taxation of natural resources while others do not. Transfers from central to local government should therefore continue to play a redistributing role and protect local governments against the risk arising from volatile commodity markets. This mechanism relates to the objective of the Governance of Extractives for Local Development (GOLD) project. 46 functions to these centers, pending the roll out of the roadmaps; (vi) pushback from central agencies against losing their current mandates); (vii) weak physical linkages of the centers to their hinterlands and to one another; (viii) human resource capacity limitations at all levels, but particularly at the local level; (ix) health risks associated with the growth and densification of urban areas, combined with the lack of critical infrastructure services such as drainage, sanitation, clean water supply, and solid waste management; and (x) poor land management and limited access to land undermine effective planning and lead to informal settlements and environmental degradation, as well as to low local revenue generation. While the legal framework, established under the Local Government Code (CGCT), provides the most important elements necessary to create well-functioning LGs, the process of undertaking the transformation is proving complex. More specifically, although Government made the sound decision to phase the process by focusing on four out of the 19 competencies to be decentralized, and by introducing a Plan requiring each of the four affected sectors to prepare roadmaps for how and when various functions and responsibilities will be transferred, this phased approach has many moving parts and is itself proving a challenge. In order to demonstrate progress, it is proposed to further “unpack” the process and establish two parallel tracks, one supporting the preparation and roll out of the roadmaps, the other selecting key elements of the decentralization framework that are already in place and making those operational (something the government has already been doing, but with uneven success). Addressing the preparation of the roadmaps. Provide support to the four sectors comprising Phase 1 for the preparation of their respective roadmaps in the form of selected expertise and exposure to other countries that have had or are themselves going through similar decentralization experiences. As part of this exercise, it might be useful to review the four sectors selected for Phase 1 and determine whether they represent the most practical alternatives to introduce decentralization – the four sectors represent the most complex functions to be devolved, comprise many sub-sectors, require significant policy oversight and management, and involve major staffing complements. Making key element of the decentralization framework operational. Given that the institutional and fiscal provisions for decentralization are in place, it should be a priority to implement those elements that can be operationalized. This would offer the opportunity to: (a) simplify the selection of functions to be decentralized from amongst the many activities identified under each of the four sectors and focus on one or two that are most easily transferrable; (b) test the viability of the institutional arrangements and build the requisite operating systems; (c) refine and routinize the fiscal transfer system; (d) based on implementation experience, better determine capacity capabilities and constraints and provide appropriately designed support systems; (e) introduce and test both upward (to central agencies) and downward (to citizens) accountability systems that provide for transparency and citizen engagement; (f) align the roadmaps with the experience being gained with the implementation of the key elements of the decentralization framework; and (g) make adjustments in line with experience. This approach would utilize the opportunities presented by the current settlement network and build on it by taking full advantage of the existing urban and decentralization policies and related enabling legislation offered by the CGCT. It would also avoid the trap of introducing ambitious reforms beyond existing implementation capabilities. To make decentralization work, it is proposed to select a limited number of LGs to put in place and test reforms as represented in the devolution framework. The experience gained would then be translated into a process for subsequently phasing in all the urban LGs. 47 It is recommended that the first set of LGs be selected according to criteria that offer the greatest chance of success. Border regions deserve attention in this regard. As the existing national institutional structure sometimes block cross-border cooperation, transferring resources and responsibilities to regional and local levels could facilitate co-operation among border communities. They are best placed to understand the challenges faced by a diversity of actors on both sides of the border and therefore to experiment with initiatives encouraging cross- border co-operation through locally designed incentives that would remove unnecessary border costs and reduce waiting time (Figure 5.1).81 Figure 5.1 Road accessibility with and without waiting time in Gaya, and along the border 81 OECD/SWAC (2019). 48 Source: SWAC/OECD (2019). A prioritization of sectors and sub-sectors to be implemented under the decentralization program 82 should be made, viewed from two perspectives. The first is the larger question as to whether the four functions (out of the 19) are the most appropriate for initiating the first phase of decentralization. While it may not be possible to change, it may be worthwhile adding an additional function that is less demanding from the perspectives of (i) ease of implementability; and (ii) simpler policy and employment oversight requirements. For example, one such function would be local transportation – for which there are sub- sectoral investments (local roads and related drainage) that have traditionally been amongst the first to be delegated to LGs. The second is selecting the two or three sub-sectors from within the wide range addressed under the Plan that could: most easily be implemented, have the most visible impact in the short term, and have the best prospects for having essential operating and maintenance (O&M) requirements addressed. Examples of possible sub- sectoral options include: solid waste (from the environmental sector); local roads (from the transportation sector); and drainage, which typically goes along with local roads (from the hydraulic sector). In summary, this approach would require: a. Review and revision if necessary of the competencies (and sub-sectors within these competencies) that should comprise the first phase of government’s decentralization program for transferring a sequence of functions to LGs. Such considerations would take into account questions of practicality, impact and contribution to putting more economic infrastructure in place; 82 As part of the Governance of Extractives for Local Development Project, the World Bank team is planning to support this stock-taking exercise along with a more in-depth public financial management assessment of the LGs. 49 b. Once the choice of sub-sectors/services is agreed, identify and put in place any additional regulatory provisions required to enable the competencies to become operational; and c. Establish clear “rules of the game” between the central agency which has oversight of the particular competency being devolved or which is relinquishing its delivery mandate, including: (i) planning/decision-making on selection of proposed investments and on operation and maintenance responsibilities; (ii) role in preparing and implementing investments and in undertaking operation and maintenance requirements; and (iii) source and flow of funds for capital works as well as O&M. BOX 9. PERFOMANCE-BASED CAPITAL BLOCK GRANTS IN TUNISIA Responding to the demands expressed during the popular uprising of 2011, Tunisia adopted in 2014 a new constitution including clear commitments to decentralization and fully devolved and empowered local governments with autonomy for executing their mandates of providing local services according to transparent principles of participation by, and accountability to, their citizens. The Government of Tunisia has rapidly sought to operationalize these principles by embarking on a wide-ranging reform program of the local government municipal investment-planning framework, the Urban Development and Local Governance Program (UDLGP). As part of the Government program, the World Bank is providing financial and technical support to the reform of the capital block grant system in order to make it more transparent, predictable and supportive of local autonomy, while seeking to enhance local government performance. To this effect, a new system for managing the allocation of resource transfers from the center to local governments was introduced. It replaced the centralized tutelle structure of central control by shifting authority in the use of grant funds to the local governments within a new legal framework whereby resource transfers from the center to the local levels are disbursed directly to local governments according to a grant system based on: (a) an objective allocation formula; and (b) local government performance measured annually according to key criteria. Moreover, a technical assistance system was also designed to assist the Government in detailing the capacity support system for local governments. At the early stages of the decentralization process, the transfer of competences to LGs has been limited to few sectors such as the provision of roads and public lighting, solid waste collection and maintaining parks. International experience has demonstrated the importance of performance-based capital block grants, particularly in the early stages of the decentralization process. If properly designed, performance-based intergovernmental fiscal transfers can provide incentives for LGs to improve their internal functioning and improve their service delivery outcomes. More broadly, they also serve to offer reassurances to central government: (i) that management of resources is being scrutinized on a routine basis; (ii) that weaknesses are being identified, giving government the opportunity to provide targeted capacity- building support; and (iii) that key functions of LGs are being monitored routinely to determine whether/where government intervention to address problem areas may be required. A performance- based element to the grant system can thus help channel transfers from the center to LGs in a systematic fashion, and manage risk while providing a lens through which to identify weaknesses and take action as appropriate as part of the process of determining the division of responsibilities based on competencies. Delegated decision-making and accountability could be reinforced. Decentralization offers the opportunity to give real voice to local issues of service delivery. International experience has also demonstrated that local decision-making on investments in local services and infrastructure is generally more economically efficient than those based on centrally determined decisions. These opportunities depend on creating a “virtuous circle” in which: (i) 50 councilors are elected by the local population within their jurisdiction; (ii) the councils are empowered by sufficient resources, predictably allocated, to deliver visible improvements, and by autonomy in the decisions they take on how to invest those resources; (iii) the citizens have input in the annual investment decisions the councils make; (iv) the councilors are held accountable, including in the re-elections they face, for the effectiveness of their role in delivering the investments they have committed. The effectiveness of accountability mechanisms is key to the sound functioning of LGs, and it will be important to address the establishment and operation of suitable systems and procedures that include: a. Participation in capital investment decision-making by citizens and public access to budgeted outcomes of public consultations; b. Routine reporting on progress with investments per the budget (normally twice a year) to the council by the mayor. These reports would be made available in real time to the public and at an open council meeting to review progress, shaping trust in tax systems; c. Improvements in financial accounting practices including consideration and possible piloting of a reformed accounting system (e.g. transition to international accounting standards) that enables reasonable oversight of the financial status of the councils in real time; d. The undertaking of routine annual financial audits of the LGs, perhaps initially on a pilot basis; e. Timely publication of key documents such as the annual budget, the semi-annual progress reports on capital budget implementation, procurement-related information such as award of contracts; f. Establishment of an effective Grievance Redressal Mechanism (GRM) for addressing citizens’ complaints in a structured and time bound manner, with clear institutional arrangements for handling various types of grievance and deadlines for redressing these. BOX 10. INCREASING ACCOUNTABILITY THROUGH BUDGET TRANSPARENCY AT THE SUBNATIONAL LEVEL IN CAMEROON Improving governance is a major development challenge for Cameroon and for many other developing countries and making public financial management more transparent is a central part of it. While budgets are public documents, accessible to citizens in principle, in practice, budget information is difficult to come by as a result of political, administrative, capacity, and logistical constraints as well as cost barriers at all tiers of government, including the national, regional, and municipal level and at service-delivery points like schools and health centers. In two of Cameroon’s 10 regions, a World Bank -supported initiative has piloted a citizen-centered approach for disseminating simplified budget information of 151 schools, 58 health centers, and 28 municipalities and the two regional administrations. Budgets were made public and awareness was raised through various activities, including public community meetings at which the budgets of institutions were read aloud, poster campaigns, art competitions, theater performances, student budget clubs, and the use of media such as community radios and Facebook. Results of the initiative include increased tax revenues for one local council, changes in the willingness of parents to contribute to the financing of schools, and greater trust between mayors and constituents. 51 Source: World Bank, Budget Transparency Initiative (2013). Learning-by-doing capacity building providing on-the-job support to LGs and central agencies involved in local government is central to the success of the decentralization reform. While training can offer some beneficial support to strengthening LG performance, international experience has indicated that the greatest gains in the capacity of LGs to perform their functions has come though “learning by doing”. Technical assistance that provides “on- the-job” support delivered “just-in-time” has shown real gains in human resource capacity in other countries, and there are a number of different models for delivering this kind of capacity building support. BOX 11. CAPACITY BUILDING ACTIVITIES FOR LGs IN WEST BENGAL Capacity building and institutional strengthening activities of LGs in West Bengal comprise mentoring and formal learning. The activities focus on improving LG performance to access and maximize performance-based grants. Mentoring. The mentoring system is: (i) maintained at a level that is as cost-effective as possible; (ii) subject to annual quality assessments to ensure that mentoring services are appropriate; and (iii) facilitate mainstreaming LG mentoring services into the local government system. Mentoring teams provide on-the-job support and demand-driven capacity building for core LG functions. Mentoring teams consist of 4 members. The core members are planning/governance and financial management specialists with infrastructure/engineering and IT support mentors offering flexible support on a needs base. Formal Learning. Formal learning and training are demand driven based on the specific and individual needs of LGs for the skills and knowledge they need to access performance-based grants and to deliver more and higher quality public goods and services. This requires a more flexible approach to the provision of training and learning events, with less emphasis on the delivery of a standard training package to all LGs. This is achieved through a local level planning process, through which learning and training needs of LGs are identified, prioritized and then planned/budgeted for on an annual basis. Learning and training activities are delivered by either public or private sector service providers, respectively through agreements or contracts. LG finances, including the fiscal transfer system, should be strengthened further. Attention to reforms and strengthening of the elements of the LGs’ OSR system is also required. However, this will involve a complicated process of adjudication of the respective roles of central and local government in setting and collecting various taxes and other levies. It also will require establishing data systems and the management of these system (e.g. 52 addressage and the establishment and management of property valuation rolls), all of which is likely to unfold over an extended timeframe. In the interim, the fiscal transfer system will play a particularly important role in the devolution process. While the framework for fiscal transfers is in place, it is not apparent that key elements are operating effectively, and it is likely that they will need to be modified. These elements include: a. Clarifying and enforcing a formula-based allocation system of the resource transfers of both the FAD and the FP that assures objectivity and equity, and that are made public to assure public scrutiny and transparency; b. Providing for multi-year (3 to 5) investment planning, typically in the form of an indicative 3 to 5-year envelope earmarked for this purpose and confirmed through such mechanisms as 5-year plans. This would require agreement between Ministry of Finance and the Ministry of Local Government on these indicative 3 to 5-year envelopes, and for this information to be conveyed to the LGs. While this indicative allocation is only confirmed through annual budgets, the principle is that the projected allocations could be relied on outside of major events affecting national priorities; c. Ensuring that the annual budgeted allocations are complied with (ensuring predictability), are in sufficient amounts to provide the LGs with the means to undertake visible improvements, and are released at the beginning of the fiscal year so that the LGs can implement their plans in a timely manner; d. While trying to keep the fiscal transfer system simple, it may be useful for the more effective operation of the FP to review refinements to the fiscal architecture that would take into account such considerations as: (i) the most practical and effective way to deal with equalization objectives; (ii) greater autonomy (unconditional grants) for the LGs in selecting investments that address their locally determined priorities without having to obtain prior consent and oversight by the center; (iii) the introduction of a performance-based element into the unconditional/conditional grant that rewards LGs that meet a set of selected performance standards; and (iv) directed/conditional grants that address national priorities and/or the specific requirements that would accompany delegation of such sectors as health and education. e. Own-source revenue collection, can be strengthened in parallel, through a number of reforms, as follows: (i) leveraging technology such as the use of GIS-based technology to improve coverage and mapping of tax bases; (ii) separating tax/revenue assessment from tax/revenue collection, such that the staff/units which identify taxpayers are different from the staff/units that actually collect taxes/revenues, thus reducing incentives and opportunities for collusion and capture; (iii) relying to a large extent on local collection officials, as national tax collection officials may know a lot less about local property (and property owners) and local businesses than do their local government counterparts; (v) updating tax assessments regularly, so as to cover new taxpayers or taxpayers who have graduated to a higher tax or revenue band; (vi) automating billing systems. BOX 12. GIS-BASED PROPERTY TAX SYSTEMS IN TANZANIA Introduction of modern technology for mass valuation of properties has proved effective in some countries. In 2014, Arusha City Council in Tanzania changed from a manually administered own-source revenue system to a modern Local Government Revenue Collection Information System (LGRCIS) integrated with a geographic information system (or a GIS platform). The new system allows urban local governments to use satellite data to identify taxpayers’ properties and includes an electronic invoicing system that notifies and tracks payments. This new method identified more than 102,000 buildings, a 53 huge increase from the 23,000 of the old system. In the first 15 months after the introduction of the new system, the number of eligible taxpayers more than tripled, from 31,160 to 104,629. Within one year, the city council boosted annual revenues by 75 percent. The LGCRIS has since been piloted in six other cities and has contributed an average of 30 percent growth in own source revenues for the seven cities in the first year of operation. Due to its demonstrable potential to reduce government’s fiscal pressures and to encourage local governments to be less reliant on central transfers for service delivery, the Government of Tanzania is now rolling out LGRCIS to all Urban Local Government Authorities. Source: CMI (2017). BOX 13. THE REFORM OF AN EQUALIZATION GRANT AND OPERATING GRANT IN SENEGAL The Local Governments Capital Development Fund (FECL), represents the principal modality through which the central government transfers investment resources directly to local governments. To provide local governments with the necessary resources to bridge investment gaps and effectively provide local services, the Government of Senegal has prioritized the reform of the FECL. The reform of the FECL incorporates two critical dimensions. First, the reform seeks to restructure the FECL modality into separate windows to enable allocations to be aligned with different objectives (the introduction of a performance-based grant system, the limitation of allocations to institutions other than LGs). Second, the reform proposes measurable and objective criteria to redress existing imbalances in the allocation of investment resources per capita across the territory and to prioritize financing for poor, rural LGs. Simulations indicate that LGs with the highest concentration of poverty and rurality will benefit from seven times more resources in the unconditional capital grant window than the wealthier LGs. The Decentralization Allocation Fund (FDD) channels central government transfers for recurrent expenditures to LGs. The reform of the FDD focuses principally on the optimal distribution of resources differentiated to: (i) the needs of different LGs and (ii) the challenge of supporting payroll costs of local public administrators (which are currently not covered by the FDD). Niger requires investments in infrastructure to accommodate its growing urban population. These should be coordinated across sectors, and in accordance with land use and regulation. This is important as urban investments are expensive and depreciate slowly; and their values are inter-dependent. For example, a house is more valuable if it has piped water on premises and a school nearby.83 Accordingly, it is urgent for Niger to clarify land rights and the systems for allocating land. This can be done simultaneously with mapping the tax base and would serve to update the land use plan, which is one the objectives of the National Social and Economic Plan 2017-2021.84 Its effective implementation in urban areas 83 Lall et al. (2017). 84 Ministère du Plan (2017). 54 will require strengthening capacity and resources dedicated to urban planning at both central and local levels. But Niger’s landscape varies spatially. Accordingly, policy and investment priorities should be different.85 These should be designed and adapted to the local challenges so as to remove place-specific binding constraints. In 2018, the desert regions of Agadez and Diffa which account for respectively 50 and 13 percent of the country land mass, were home to only 3 and 4 percent of the population.86 In these sparsely populated areas, investment in access to basic services will have the most impact on spatial equity and should be prioritized. In these areas, considering alternative technologies for service provision (e.g. solar panels, mobile clinics, etc.) that are not dependent on scale economies for achieving efficiency is critical. In the South where population density is higher, leveling the playing field through clear land rights, and improving access to services and should be complemented by investments in connective infrastructure to broaden economic opportunities for the region. Connecting communes in the South will provide larger markets for workers and firms. Unlike large cities, border towns are often overlooked, despite their importance as a whole (Figure 3.2). Clarifying land rights and strengthening regulation in the transport sector will increase the potential benefits of transport investments and their redistribution along the corridor. In addition to improving the road network, border delays due to hassles would increase the potential markets accessible from and to border towns.87 For example, the border between Nigeria and Niger is particularly favorable for cross-border flows, due to the large network of cities and markets located on both sides. In Niamey where the population is projected to exceed 1.2 million people by 2020, which would be equivalent to almost 5.5 times the size of the country’s second largest city, interventions should be more ambitious in order to provide an environment conducive to economic activities and thus to employment and economic growth. Larger cities provide opportunities for economic development that do not exist in rural or small cities. Niamey’s higher population density provides the basis for agglomeration economies – but seizing and maximizing the opportunities for agglomeration economies requires further action. When the basics are in place, Niamey should foresee planning for urban expansion that allocates land for future housing, roads, and services, the provision of strategic infrastructure (for transport, for communications, etc.), other key services (e.g. waste management, electricity, water) to support job creation in the tradable sector. Priorities should also be different in border communities, which are hosting forcibly displaced people (refugees or internally displaced) to ensure no one is excluded. Clarifying land tenure, improving access to services and connective infrastructure, as well as more targeted interventions to promote social cohesion will be needed. In that regard, it is essential that the priority interventions be informed by the key local stresses and the stakeholders involved. Coordination between affected communes will be essential to ensure 85 World Bank (2009). 86 INS (2018). 87 OECD/SWAC (2019). 55 regional stability and exploit possible positive economic and social externalities such as those achieved by coordination of service provision or infrastructure investments. In general, investments should be accompanied by complementary interventions removing local economic development constraints such as strengthening land market regulations and improving access to quality services. When constraints are multiple, addressing one will not be enough to maximize expected returns and deliver on social promises. Getting the demographic dividend right – and its economic benefits – is about better skills and better urban policy enabling economic transformation. Specific attention should be paid to improving access to education, and to improving its quality, in particular for girls. Policies should therefore focus on i) continuing investments in family planning programs, which can accelerate demographic transition if economic transition remains slow; ii) increasing the quality of education through new technologies; iii) increasing the return to education through better employment opportunities for educated women; and iv) reducing discrimination on the labor market and promote social mobility based on merit instead of social class or gender. Policies should focus on strengthening urban land institutions and planning; improving municipal finances; investing in infrastructure’ and in coordinating across sectors, and with land use policies. This will require improving coordination across level of governments. Endowing people with better education and health and clarifying land rights will remove some of the barriers to mobility and ensure that people are contributing to urban economies. Improved municipal finances are key to enable local governments to better plan and implement. Given the extensive analysis and related reforms elaborated above, and taking into account institutional and fiscal constraints and limited human resource capacity, it is recommended that a program to support the process of urbanization in Niger be prioritized as follows: Priority I: Niger has already taken a critical first step by implementing key actions that are fundamental to underpin the process of urbanization: They have enacted legislation that creates the institutional and fiscal framework necessary for urban areas to undertake programs that invest in essential local services. The priority now is to make this system operational by selecting 4 or 5 urban local governments (ULGs) that are considered to have higher capabilities and that comprise a reasonable population base, and take the following actions: • Launch the operation of the fiscal framework established under the decentralization law that provides for an annual transfer of funds to the ULGs, ensuring that the distribution of these funds between each ULG is based on objective and transparent criteria. Make sure that the transfer is predictable by assigning an indicative three- year allocation envelope that facilitates multi-year investment planning to ensure effective priority setting and improved efficiency in investment implementation. A key element to this investment planning would be the adoption of systems designed to include citizen participation in investment decision-making and in ULG reporting systems that allow for upward and downward accountability • Introduce, as a part of the annual allocation, a performance assessment (PA) system that mediates the amount of the eligible transfer to which each UG is entitled by measuring the extent to which each participating ULG has achieved certain indicators. 56 The PA thus serves as an incentive to ULGs to improve their performance while also providing the government with a tool to both determine the “health” of the sector and monitor effective use of public funds. • Limit the menu of investments, perhaps by introducing a positive list of eligible expenditures, in order to: (i) maximize impact on the ground (including the selection of investments that are relatively simple to execute, both institutionally and functionally, such as local roads, local drains, solid waste, street lights); (ii) enable the ULGs to focus their efforts given the limited expertise available; and (iii) avoid getting caught up in unresolved assignment decisions between central agencies and the ULGs (this issue is important, but will take time and should be examined under the second Priority) • Introduce, early on, a system of capacity support at both national and local levels that draws on international experience and that includes key elements that: (i) are in place from program outset to assist with planning the first investment cycle; (ii) are demand- driven and are designed to respond “just-in-time” to ULG demand; and (iii) are primarily delivered “on-the-job” over short interventions. • Key to this Priority would be creating the fiscal space (eg supported by the World Bank) to ensure that the funds were sufficient to: (i) serve as an incentive to the ULGs to strengthen their performance; (ii) have a clear and credible impact on the ground that the citizens Priority II: The focus of Priority II would be centered on scale-up and would address the following: • Establishment of a monitoring system of key facets of program implementation in order to make adjustments to program design in the light of experience. The adjustments would be made to better serve a broader cross-section of ULGs to facilitate scale-up. One potential basis for selecting monitoring criteria so that it could be calibrated to improve the functioning of the program. While the PA would be one source of useful information, broader factors would have to be taken into account and one potential basis for selecting appropriate criteria could be development linked indicators in the context of a Bank-supported operation. • Under Priority I, pilot an initiative to introduce a “rapid response” approach geared towards providing accommodation for the influx of urban migrants – a form of “sites and services” to lay down infrastructure ahead of growth of urban settlements. This would also open the door, on a modest, bottoms-up approach to addressing land management issues (see Priority III) • Support the preparation of road maps by the selected central sectoral agencies to develop a decentralization program addressing the respective roles of the central agencies and the ULGs and the flow of funds to. Preparation of the road maps could be accompanied by a re-assessment of the sequencing of their roll out, including the reconsideration of which sectors might comprise the first batch to be implemented. Priority III: There are several key broader policy issues that have to be addressed in order to achieve essential efficiencies in the urban economy and to ensure sustainability. While ideally these would be initiated at the outset of the program, in order for them to have traction, local capacities need to be developed and demonstrated before serious analysis and dialogue could be expected. 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