Niger didn’t get its first mining code until 1993, which put in place an unbalanced fiscal regime that gave substantial advantages to private companies (they were exempt from paying duties and taxes both during the initial exploration period and the actual extraction process). This 1993 Code led to a proliferation of mining projects carried out by multinational firms driven to get their hands on Niger’s massive quantities of uranium. Over the years, more than 160 exploration and exploitation licenses have since been given out. And today, the growing rush for Niger’s uranium poses a serious threat to the country’s agro-pastoral activities – a sector that a majority of Nigeriens depend on for their livelihoods.

Niger’s extractive industry holds the greatest economic growth potential for the country. Nonetheless, the benefits from this potential remain quite apart from the reality of Niger’s struggling economy. While Niger should be leveraging its mining resources on the basis of taxation, there is no coherent policy on local content or the development of the value chain from mining that would enable the economy to maximize its profits by diversifying the sources of income and employment.

Today, given the weakness of the country’s financial resources and the negative impact of mining on the environment and other economic activities (agriculture, livestock, fisheries), it is clear that the current royalty rate of 5.5% paid by multinationals is far below the optimal taxation level. The minimum amount that should be taxed is more in the vicinity of 15 to 20%. For instance, in Canada’s uranium-producing province of Saskatchewan and in Kazakhstan, where AREVA is producing uranium, the royalty rate is respectively 13% and 18.5%.

Why then does AREVA refuse to pay a fair rate to Niger?

In 2006, Niger revised its 1993 mining code and implemented a new set of fiscal and environmental obligations for all its mining activities. As part of the current AREVA negotiation – AREVA has been exploiting the country’s resources for the last 50 years – there is fierce opposition to this new law with AREVA citing lack of profitability of its investments. In reality, this argument holds little truth. According to Niger’s 2011 EITI report, mining production increased significantly between 2007 and 2010 while income paid by companies during this same period actually decreased by 25% – from 70.5 billion FCFA (in 2007) to 53 billion FCFA (in 2010). There are several explanations to account for this discrepancy, including distortion of the regulatory framework, weak state capacity, manipulation and lack of transparency, and lack of compliance by companies.

According to this 2011 EITI document, COMINAR and SOMAIR (two of AREVA’s Niger mining sites), reportedly paid the Niger government FCFA 33.8 billion in 2010 (approximately €51.8 million). If the optimal tax level (15% to 20%) was applied on the basis of the assumption of ceteris paribus (all else being equal), the two companies would pay – in 2014 – between about FCFA 92.6 billion and FCFA 123.5 billion. So Niger’s desire to raise its tax levy to 12%, in the current negotiations with AREVA, is more than justified. On this basis, Niger’s state should then receive – from COMINAR and SOMAIR alone – upwards of 74 billion FCFA (or €113 million) compared to the 33.8 billion FCFA they are currently receiving. Niger’s government would also benefit from streamlining the multiple tax exemptions and privileges it grants to all its mining companies.

AREVA has declared its consolidated turnover from 2013 is €9.303 bibillion while the Niger national budget amounts to approximately €1,900 million – merely a fifth the profits of the French multinational. Additionally, while AREVA’s business grew by 3.8% compared to 2012, Niger’s national budget has actually fallen by 11% compared to 2012. The country’s GDP is estimated at €5.279 million in 2012, which is far lower than the French nuclear giant’s own turnover. Quite ironically, Niger’s mining sector only contributes 5% to the Nigerien GDP. This simply illustrates that the current AREVA contract does not work in favor Niger.

The French nuclear giant has always had “˜special’ treatment on the basis of a 1968 partnership agreement between France and Niger – an agreement that has historically dictated the fiscal management of Niger’s uranium sector. For nearly half a century, Niger has been practically giving its uranium away to France. (This 50-year period also corresponds to the “˜uranium boom’ that took place in Niger in the 1970s.) Today, aside from increasing its tax rates, the State of Niger could also increase its revenues by reducing the multiple tax exemptions and privileges they currently grant to its mining companies – exemptions that could otherwise be invested in its people.

Dr. Ibrahima Aidara is Economic Governance Manager at OSIWA. This piece was also published on the OSIWA blog.