1.3.2 Financial Sector Development
Niger is a member of the Economic and Monetary Union of the
West Africa (WAEMU) which comprise of 8 former French colonies in West Africa.
The Central Bank of the States of West Africa, known as Banque Centrale des
Etats de l'Afrique de l'Ouest (BCEAO) in French which was established in 1962
is responsible for both the
management of the monetary policies, regulating and
supervising the banking services of the member countries. The financial sector
of Niger is relatively underdeveloped. The sector includes the central bank,
ten commercial banks; the national fund of social security system; five
insurance companies; three brokerage firms and about 270 microfinance
institutions MFIs; Monograph of BCEAO (2004). Among the WAEMU member countries,
Niger's ratio of broad money to GDP and deposit to GDP is the lowest. Based on
this, it is safe to conclude that the financial intermediation in Niger is
still very low. Total assets of the financial system at the end of 2005 stood
at about 373 billion CFA francs, representing 21% of the GDP. The banking
sector dominates the financial system with total assets accounting for about
63% where as the non financial sector accounted for about 29% with the
insurance sector accounting for about 5.3% and the microfinance institutions
accounting for about 2.7%; WAEMU (2005). The financial sector suffered serious
difficulties in the late 80s and 90s. Banks, security funds and microfinance
institutions went through severe financial crisis. Additionally, long period of
political and economic instability and sluggish economic growth are factors
that contributed to this financial crisis. Other factors that affected the
sector include the inefficiency of the judiciary, poor financial sector
policies, including supervision, lax banking, the rigidity of the structure of
interest rates and sectoral allocation of credit; WAEMU (2003). Mismanagement,
subsidized loans (especially in the late 70s and the 80s) and budget deficits
also contributed to the failure of the financial institutions.
1.4 Disposition
The study is structured in four parts; the first chapter is an
introduction focusing on the motivation, the scope and a brief history of
Niger's economic growth and financial sectors. The second chapter is an
overview of theories concerning financial development and economic growth. The
third chapter is the description of data, variables, and results of empirical
validation. The final chapter is the conclusion and policy implication of
findings of the study.
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