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NIAMEY, Sept 28 (Reuters) - Niger will reduce the cost of fuel at the pumps by about 7 percent next year as a result of China cutting the interest rate on a loan taken out to pay for the West African country's sole oil refinery, the oil minister said on state television.
The move will curb the threat of further social unrest in the West African state, where riots over fuel prices have cost at least two lives this year. There have also been several strikes by taxi drivers over the cost of locally produced fuel.
However, the price cut at the pumps will cost the government 14.5 billion CFA francs ($28.43 million) in lost revenue, Niger's trade minister said.
Niger started pumping oil late last year in a joint project with China, which provided a $980 million loan to help to fund the SORAZ refinery in Zinder, 700km east of the capital, Niamey.
China's Export-Import Bank agreed in July to cut the rate on the loan to 2 percent, paid back over 20 years, from a rate of Libor plus 3.1 percent over ten years.
Foumakoye Gado, Niger's oil minister, said late on Thursday that the rate cut will reduce production costs at SORAZ and "lead, in January 2013, to a 40 CFA franc reduction in the cost of fuel at the pump". The retail price is currently 579 CFA francs per litre.
Tax on oil-related products will be cut to 12 percent from 15 percent as part of the move, but Trade Minister Saley Saidou said: "The decision will cost the state 6.5 billion CFA in tax receipts and it will cost the refinery 8 billion CFA."
The refinery, which can produce 20,000 barrels of oil a day, is 60 percent owned by China's CNPC, with Niger owning the other 40 percent. ($1 = 510.0160 CFA francs) (Reporting by Abdoulaye Massalatchi; Writing by David Lewis; Editing by David Goodman)