By Abdoulaye Massalatchi

NIAMEY, Dec 3 (Reuters) - Landlocked Niger has secured $236 million from Islamic donors to build a long-awaited dam on the Niger river to provide hydro power and help grow food for the largely desert country, the government said.

Home to one of the world's poorest and fastest-growing populations, Niger stretches deep into the Sahara desert.

It suffers frequent hunger crises exacerbated by widespread poverty and desert encroachment onto traditional farmland, and its economy depends largely on uranium mined in the arid north by former colonial power France.

"Funding for building the Kandadji dam and associated projects has been secured," Prime Minister Seyni Oumarou said in a statement late on Sunday after returning from a meeting with donors in Jeddah, Saudi Arabia, last week organised by the Islamic Development Bank.

The government has been talking about building the Kandadji dam upstream from the capital Niamey for nearly four decades, but the Islamic donor funds should allow the first phase of the huge development project to begin in mid-2008.

The Niger river, crossing the extreme southwestern corner of the country on its way to Nigeria and the Atlantic, has a fertile flood plain ripe for irrigated agriculture and potential to reduce the country's huge dependence on imported electricity.

"Building the dam will allow us to solve at least three problems: firstly regenerating the natural environment, secondly improving food security through water-based agriculture or irrigation, and thirdly to provide electricity," Oumarou said.

However, the donor funding will cover barely a third of the projected 300 billion CFA franc ($670 million) cost of the broader Kandadji project, and Oumarou said the hydropower station itself would be financed through a public-private partnership.

He said a dozen potential investors had expressed interest in the project, which would reduce Niger's dependence on neighbouring Nigeria's National Electric Power Authority, from which it imports much of its electricity needs.

Niger's economy depends heavily on uranium mined in the north, where light-skinned Tuareg nomads have rebelled against government forces this year, killing dozens of soldiers. The government dismisses the rebels as drug traffickers and bandits.

The dam site at Kandadji around 180 km (110 miles) northwest of Niamey, near Niger's borders with Mali and Burkina Faso, has not been affected by the rebellion. (Writing by Alistair Thomson, editing by Myra MacDonald)

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