Niger officially became an oil producer Monday with the opening of a refinery run by the state and a Chinese company.

Niger's President Mahamadou Issoufou and China National Petroleum Corporation boss Jiang Jiemin cut the red ribbon at the new plant at Olelewa in the east, near the country's second city Zinder.

"Niger has entered the era of oil production," Issoufou said as he inaugurated the refinery decorated in the colours of the two countries.

"Niger, which has up to now imported its petrol, will become self-sufficient ... and then start exporting."

Energy Minister Foumakoye Gado said locally produced fuel will be sold at the pump starting Thursday at a price of 570 CFA francs (0.86 euro cents) per litre of petrol -- down from the current 679 CFA francs (1.02 euros).

The price of diesel will drop to 577 CFA francs from 655 CFA francs.

Long considered unprofitable by Western prospectors, the extraction of crude oil started in September in Agadem in the Niger desert, from where it is piped to Olelewa some 460 kilometres (290 miles) away for refining.

Niger expects to produce about 20,000 barrels of fuel a day, initially just for the local market.

Oil reserves in Niger, one of the world's poorest countries despite being a top uranium producer, are estimated at 480 million barrels.

The contract signed by then-president Mamadou Tandja in 2008, two years before he was deposed in a military coup, awards 40 percent of production to the government of Niger and 60 percent to the Chinese company.

Junta chief General Salou Djibo handed over power to Issoufou, an elected civilian president, in April.

Non-governmental bodies have asked Issoufou's government to review the contract, alleging a lack of transparency.

"The most important thing is that our oil resources benefit the people of Niger, especially the majority in the rural areas who need education, health care and roads," Issoufou said at the ceremony.

Since 2006, China has reinforced its economic ties with the former French colony, helping it tap its vast uranium wealth in the northern Agadez region.

Agadez is under threat from Al-Qaeda in the Islamic Maghreb (AQIM), which is holding four hostages abducted from a site there of French nuclear energy giant Areva in September last year.