The German leader said the army of the arid west African country, one of the world's poorest, would receive €10 million worth of equipment next year.
Germany will also build a military base to back up the UN mission in neighbouring Mali, the first country she had visited on the whirlwind African tour.
Merkel also promised €17 million as development aid for Niger's arid and desperately impoverished Agadez region in the north in a bid to fight migration to Europe.
“What compensation can we offer to the people of Agadez to help them survive?” she said.
“While these people fight smugglers, illegal emigration, they need revenues. Earlier they lived off tourism and that is something they cannot do now,” she said.
Unrest in the region, including jihadist attacks and tourist kidnappings, have led to a sharp fall in the number of visitors.
She said efforts to stall the influx of migrants into Europe would be futile without development.
Niger is a key transit point for people from sub-Saharan Africa who try to cross the Mediterranean to enter Europe.
Since 2014 more than 10,000 migrants have lost their lives in the Mediterranean, according to UN figures.
Merkel has said that she wants the European Union and North African countries to do deals modelled on a controversial agreement with Turkey to curb migrant flows to Europe.
Under the EU-Turkey deal, Ankara agreed to take back migrants who made it to Greece in return for being allowed to send Syrians from its massive camps to the bloc in a more orderly redistribution programme.
The pact also pledges billions of euros in EU aid for Turkey and visa-free European travel for Turkish citizens.
Merkel will visit Ethiopia on the last leg of her trip.