Benin Republic to reap from Nigeria’s growth in coming years
The recovery from economic recession of Nigeria, Africa’s biggest economy, may support growth rate of its neighbour trading partner, Benin republic in the preceding years ahead, according to S&P Global report.
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“We believe Benin’s economic activity will remain highly vulnerable to the economic development in Nigeria, its main trading partner.” the report noted.
“The economic slowdown in Nigeria between 2014 and 2016 had substantial spill overs on Benin’s economy and its external and fiscal policy. However, Nigeria’s recovery should support Benin’s real GDP growth in the coming years.”
The Republic of Benin as it is officially known is a small country in West Africa. It is bordered by Togo to the west, Nigeria to the east, and Burkina Faso and Niger to the north. The majority of its population lives on the small southern coastline.
The economy of Benin Republic relies heavily on its informal re-export and transit trade to Nigeria. The informal re-export and trading make up roughly 20 percent of Benin’s GDP.
“The economy of Benin republic is highly tied to the Nigerian economy. It serves as a transit port for goods coming into the country. A lot of goods consumed in Benin Republic are produced in Africa with majority of these goods originating from Nigeria,” Johnson Chukwu, CEO, Cowry Asset Management Limited told BuinessDay in a telephone chat.
“Nigeria serves as an export market for goods that transit through Benin republic and also as a source of import for a lot of locally made Africa goods. So Nigeria economic health situation is a major factor in the economic health of Benin republic,” Chukwu concluded.
The economic slowdown in Nigeria’s GDP from 6.3 percent in 2014 to a low of -1.6 percent by end-year 2016 had substantial spill overs on Benin’s economy as the tiny West Africa country saw a significant drop in its GDP from 6.4 percent in 2014 to 4.0 percent in 2016. However, with a 0.83 percent growth in 2017, Nigeria has succeeded in navigating the storm of the recession.
“Any improvement in the Nigerian economy will drive economic activities in Benin republic, hinged largely on trade,” Ayodeji Ebo, MD, Afrinvest Securities Limited said.
According to International Monetary Fund (IMF), Benin republic growth is estimated to grow steadily from 5.6 percent in 2017 to 6.0 percent in 2018. By 2019 and 2020, the Brettonwood institution projects growth to hit 6.3 percent and 6.7 percent respectively.
The economy of Benin remains underdeveloped and dependent on subsistence agriculture with cotton being a major agricultural product. Cotton accounts for 40 percent of GDP and roughly 80 percent of official export receipts. There is also production of textiles, palm products, and cocoa beans.
Recently, the authorities of Benin republic have implemented reforms to limit the economic dependency by implanting new tariffs to reduce incentives for re-export.
Benin’s dependence on agriculture makes its economy vulnerable to the volatilities of agricultural prices and adverse weather condition.
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