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When Nigeria sneezes, Benin catches a cold

By Vincent Duhem for Jeune Afrique
Posted on Thursday, 6 April 2017 15:12

It is a scorching December midday, and Solange is extremely bored. Sitting on a white plastic chair in front of one of her four shops, she is yet to serve a single customer. Her boutique is ideally located, nonetheless, by the main road at the Seme border post, the main entry point from Benin into Nigeria.

For centuries, Seme – a border settlement where bank robberies are part of the daily routine – has been the symbol of strong economic links between the two countries. But since 20 June 2016, when Nigeria’s central bank decided to devalue the naira, there have been a different set of problems in Seme.

Before the devaluation, one naira was worth 2.9 CFA francs ($0.005), but now it is less than 2 CFA francs at the official rate. “We used to make at least 1m CFA francs a day, but these days we sometimes don’t sell anything,” complains Solange, dressed in an emerald-green tunic. Passing in front of her are several jam-packed Peugeot 404s with bags of rice and cement on their roofs, heading towards Nigeria’s economic capital, Lagos. A police car stops and the officers buy bottles of water – which are warm because the refrigerator is not working that day. They are her first customers of the day.

A few minutes later, a Nigerian climbs off a scooter. Like his countrymen, he has stopped to stock up – mainly on alcohol – before crossing the border. The negotiations are in English, and the buyer pays in naira, about N60,000 ($193).

Solange is still not happy. “­Nigerians no longer want to pay us in CFA francs. The problem is that we risk losing money if their currency declines further,” she says. “I’ve lost 24m CFA francs in three months simply due to the exchange rate.” It is a difficult environment, which stretches to the markets of Coton­ou. “The decline in the naira’s value has dramatically changed the economic landscape because Nigerians are less interested in buying goods from Benin,” says a French businessman.

Benin’s government says that trade between the two countries has been cut in half. The immediate consequences on the economy are, however, difficult to quantify because much of the trade between the two neighbours is conducted ­informally. For example, smuggled fuel called kpayo (‘unoriginal’ in the Goun language), is illegally imported from Nigeria, where the fuel is highly subsidised.

According to data from the ­International Monetary Fund and the World Bank, trade with Nig­eria – which has also weakened due to the drop in oil prices – makes up about 14% of ­Benin’s tax receipts. A large number of consumer goods imported via Cotonou are usually re-­exported to Nigeria and its market of some 180 million people.

Boom and bust

Like ‘Chicken King’ Sébastien Ajavon, thousands of Beninese businessmen have made their fortunes this way. But Ajavon’s earnings have decreased by more than 70% since the beginning of the crippling crisis facing the Nigerian economy.

While the negative impact of the devaluation is certainly being felt, the protectionist measures put in place by President ­Muhammadu Buhari’s government to restructure the economy have had little impact at home.

Buhari’s administration has banned the import of new and used vehicles by road since 1 January. Before that decision, arrivals of imported automobiles at the port of Cotonou port had already dropped by almost 70%. Previously, some 30,000 second-­hand cars arrived in the Beninese economic capital every month.

The situation has forced several thousand of the Lebanese traders – who control the sector – to leave. “From the port to the border, thousands of jobs are disappearing, not to mention the loss of Lebanese-­generated trade,” says a Beninese businessman.

No friends at the top

Finance Minister Romuald Wadagni and Planning Minister Abdoulaye Bio Tchané are crafting the government’s response. John Igué, a professor at the Université d’Abomey-Calavi, says that they are overwhelmed by the magnitude of the problem: “The relationship between the two countries depends on the relationship between their presidents,” he says. “[Former Beninese president] Thomas Boni Yayi was close to [former Nigerian president] Olusegun Obasanjo, who helped him in his rise to power. Obasanjo was Yayi’s biggest supporter in the sub-region during his first term. But, today, it seems Nigeria has not warmed up to the new [Beninese] president. Who are Patrice Talon’s allies in Nigeria?”

A Beninese public servant who took part in several inter-ministerial committee meetings on Benin-Nigeria relations argues: “Since day one, President Talon’s goal has been to bind Benin to Nigeria. There were even discussions to create a joint chamber of commerce, but we were caught off guard by the devaluation of the naira and everything changed.” Your Galaxy of Yachts Events in the field of yachting

The current crisis is forcing ­Benin to review its economic relations with its neighbour, and Patrice Talon’s government sees the solution in diversifying the economy. The government launched a series of measures in December 2016 through the Programme d’Action du Gouvernement. The main obstacle is that the projects in the programme cost 9trn CFA francs and most of them will not be completed before 2019.

From the April 2017 print edition

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