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Select Economic and Financial Indicators2014201520162017e2018f
Real GDP (% change)6.42.14.05.46.0
GDP (USD bn)9.78.38.69.410.6
Inflation (average)-1.10.3-0.80.22.1
Fiscal Balance (% GDP)-2.3-7.6-5.9-6.1-4.0
Broad Money (% change, end period)16.77.9-2.67.611.7
Population (mn)10.310.610.911.211.5
Exports (USD bn)1.51.31.41.72.0
Imports (USD bn)3.02.42.42.93.2
Current Account Balance (% GDP)-8.6-8.4-7.2-8.7-7.1
FX Reserves (USD bn, end period)0.10.70.60.20.0
Exchange Rate (average)496.08594.27600.68588.92565.09
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic outlook

Economic outlook

Real GDP: The macroeconomic outlook for 2018 is positive with growth likely to reach the high single digits, after rebounding from 2.1% in 2015 to above 5% in 2017. This is despite still-weak economic activity and expected low medium-term growth levels in neighbouring Nigeria (Benin’s dominant trade partner). Growth in Benin will be driven by improved agricultural production and tourism; both sectors have been targeted for public investment through the 2016-2021 Government Action Plan (GAP), which aims to foster structural transformation to reduce Benin’s dependence on Nigeria, and implement fiscal reforms.

Inflation: is projected to rebound to around 2% in 2018 – assuming no significant global oil price shock or food security issues – which is below the Union Economique et Monétaire Ouest-Africaine (UEMOA) convergence criterion of 3%. The rate increase will be partly due to food price increases. Nonetheless, an expected strengthening bias of the EUR in 2018 (and hence the XOF given the pegged exchange rate) will help to keep price pressures down.

Fiscal balance: The fiscal balance is expected to narrow in 2018, owing to fiscal reforms to be made as part of GAP, supported by the IMF – Benin secured a three-year, USD34.5mn Extended Credit Facility from the IMF in April 2017. This follows the widening of the budget deficit in 2017, amid increased government spending on GAP against a background of weak revenues resulting from the economic malaise in Nigeria (around 80% of Benin’s imports are informally re-exported to Nigeria).

Current account: is expected to remain wide in 2018 owing to a rise in investment-related imports, still-weak re-export performance related to Nigeria’s relative weakness, and potential strengthening of oil prices over the year, which would raise the cost of fuel imports.

Risks

Exposure to fluctuations in Nigeria’s economy is a key, continuing risk over the outlook period. The high level of non-performing loans in the banking sector since 2009 is another concern, which has reduced commercial bank credit to the private sector that will act as a drag on growth. Failure to implement reforms intended to boost economic activity would also undermine growth prospects. Finally, weather related disruptions to the agricultural sector continue to pose a risk given the dependency on rain fall for production.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange rate structure

RegimeFixed
TargetXOF655.957 to EUR1
Type of interventionVia Central Bank
Convertible currency?Partial
Market participantsCorporates (40%); Small and medium enterprises (30%); Interbank (10%)
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FX

FX ProductsSpotForwardsNon-deliverable ForwardsOptionsSwaps
On offerYesYesNoNoYes
Daily trading volume (USD mn)n/an/an/an/a
Average trade size (USD mn)
Average spread
Trading hoursLimitedLimitedLimited
Settlement cycleT+23 Days to 6 months7 Days to 30 Days
FX Market StructureBCEAO’s exchange regime is free of restrictions on payments and transfers for current international transactions, apart from restrictions maintaned for security.
Non-resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowForeign investments or personal offshore account funded from their local accounts are restricted by our regulationRestrictionsn/a
Financial flow
Resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowImports or exports require authorization required by the Ministry of Finance on the documentation, the type of product, the limit of amount on Cash FX transaction etc.Restrictionsn/a
Financial flow
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FI

Primary MarketTreasury billsTreasury notesTreasury bondsCentral Bank billsOMOs
IssuerGovernmentn/aGovernmentCentral bank
End useGovernment financingGovernment & infrastructure financingn/a
Maturity structure7-days to 2-years3- to 10-yrs
CouponZeroFixed
Coupon paymentsn/aAnnual
Secondary Market 
Daily trading volumeUSD 2 mnn/a
Average trade sizeUSD 0.1 mn
Settlement cycleT+0 (Intra-country); T+2 (Inter-country)
Ecobank local affiliate contact details:
Ecobank Bénin, Rue du Gouverneur Bayol, Cotonou
Tel: +229 21 31 30 69 / 40 23
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FI primary market information

FI primary market information

Benin Debt2014201520162017e2018f
Government debt (% GDP)30.542.450.355.656.1
 Sub-Sahara average44.351.554.754.854.8
External debt (official creditors, % GDP)19.821.322.726.327.1
Sub-Sahara average25.429.531.333.033.4
External public debt stock (USD bn)1.91.82.02.32.6
Share of total sub-Sahara debt (%)0.80.70.70.70.7
Source: IMF; Ecobank Research

Commodity and trade information

Commodity and trade information

Hydrocarbon & mineral production

Benin has a small gold mining sector, dominated by artisanal producers, with estimated output of 11 tonnes per year. The country is a moderate producer of cement, with output of 1.4mn tonnes per year, most of which is exported. Benin also has unexploited reserves of iron ore and phosphates.

Benin is believed to hold modest reserves of oil. Benin used to produce crude oil from offshore fields, with output peaking at 8,000 bpd in 1986, but output declined in the 1990s and ceased altogether in 2004. Efforts to restart the Seme Oil field in 2014/15 by Nigerian independent, South Atlantic Petroleum, met with significant challenges and were suspended. However, the government hopes to resume production on the field in the future. Although one of the smallest countries in West Africa, Benin consumed an estimated 771mn tonnes of petroleum products in 2016, all of which were imported. Benin imported an estimated US$343mn worth of petroleum products in 2016, of which it re-exported around US$13mn to neighbouring countries.

Soft commodity production

Benin is West Africa’s third-largest cotton producer, with estimated output of 150,000 tonnes of cotton lint in 2016/17. Cotton production has increased since the government take-over of the sector in 2011/12, despite periodic disputes with private ginners and cotton fibre quality issues. Increased planting and good weather are expected to drive a further rise in output in 2017/18. Benin is a significant producer of cashew nuts (110,000 tonnes in 2017), most of which are exported raw to world markets. The country also produced an estimated 151,000 tonnes of milled rice in 2016.

Trade flows

Imports

Benin’s import totalled US$2.6bn in 2016. The largest imports are food, including cereals & flour (worth US$817mn in 2016), poultry (US$167mn), fish (US$116mn) and palm oil (US$76mn), of which a large proportion is exported via informal channels to Nigeria. Rice imports have surged from an average of 977,000 tonnes per year in 2015 to 1.5 mn tonnes in 2016. This reflects the tightening of Nigeria’s rice import regime in a bid to protect Nigeria’s domestic rice producers, which has led to a trebling of rice imports through the port of Cotonou (mostly comprising the parboiled variety preferred in Nigeria) which cross the border illegally into Nigeria. The majority of Benin’s other imports of fuel, capital goods and consumer goods are re-exported to other countries in the region, predominantly to Nigeria. These imports include petroleum products from the Netherlands, Angola, Belgium and Togo (worth US$473mn in 2016), machinery & vehicles (US$307mn), iron & steel (US$82mn) and pharmaceuticals (US$82mn).

Exports

Benin’s exports totalled US$410mn in 2016, 34% lower than the previous year. Cotton remains Benin’s most valuable export, worth US$187mn in 2016, most of which was exported to India, Malaysia, Bangladesh and China for spinning and textile manufacture. Benin also exported cashew nuts (worth US$55mn), the majority of which went to India for processing. The country also exports modest quantities of gold, worth US$18mn in 2016, and re-exports of iron & steel (US$21mn). Like Togo, Benin is a major re-export hub, serving as a key informal conduit for capital and consumer goods going into and out of its eastern neighbour, Nigeria; as a result, a large proportion of its trade flows is not captured by official data.

  • Flag
  • Population
    11,485,674
  • Area
    114,763 km2
  • Capital
    Porto-Novo
  • Largest city
    Cotonou
  • Official language
    French
  • Major languages
    Fon, Yoruba
  • Currency
    West African CFA Franc (XOF)

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