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Authors : Amour Gbaduidi Amoussou, Aristide Medenou et Moïse Lawin
Affiliated organization : American Journal of Economics
Type of publication : Article
Date of publication : 2021
Trade Exchange between Benin and Nigeria
The border between Benin and Nigeria induces a space whose dynamism varies according to the border segments between the two countries. This dynamism has induced in time a strong dependence of Benin on Nigeria in matters of petroleum and manufactured products, while the opposite is observed in the field of agricultural products. During the period from 1977 to 1990, Benin’s economy recorded formal imports from Nigeria far in excess of exports. This reflects a trade balance deficit between the two countries. In 1994, there was a break in the trend, with formal exports exceeding formal imports. Such a result is justified by the monetary policy of the WAEMU zone, which devalued the CFA franc in 1994. The economic recovery following the devaluation significantly increased exports of raw materials and manufactured goods, and the competitiveness of Beninese companies. This period of economic recovery is characterized by a high inflation rate in Benin.
71.09% of imports and 80,63% of exports were achieved in 2019, despite the unilateral closure of the borders on the Nigerian side. In addition, there was a permeability of 13,26% of imports and 41,66% of exports of goods. This shows that the capacity of Beninese products to infiltrate the Nigerian territory through formal channels in a closed border situation is higher than that of Nigerian products to infiltrate Benin
In 1999, the fall in world commodity prices led to a recession in the Nigerian economy, thus prompting a further devaluation of the Naira. Indeed, one Naira fell from 26.95 CFA francs per unit in 1998 to 6.66 CFA francs in 1999, which explains the considerable increase in Benin’s imports from Nigeria between 1999 and 2001. During the period 2008-2011, there was a significant variation in exports. This increase is the result of the 2008 financial crisis and the depreciation of the CFA franc in 2009. Indeed, from 447.8 CFA francs in 2008, 1$ rose to 472.2 CFA francs in 2009. It should be noted that this variability of the currency has led to a loss of competitiveness of Benin compared to other countries whose currencies have a good performance against the dollar, especially Nigeria. Moreover, formal trade between Benin and Nige- ria has declined since 2019 with the closure of the borders between the two countries and the advent of the COVID-19 pandemic.
Permeability Result
n order evaluate the effect of the closure between Benin and Nigeria we have consider two scenarios: Scenario 1 (Borders between Benin and Nigeria were not closed thru 2019) and scenario 2 (Borders between Benin and Nigeria were closed in 2019). The trade results in scenario 2 are not estimated because the real values exist.
If the land borders of Nigeria were not closed (scenario 1) in 2019, formal import would be 37.25 billion CFA francs 41.71 for formal export. Then the correspondent trade balance is equal to 4.46 37.25 billion CFA francs for scenario 1. On the other hand, we note the closure of the borders of Nigeria (scenario 2) increased the trade balance by 62.64% compared to the free trade defined in scenario 1.
71.09% of imports and 80,63% of exports were achieved in 2019, despite the unilateral closure of the borders on the Nigerian side. In addition, there was a permeability of 13,26% of imports and 41,66% of exports of goods. This shows that the capacity of Beninese products to infiltrate the Nigerian territory through formal channels in a closed border situation is higher than that of Nigerian products to infiltrate Benin.