Strategies for Anchoring Beninese Economy to Nigeria in the Face of Currency Depreciation: Reflection by Olushegun Bakari

Full reflection of Olushegun Bakari which dates from 2016

ECONOMY

Bring Benin to Nigeria!

On June 20, the Central Bank of Nigeria introduced a free interbank foreign exchange market subject to the law of supply and demand.

This leads de facto to a sharp depreciation of the Nigerian currency. However, a weak naira is bad news for Benin, whose CFA franc is pegged to the euro and which, until now, has constantly positioned itself as a transit economy to Nigeria.

From now on, rice, oil and sugar imported via Benin are likely to cost much more than those produced in Nigeria. Similarly, used vehicles imported from Europe or America via the port of Cotonou will be less competitive. Customs and tax revenues, Benin’s main sources of revenue, could thus be under pressure for quite a long period.

We need to react quickly while being inventive. A direct neighbor of Nigeria, Benin is geographically closer to Lagos than Cameroon, Chad or Niger. Like Hong Kong for China, Singapore for Asia or Dubai for the Mediterranean area, it must exploit this strategic position. I am pleased to formulate here three strong measures intended to resolutely anchor the Beninese economy to that of Nigeria.

The first would consist in creating within Beninese territory a monetary, legal and fiscal enclave in which Nigerian businessmen could trade freely without exposing themselves to exchange rate risk and with, for certain activities, taxation aligned with that of Nigeria. Investors, especially Europeans, interested in the huge Nigerian market but cautious because of its complexity could pass through this enclave. The objective is clear: to position Benin as the main gateway to the West African giant and to continue to make the country an attractive outlet for Nigerian businessmen. The free industrial zone of Kraké, abandoned for years, could be used for this.

BENIN SHOULD MAKE ITS REGULATORY FRAMEWORK – PARTICULARLY REGARDING INVESTMENT – COME TOGETHER WITH THAT OF NIGERIA

Second measure: adapt our legal and regulatory system to that of Nigeria. As a former colony, Benin is a “civil law” jurisdiction of French inspiration. We share this legal framework within the Organization for the Harmonization of Business Law in Africa (Ohada).

This is a good thing, but strategically we should bring our regulatory framework – especially with regard to investment – ​​closer to that of our neighbour. For example, the law on public-private partnerships, currently being drafted in Benin, should draw inspiration from both the French and Nigerian corpuses.

Despite the current crisis, the Nigerian financial market is very large and largely liquid. This explains why more than 85% of the country’s public debt is domestic and in local currency. Nigerian investors are increasingly interested in French-speaking Africa. Benin should be able to capture part of this liquidity by highlighting its position as a gateway between the Ohada zone and the “Common Law” zone.

I dream of tomorrow seeing major infrastructure projects financed in Benin by Nigerian investors, as was largely the Henri-Konan-Bédié bridge in Abidjan.

Finally, I think we should make English the second official language of Benin and introduce systematic bilingualism from primary school. I can hear the cries of the sea from here. I am attached to French, but we must be pragmatic. Many Beninese speak Yoruba or Hausa, as in Nigeria. In ten years, more than 75% of an age group should be perfectly bilingual, in order to be able to work from Benin for Nigerian companies.

BENIN MUST CONSIDER ITSELF AS A NEW ECONOMY START-UP

Some will say that it is not possible, but the example of Rwanda in this area is instructive. Being able to converse with investors without an interpreter is important, and whether we like it or not, the language of business remains English.

Benin must consider itself a new economy start-up, like Facebook or LinkedIn. Its main asset now lies in the 700 km of land border it shares with Nigeria. Each of the connections that will be developed with the neighboring giant will be a plus for our economy. Succeeding in this bet requires long-term thinking, and this is what Benin’s next strategic plan should serve.