Benin: Risk Assessment

Country Risk Rating

B Political and economic uncertainties and an occasionally difficult business environment can affect corporate payment behavior. Corporate default probability is appreciable.

Business Climate Rating

C The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.


  • One of the most stable democracies in Africa
  • Substantial financial support from donors (ODA, HIPC, and MDRI)
  • Strategic position (sea access point for landlocked countries)


  • Narrow export base (dependence on cotton price fluctuations)
  • Erratic electric supply
  • Shortcomings in governance (endemic corruption)
  • Impact on economy and tax revenues of internal economic and political decisions in Nigeria (33 times Benin's GDP)
  • Terrorist threat (Boko Haram) from neighboring Nigeria

Current Trends

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Growth dependent on agricultural production and economic conditions in Nigeria

Following a dip in 2015, growth is expected to continue to decline slightly in 2016. This should come from slower economic activity in Nigeria and lower cotton production partly related to the El Niño weather phenomenon. Cotton production, which dominate the large primary sector, should thereafter recover due to improved weather conditions and an expected rebound in world prices. Economic activity should also benefit from the diversification and modernization policies implemented as part of the strategic plan for revitalizing the sector. Manufacturing industry is also likely to see growth in line with agriculture production and the start-up of new facilities for processing food products. The tertiary sector should feel the benefits of the investments being made into the modernization of the port of Cotonou, helping to stimulate port and commercial activities.

Public investment projects are expected to continue and encourage the involvement of the private sector thanks to public-private partnerships. The objective is to eradicate poverty, which has worsened since 2011 according to the household survey of 2015, mainly through key projects in the areas of transport, energy, hydro-agriculture, tourism and healthcare. With the aim of making growth more inclusive, these programs include an infrastructure element to end the isolation of the more remote regions in particular with the construction of a railway line connecting the north of the country to the coast. Inflation is expected to rise in 2016 due to higher domestic food prices, following a poor harvest, and a slight depreciation of the CFA franc against the dollar.

Large twin deficits

The government found a significantly weakened fiscal situation when it took office in April 2016. The deficit widened sharply in 2015 owing to spending overruns, which continued in the first quarter of 2016 and resulted in large bond issuances in the regional financial market. Moreover, costly off-budget projects have been negotiated by the former administration at the end of 2015 and the beginning of 2016. The new government started discussions with the IMF on a possible three-year economic program supported by a Fund’s credit facility and obtained approval by the National Assembly of an amended finance bill for 2016 (with a 8% decrease in expenditures compared with the initial finance law). It was also able to suspend the majority of the off-budget projects, as they had not yet been implemented. Furthermore, the government initiated reforms to improve business environment and the management of public finances and is preparing a medium-term investment plan. Lower cotton production and prices as well as weaker re-exports to Nigeria should weigh on sales abroad in 2016, while a lower oil bill could offset still large capital goods imports and higher food imports. Rising remittances and aid should lead to a higher surplus in the balance of current transfers, thus limiting the impact of higher imports of transport services. The current account deficit is largely being financed by concessional loans and FDI inflows linked to the activity of infrastructure-related public-private partnerships.

A new democratic changeover

Supported by the opposition, the businessman Patrice Talon largely won the March 20th presidential run-off election against Lionel Zinsou, Prime minister and candidate of the outgoing president. This is the fourth democratic changeover in this country since 1991.

This victory occurred against the background of rising popular discontent over the lack of social progress and a series of corruption scandals. The newly-elected president has a strong legitimacy.

On the institutional front, one of the key measures he would like to see brought forward is the single presidential term. Thus, the Beninese will be called again to the polls before the end of 2016 to vote for or against a constitutional revision in this direction. The business climate remains marred by corruption, patronage, red tape and weak regulations. Despite the limited progress made in terms of cross-border trade, the World Bank’s “Doing Business” report ranks the country 158th out of 189 countries.


Coface (09/2016)