Journal Issue


International Monetary Fund
Published Date:
October 1996
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I. Production, Income, and Prices

1. Introduction

The Republic of Benin is a relatively small West African country of 112,622 square kilometers, bordered by Nigeria on the east, Niger and Burkina Faso on the north, Togo on the west, and coastal waters leading to the Atlantic Ocean on the south. With a population of 5.5 million at the end of 1994 and a per capita gross domestic product (GDP) estimated at slightly above US$400, Benin remains among the poorest countries in the world. Its small open economy is based mainly on agricultural production (cotton, palm products, and food crops), regional trade, and some manufacturing. Agriculture accounts for 25 percent of GDP and generates more than 70 percent of the country’s domestic earnings. Agricultural export crops comprise essentially cotton and palm products, while food crops include maize, cassava, and yams. Under normal weather conditions, agricultural food production has been sufficient to meet domestic needs and, at times, has even generated surpluses. With almost 46 percent of GDP, the tertiary sector, excluding public administration, is second in importance and consists mainly of commercial and transport activities. The commercial sector is particularly active, with a considerable transit trade between Benin and its neighbors, especially Nigeria. Finally, a modest industrial sector (9.5 percent of GDP) produces mainly consumer goods (beverages, soaps, cement, and textiles), while a small oil field has been operating since 1983 with annual production fluctuating around 1 million barrels during the last five years.

From the mid-1980s until January 1994, Benin’s economy was adversely affected by the appreciation of the CFA franc It has also been vulnerable to developments in neighboring countries, especially Nigeria, with which it has an important re-export trade in consumer goods.

2. Recent overall developments, 1989-95

Before launching structural reforms and adjustment policies in the late 1980s, Benin had, for a decade, experienced economic stagnation and a deterioration of its financial situation, with a large accumulation of domestic and external arrears, widespread financial difficulties of public enterprises, and ultimately, a collapse of the banking system. The implementation of the adjustment process with Fund assistance in 1989 brought about a substantial improvement in the country’s economic performance. During the period 1989-93, the public finance situation strengthened significantly, the overall balance of payments shifted into a surplus position, and economic growth resumed, attaining an annual average of 4 percent. The public enterprise sector was restructured, with a large number of enterprises privatized, reorganized, or liquidated. The banking system was completely reorganized with the entry into operation of new banks; a comprehensive tax reform was introduced, with the institution of the value-added tax (VAT) and simplified taxation of small businesses, and the civil service was streamlined with a voluntary departure program.

During 1993-95, the reform strategy was further reinforced in the framework of a program supported under the enhanced structural adjustment facility (ESAF); it included additional improvements in tax administration and tax reforms, a reallocation of government expenditures toward the priority social sectors, and continued restructuring of the public enterprise sector. Public finances improved further, with the Government reducing its indebtedness to the Central Bank by about two thirds, while public investment rose considerably, mostly to improve infrastructure and social services (Charts 1 and 2).


Sources: Beninese authorities; and staff estimates.

1/ Total expenditure excluding interest obligations and foreign-financed capital outlays.


Sources: Beninese authorities; and staff estimates.

In 1994, the adjustment strategy was strengthened by the CFA franc devaluation, which bolstered Benin’s competitiveness. The devaluation resulted in a strong increase of competitiveness of the agricultural sector, and in particular of the cotton sector, with associated increases in production and tax revenues; manufacturing activity also increased; private investment, after a reduction in 1994, rose considerably in 1995, complementing higher public investment.

3. Production trends

During the period 1990-93, the Beninese economy recorded a sustained expansion, with real GDP growth averaging 3.8 percent annually (Annex V, Tables I and II). The average growth rate of the primary sector was 5.4 percent a year. The growth of the secondary sector was particularly strong (8 percent on annual average), stimulated by a rise in construction, reflecting higher public and private investment, and increased water and electricity supplies. In the services sector, major progress was made in domestic trade (4.3 percent annual average growth). At the same time, the value added of public administration declined by 2.6 percent a year on average, reflecting the streamlining of the civil service and the containment of primary public expenditure.

In 1994 real GDP growth equaled 4.3 percent, mainly on account of a surge in the export sector. The primary sector grew by 10.6 percent, reflecting a large increase in the production of cotton (277,000 tons compared with 161,600 a year before), stimulated by higher producer prices, and also higher production of foodstuffs. Value added in the secondary sector, excluding mining, rose by 3.7 percent, reflecting the shift of domestic demand toward domestic products, and the expansion in cotton processing.

In 1995, the acceleration of economic activity was widespread, and real growth reached 4.8 percent, despite a decline in agricultural production and value added, owing to excessive rains and flooding, which lowered cereal production. Cotton production declined by 5 percent to 265,000 tons, from the peak reached in 1993/94; however, the production of ginned cotton increased as the ginning capacity expanded. The manufacturing sector recorded a growth of about 5 percent, which was particularly strong in the textile sector; construction activity strengthened considerably (10 percent growth rate), as the public investment program accelerated, partly in connection with the francophone countries’ summit, and as private construction picked up. Value added in the tertiary sector, including indirect tax, rose by 7.7 percent, mainly reflecting higher import activity.

4. Consumption, investment, and saving

During 1990-93, economic growth was sustained by both domestic and external demand. Although the public primary expenditures were contained and civil servants’ wages were restrained, consumption rose by nearly 21 percent, reflecting a sharp upturn in private consumption (from 81.3 percent of GDP in 1990 to 83.3 percent in 1993) (Annex V, Tables III and IV). The investment ratio rose steadily, reaching about 15 percent in 1993, while private sector investment increased from 6 percent of GDP in 1990 to 7.8 percent in 1993. This increase reflected higher construction activity, and a growing involvement of private investors in the manufacturing sector. In this period, gross domestic savings peaked at 6 percent of GDP in 1991 and fluctuated from 5.5 percent of GDP in 1990 to 4.9 percent in 1993.

In 1994, a sharp drop in consumption followed the exchange rate realignment at the beginning of the year. As a ratio to GDP, consumption fell from 95 percent in 1993 to 90 percent in 1994, reflecting a substantial decline of purchasing power. The investment ratio declined only slightly to about 14.0 percent, as a decrease in private investment was offset by the rise in execution rate of public investment. Spurred by favorable international cotton prices and a strong increase in cotton production, exports in value terms almost doubled, and their contribution to GDP reached 19.8 percent as compared with 16 percent in 1993. Domestic savings almost doubled to the equivalent of 9.5 percent of GDP, and gross national savings also rose strongly.

In 1995, domestic demand strengthened considerably. Investment increased substantially, with public investment rising to about 7.6 percent of GDP, up from 6.7 percent in 1994; nongovernment investment also rose, reaching 9.1 percent of GDP. Private consumption is estimated to have grown by 18 percent in nominal terms, as disposable incomes benefited from the improved terms of trade.

5. Prices and wages

During 1990-93, consumer price inflation slowed down to 2.4 percent on an annual average (Annex V, Table XV). In the year to December 1993, inflation decreased to 0.5 percent. In 1994, as measured by the consumer price index, inflation rose markedly in the aftermath of devaluation. It stabilized from May and August, but accelerated again during the last four months of the year, reaching 38.5 percent on an annual average, and 54 percent on a year-on-year basis. This rise reflected, first, the impact of the devaluation, and as well as a pickup in domestic demand in the second half of the year, large price increases on Nigerian goods imported into Benin, and also emerging pressures on Benin’s productive capacity following a shift in demand toward domestically produced goods.

In 1995, the price level stabilized, partly because of the favorable agricultural crop at end-1994. In the 12 months to December, the rise in the consumer price index was limited to 3.1 percent.

Wage increases were very modest in the period 1990-93. In May 1994 the minimum wage was increased by 44 percent; wage increases in the private sector were however much more limited, reportedly in the range of 10-15 percent. In the civil service, in 1994, the base wage was increased by 10 percent; this was accompanied by the re-establishment of the housing allowance, suspended in 1988, and the payment of promotions linked to the 1988 advancements, with an increase in average salaries of about 20 percent.

II. Public Finance

1. Overall fiscal performance 1/

During the period 1989-95, the Government’s financial position improved markedly in the context of the adjustment program launched in 1989. The budget deficit, on a cash basis, narrowed from the equivalent of 13.5 percent of GDP in 1989 to 7.3 percent in 1995 (Annex V, Table XVII), despite an increase in the investment-to-GDP ratio by about 2 percent. The primary balance of the budget shifted from a deficit representing 2 percent of GDP in 1989 to a surplus of 2.2 percent. This protracted adjustment effort put Benin’s public finance on a sustainable path, as shown by a significant decline in the debt service-to-fiscal revenue ratio 2/ from about 30 percent to nearly 16 percent. This fiscal consolidation did not hamper a sustained growth of the economy which, as already indicated, averaged 4 percent during the period under review.

The adjustment program emphasized the improvement of revenue collection efforts together with the broadening of the tax base, instead of a strategy of reduction in expenditures. In 1995, total revenue reached close to 14½ percent of GDP, up from 9½ percent in 1989. Meanwhile, the expansion of current expenditure, excluding interest obligations, was moderate, so that its share in GDP remained at about 11 percent.

During 1989-95, Benin enjoyed very large external budgetary support, including debt relief, averaging the equivalent of about 10 percent of GDP. With the improvement in the Government’s financial position and external financial assistance, the Beninese authorities were able to begin eliminating the large stock of identified domestic payments arrears that had been accumulated in the 1980s and to sharply reduce the Government’s indebtedness vis-à-vis the banking system.

2. Fiscal developments in 1994-95

After the sharp improvement of the Government’s financial position initiated in 1989, fiscal consolidation slowed somewhat in 1994 and 1995, in the aftermath of the devaluation of the CFA franc, as the investment effort was strengthened and outlays for health and education were boosted. The primary surplus remained at about 2 percent of GDP in 1993-95 while the overall deficit, on a commitment basis, increased from the equivalent of 4.7 percent of GDP to 7 percent, mainly on account of an increase in externally financed investments.

In 1994-95, the revenue-to-GDP ratio increased by nearly 1.5 percentage points to 14.4 percent, 3/ boosted by the continued administrative improvement at the Customs and Tax Directorates, by the buoyancy of the tax base in the aftermath of the devaluation, and despite some tax reductions that were decided in early 1994 to alleviate the impact of the devaluation on the poorest segments of the population. Taxes on international trade, which accounted for about 50 percent of tax revenue and 5 percent of GDP in 1993, rose by 84 percent in 1994-95 (equivalent to 5.8 percent of GDP), but still represent 49 percent of revenue in spite of the sharp rise in the relative price of imports. Taxes on the cotton sector, which were negligible in the early 1990s, rose rapidly to reach the equivalent of 1.4 percent of GDP in 1994 and 2.3 percent in 1995, since producer prices were not increased as much as international prices, expressed in CFA francs. In 1994 and 1995, nontax revenue remained near 2 percent of GDP (2.5 percent in 1995). With the strengthening of the financial situation of major public enterprises, their contribution to the budget increased substantially.

Primary expenditure rose to the equivalent of 12.2 percent of GDP in 1995, from 10.4 percent in 1994, and 10.8 percent in 1993, despite a decline in the wage bill in relation to GDP (5.2 percent in 1995, 5.4 percent in 1994, and 6.3 percent in 1993). In 1994, the wage bill rose by 20.1 percent, owing to measures adopted to deal with the consequences of the devaluation. The package included the restoration of the housing allowance suspended in 1988 and a 10 percent increase in base pay, as well as payment of the promotion and grade advancements obtained up to 1988, the rise in allowances to personnel posted abroad, higher transportation allowances, and the reinstatement of the military draft. 4/ In 1995, the wage bill rose by 16 percent on account of an upward adjustment in social security contributions for the military, 5/ the increases in family and housing allowances, and the full-year impact of the 1994 adjustments.

The share of nonwage outlays in total expenditures continued to grow rapidly. Expenditure on materials and supplies increased significantly, from the equivalent of 2.5 percent of GDP in 1993 to 4.6 percent in 1995, reflecting an increasing emphasis on education and health expenditures. Capital expenditure rose from the equivalent of 4.7 percent of GDP in 1993 to 6.4 percent in 1994, and reached 7.6 percent in 1995. It is worth noting that the domestic contribution to the public investment plan almost tripled between 1993 and 1995.

3. Tax reforms

Reform measures introduced during 1989-95 for domestic taxes included the following: (a) for taxes on income and profit, the corporate profit tax rate was reduced from 48 percent to 38 percent (1990), the system of compulsory contribution to the National Investment Fund was rescinded (1991), and presumptive taxes at the import and wholesale levels were introduced for the operators of the informal sector (1991); (b) for taxes on domestic goods and services, in April 1991 a VAT with a single rate of 18 percent was introduced in replacement of various taxes on transactions. At end-1993, the VAT was extended virtually to all goods and services with the exception of locally produced cement; however, agriculture and financial sector activities are exempted from the VAT; (c) taxes on real estate property were simplified in 1994; (d) the taxation of imports for externally financed projects was modified in 1993; under the new system, all contracts have to be submitted, including all taxes; no outright tax exemption is granted, but contractors can obtain a tax credit from the Treasury instead of paying the indirect taxes due and obtaining a refund; and (e) the tax reform on wages and other incomes introduced at the beginning of 1996 reduced the number of rates and lowered the maximum rate to 40 percent.

To carry out these reforms successfully, accompanying administrative measures were taken in order to improve the efficiency of the Tax Directorate (Direction Générale des Impôts, DGI). They included the transfer in 1990 of all tax collection responsibilities to the DGI, an important reorganization of its services, the simplification of collection procedures, the introduction in 1991 of a new system under which the previous taxroll systems were replaced by direct filing by taxpayers, and the computerization of taxpayers’ files. Furthermore, in order to reduce fraud, a registry of major taxpayers was created in 1991, with a single identification number for all tax purposes, at the Tax and Customs Directorates. In 1993, a similar roster was completed for small businesses, in the context of preparatory work on a unified business tax (Taxe Professionelle Unique) and a unified real estate tax (Taxe Foncière Unique), enacted with the 1994 Budget Law. These new taxes aim at simplifying further the taxation system for the informal sector; they are based on the rental value of business premises, which are in turn assessed on the basis of turnover.

Regarding taxes on international trade, the action program for the Customs Directorate included measures aimed at improving the efficiency of the customs administration and control procedures in order to curtail fraud. Among these measures were a better control of duty exemptions and special customs regimes and an improved verification of customs documents. Specific revenue-enhancing measures introduced in 1991 included the following: (a) the simplification of the external tariff, which reduced the number of levies from 22 to 12; the single-rate VAT; the earmarked tax for the contribution to ECOWAS revenue (Prelèvement Communautaire de Solidarité, PCS), and the import duty (Droit Fiscal) ; (b) the change in the valuation of imports for the calculation of duties through the broadening of the base to 100 percent of the c.i.f. value of imports, and the adjustment of reference values. Additionally, there was a reduction in the number of products for which duties were calculated using reference values. With the 1994 budget law, the tariff was simplified further with the introduction of a four-rate schedule (5, 10, 15, and 20 percent), with a zero rate for re-export transactions, which replaces the previous structure with 12 different rates.

4. Domestic payments arrears

During the 1980s both wage and nonwage arrears were accumulated by the Government. Wage arrears were incurred because of: (i) delays in regularizing the position of newly recruited staff, whose wages for years were paid only through partial advances; (ii) delays in payments of salary adjustments connected to promotions; (iii) nonpayment of family allowances and indemnities in cases of death; and (iv) the nonpayment of three months of salaries in 1988. By end-1991, total wage arrears were estimated to be CFAF 9.2 billion.

Nonsalary arrears consisted mainly of: (i) housing rental obligations; (ii) debt to French hospitals for treatment of civil servants; (iii) contributions to international organizations; and (iv) purchases of material and services for investment.

An inventory of the stock of arrears was carried out in 1990-92, which led to an estimate of CFAF 32 billion for end-1992. This included wage arrears net of advances to personnel of CFAF 11.6 million, and nonwage arrears net of taxes due of CFAF 20.4 billion (excluding government arrears to the Central Bank). In mid-1992, it was decided that these arrears would be repaid over a six-year period, with a precise schedule for wage and nonwage arrears. Actual repayments of arrears amounted to CFAF 7.0 billion in 1992, CFAF 6.4 billion in 1993, CFAF 10 billion in 1994, and CFAF 5 billion in 1995. However, at end-1995, a new survey revealed that the actual stock of domestic arrears amounted to about CFAF 25 billion, taking into account additional obligations that were identified, mainly to the public hospitals and public utilities, and also obligations on account of past promotions and advancements toward individual civil servants that had not been identified in 1992. These arrears are to be paid in full in the period 1996-97.

III. Monetary Developments

1. Institutional framework

Benin is a member of the West African Economic and Monetary Union (WAEMU) and shares a common currency, the CFA franc, and the Central Bank, (BCEAO), with the other six member countries of the union. The CFA franc has been pegged to the French franc since 1948; the fixed parity was altered only once in January 1994 when the CFA franc was devalued from CFAF 50 = FF 1 to CFAF 100 = FF 1. 6/

While Benin accounts for only 8 percent of the union’s aggregate GDP and less than 8 percent of its broad money, it contributes roughly one fifth to the zone’s net foreign assets. By contrast, given the low recourse of the Beninese Government to bank credit and the commercial banks’ very prudent lending behavior in the aftermath of the banking crisis that shook the country in the late 1980s, Benin’s share in the zone’s net domestic assets is relatively low (4 percent). The high degree of liquidity of Beninese banks has increasingly been an important financing source for banks in other WAEMU countries via the regional interbank and money markets; it has also allowed them to absorb a large part of the stock of consolidated government bonds issued by Benin and the other WAEMU countries. 7/

The BCEAO, which has its headquarters in Dakar and is represented in each member country through a national agency, holds the union’s pooled international reserves and conducts monetary policy at the regional level. Since October 1989, the BCEAO has embarked on a gradual reform of its set of monetary policy instruments, by phasing out country-specific and bank-specific credit ceilings and selective interest rate controls, and successively replacing them with indirect instruments, such as money market auctions and minimum reserve requirements. In a major step toward completing this move toward indirect monetary control, in the second half of 1996, the BCEAO plans to start auctioning central bank bills to commercial banks of the zone. As a result of the increased reliance on indirect instruments and the accompanying development of regional money and interbank markets, the BCEAO’s ability to conduct country-specific monetary policies has largely disappeared and, consequently, Benin has been governed by the concerns over the monetary and credit conditions in the larger member countries of the zone. In addition, given the constraints imposed by the fixed parity, the BCEAO enjoys an only limited degree of independence in the conduct of its monetary policy at the regional level. 8/

The Beninese banking system comprises five deposit money banks and four nonbank financial institutions; the latter specialize in small lending and leasing activities and—with the exception of the Caisse Nationale d’Epargne, which operates under a special statute—do not accept deposits. The bank network is concentrated in the coastal area around Cotonou and Porto Novo, with a few branches scattered in the central part of the country (e.g., Parakou); remote and rural areas are largely served by an extensive system of decentralized savings and loan associations of a cooperative nature that, over the last few years, have complemented the formal banking system to an increasingly large extent and accounted for a significant amount of deposits and credits, albeit outside the official monetary statistics. All the banks and one financial institution were created in the early 1990s, following the almost complete collapse of the financial system in the late 1980s. Stemming from this collapse is a large stock of nonperforming assets and frozen deposits that a court-appointed receiver (SYNDIC) has since been trying to recover and repay, respectively—albeit with limited success–hindered, inter alia, by an inadequate judicial system. 9/

Banking supervision in Benin is conducted by the Regional Banking Commission in Abidjan (Côte d’lvoire), a supranational institution established by WAEMU member countries in 1990. It is assigned to enforce the new prudential regulations introduced in 1991 and to supervise the 55 banks and 19 other financial institutions of the subregion through on-site inspections and off-site analysis of monthly statistics. 10/ It is equipped with a set of sanction instruments, ranging from monitoring banks’ activities to disciplinary actions, such as removing managers and withdrawing a bank’s operating license. In addition to banks and financial institutions, the Banking Commission has also recently been mandated to inspect the national entities established for the recovery of nonperforming loans in the context of the national programs for the restructuring of the respective banking system, including the Beninese SYNDIC. As soon as the Beninese Parliament ratifies the new prudential regulations governing credit cooperatives, expected by end-1996, these institutions will be subject to the Commission’s supervision.

Benin does not yet have a developed financial market. However, in recent years bonds were issued occasionally by some private issuers (e.g., the brewery, SOBEBRA) and placed directly, without being listed on a stock exchange, with institutional investors, some of them in France. The opening of the regional financial market, scheduled for early 1997, will provide Beninese enterprises and investors with new and standardized financing means and investment opportunities, principally with a medium- to long-term maturity, and will also facilitate the privatization of Beninese public enterprises. The new market, developed and promoted jointly by the BCEAO and the International Finance Corporation (IFC), will be fully computerbased; national monitoring centers in all WAEMU member countries–the financial market will be headquartered in Abidjan–are being created in order to popularize this market and reach a maximum of potential market participants. By providing transparency, increased liquidity, and efficient settlement techniques, it is expected that the market may, in the long run, also attract international investors.

2. Recent monetary and credit developments

The remarkable rehabilitation of the Beninese financial system and the creation of new commercial banks in the early 1990s led to a slow but steady return of confidence and a noticeable increase in financial intermediation. The parallel forceful implementation by the Beninese authorities of their domestic adjustment strategy with appropriate macroeconomic and financial policies contributed to this renaissance of the Beninese financial system, inducing a development of monetary and credit aggregates that ran counter to trends observed in other WAEMU member countries that had delayed or insufficiently implemented their domestic adjustment efforts. Between 1990 and the January 1994 realignment of the exchange rate, Benin registered impressive progress in a number of monetary indicators:

  • broad money rose by 29 percent per annum on average, largely led by an eightfold expansion of deposits, partially compensated by a halving of currency in circulation; 11/

  • the recourse of the Government to bank financing remained broadly flat;

  • credit to the economy grew sharply, albeit from a very low base; and

  • Benin’s contribution to the official foreign reserves of the zone turned from a negative position in 1989 (CFAF 9.9 billion) to a remarkable surplus position of CFAF 71.3 billion at end-1993, representing 14 percent of the zone’s gross official reserves (Annex V, Tables XXVI-XXX).

These developments reflected the buoyant real sector activity, the strengthening of public finance, the implementation of structural reforms, as well as the regained international trust in the Beninese economy, and they occurred in spite of the flight of capital observed in other countries of the zone in anticipation of the devaluation.

During this period, the BCEAO raised its discount rate by some 4 percentage points, to 12.5 percent in November 1992, to stem the flight of capital from the union and ensure a large positive interest rate differential vis-à-vis the anchor country (Annex V, Tables XXXI). The high level of interest rates, coupled with the prudent behavior of banks in extending new credits in view of the experience of the late 1980s, contributed to the low growth rates of credit in an otherwise booming economic environment.

After the devaluation, and as the new parity gained credibility, the Government reinforced its domestic adjustment strategy, and flight capital started flowing back as illustrated by the following developments:

  • broad money growth reached 41 percent during the course of 1994, representing a rapid reconstitution of real money balances, and decelerated to a 12-month growth rate of 16 percent by end-1995, faster than GDP growth, indicating continued financial deepening;

  • net credit to the Government continued to remain stable over the two-year period, with the Government being able to completely repay its overdraft facility at the Central Bank by mid-1995, although by end-1995, this facility had to be used again;

  • private sector credit demand picked up, albeit to a lesser extent than expected, as banks continued to exhibit prudence and private enterprises preferred to finance their investments internally through self-generated revenue;

  • the increasing role of the rural savings and loan associations in financial intermediation, with a doubling of their deposit base and a quadrupling of their credits; and

  • the country’s net foreign assets doubled.

In the immediate aftermath of the devaluation, the BCEAO raised its discount rate by 4 percentage points to 14 percent to support the credibility of the new peg. As money market and interbank rates followed this rise to a much smaller extent, in view of the zone-wide surge of liquidity in the banking system stemming from the rapid inflow of flight capital and sluggish credit demand, the BCEAO was gradually able to cut its discount rate to 10 percent by August 1994 and 7.5 percent by December 1995. During the same period, the average money market rate fell from 7.9 percent to 5.50 percent, while the range of interbank rates was roughly halved, to 5-6 percent (Annex V, Tables XXX and Table XXXII); however, given the comfortable liquidity position of most banks in the zone, trading volumes in both markets remained limited and only picked up toward end-1995, when financing pressures emerged in some countries of the zone as a result of an exceptionally buoyant crop. For the same reasons, bank deposit rates have declined substantially and induced a shift from term deposits to sight deposits. Lending rates showed some stickiness, as they declined by only 2 percentage points on average, to 12-14 percent, given the banks’ prudence in their lending decisions.

The zone-wide overliquidity experienced after the devaluation was temporarily absorbed by the decision of the BCEAO, in July 1994, to securitize and sell the stock of the consolidated claims in its portfolio to the banks of the union. After a decisive alteration of the bonds’ sales conditions in September 1994, 12/ demand by banks increased considerably, and by September 1995, the entire stock of securities has been sold, including the remaining CFAF 41 billion issued by Benin. Given their particularly comfortable liquidity position, Beninese banks invested heavily in these bonds, with a peak in September 1995, when one fourth of the zone’s entire stock of circulating bonds was concentrated in the portfolios of Benin’s commercial banks (CFAF 80 billion, equivalent to 31 percent of Beninese broad money, or 181 percent of credit to the private sector).

3. The soundness of the banking sector

The disruption that emerged during and after the banking crisis of the late 1980s still influence the business decisions of Beninese banks, although all of these banks were founded in the early 1990s. As liquidity constraints were one of the major elements of the crisis, Beninese banks strive to have a comfortable liquidity position, usually meeting the respective prudential norm of the regional Banking Commission by a large margin. However, as banks have been confronted with high start-up and operating costs, declining interest margins, exposure to nonperforming loans, and a large amount of idle resources remaining in unremunerated accounts at the BCEAO, the profitability of Beninese banks has been below the zone-wide average—in spite of some devaluation-linked exceptional foreign exchange gains. According to the Banking Commission, the minimum capital requirements have largely been met, but in some cases the Commission has had to make sure that banks would increase capital adequately. One foreign-owned bank had to be taken over and recapitalized by a consortium of Beninese private investors (65 percent) and the Government (35 percent), as the foreign owner preferred to withdraw from Benin instead of injecting additional capital into that bank; the operation incurred budgetary costs amounting to CFAF 1.5 billion. The Government intends to find another foreign investor to take over 30 percent of its share in the recapitalized bank.

The Banking Commission also noted that the rapid increase in credit of the newly established banks has been accompanied in certain cases by an increase in doubtful credits; this deterioration is partly linked to the inadequate judicial system, which makes it difficult for banks to enforce contracts and collect collateral. In order to standardize and better monitor banking activities throughout the zone, a new accounting plan was introduced in January 1996.

4. Banks’ liquidation

The process of liquidating the three government-owned commercial banks, BCB (Banque Commerciale du Bénin), BBD (Banque Béninoise de Développement) and CNCA (Caisse Nationale de Crédit Agricole), which started in 1988, has progressed further in 1994-95. By end-December 1995, the Court-appointed receiver (SYNDIC) had recovered overdue loans of the liquidated banks, including compensation with deposits and sales of assets, amounting to CFAF 27.5 billion, up from CFAF 21 billion at end-1993; by end-March 1996, this amount had reached CFAF 28 billion (Annex V, Tables XXXIII and XXXIV). With the proceeds of the assets recovery and with financial assistance received from foreign donors, by end-1995 the reimbursement of frozen deposits had reached CFAF 28 billion, compared with CFAF 80 billion frozen at end-1988. At end-March 1996, the remaining frozen deposits amounted to CFAF 23 billion, including CFAF 9.2 billion pertaining to the private sector, and CFAF 13.4 billion to public enterprises and agencies; the remainder was due to foreign correspondent banks. An operation to reimburse all deposits smaller than CFAF 2 million, or larger, either in an amount of CFAF 2 million or 10 percent of the deposit’s amount, whichever is larger, started in April 1996 and is expected to reduce frozen deposits by an additional CFAF 2.7 billion, thereby reducing private sector deposits to about CFAF 6.5 billion.

5. Savings and loan associations

Savings and loan associations of a cooperative nature (CLCAMs) have been playing an increasingly important role in financial intermediation over the last six years, with a rapid expansion of their credit and deposit business. These cooperatives are active mainly in rural and remote areas of the country, but some of them are competing directly with commercial banks and financial institutions in the urban centers. While the official banking system reaches only about 10 percent of the population and often deters potential clients by requiring minimum deposit amounts (between CFAF 150,000 and CFAF 600,000) or minimum monthly incomes, credit cooperatives are open to everyone without any restrictions and are thus generally characterized by a large amount of accounts with small amounts and a diversified credit portfolio. According to the latest information, 90 percent of the CLCAMs are profitable, the loans-to-savings ratio is 65 percent, and 98 percent of loans are repaid.

The credit cooperatives, including their national head institution, were also affected by the banking crisis in the late 1980s and the entire system had to be rehabilitated. The rehabilitation program that was implemented in the early 1990s by the Beninese Government received financial support from international donors (IDA, France, and Switzerland). The new cooperative system comprises three levels: locally, there are more than 200 independent CLCAMs; regionally, there is a system of head institutions (URCLCAM) that provides technical support and some clearing services to local entities and participates in their supervision; and, in July 1993, a new national head institution (FECECAM, Fédération des Caisses d’Epargne et du Crédit Agricole Mutuel) was incorporated, which coordinates and supervises the activities of the lower entities, provides refinancing and a placement window for excess funds, allows “deficit” cooperatives—mainly in very remote areas—to survive through special credit lines and financial contributions, offers technical support and training, and serves as a lobbying unit vis-à-vis the authorities. The savings and loan associations will become subject to standardized supervision once Parliament has voted on the respective pending legislation, probably in late 1996. The prudential norms for these institutions will be weaker than for commercial banks; for example, there will be no minimum capital requirement, cooperatives may operate with a variable capital base, and the liquidity ratios will be less stringent. In addition, credit cooperatives are exempted from taxes on financial transactions.

In addition to credit cooperatives—which constitute the semiformal financial sector—there is a large informal financial sector in Benin. Among the multitude of enterprises and activities in this sector, there have been efforts to address the particular financing needs of micro - enterprises, inter alia, through a program called PADME (Programme d’Appui du Dáveloppement des Micro-Entreprises), which is sponsored by the World Bank. PADME offers a standard one-year loan against collateral, priced at 2 percent a month, to individuals or groups of up to five people. The program, which started in August 1993, has been successful, with a loan repayment rate of 98 percent. 13/

IV. Balance of Payments Developments and External Debt

The parity realignment of the CFA franc, effective on January 12, 1994, fostered Benin’s external competitiveness. The current account deficit, excluding grants, which had averaged 7 percent of GDP between 1990 and 1993, fell to 5 percent in 1994, reflecting a surge in exports and a sharp compression of imports (Annex V, Tables XXXV and XXXVI). In 1995, the current account deficit widened considerably, as export growth slowed down, while import picked up, reflecting stronger domestic demand. Official grants rose by 15 percent in 1994 and 14 percent in 1995, while the capital account shifted from a deficit in 1994 to a surplus in 1995, partially offsetting the deterioration in the current account. As a result of these developments, the overall balance of payments registered a large surplus in 1994, with Benin’s contribution to the official reserves of the BCEAO amounting to CFAF 17 billion. In 1995 however, Benin’s contribution became negative. 14/

1. Exports

In 1990-93, exports, including re-exports, rose at an annual rate of 7.3 percent in value terms, mainly on account of rising re-exports. Excluding re-exports, exports in value terms remained broadly stable, as the sharp rise of cotton exports in volume terms (55 percent) was offset by the decline of international prices. The re-export trade through Cotonou’s harbor expanded strongly in the period 1990-93, by 40 percent in value terms, generating important revenues for private traders; this reflected not only rising demand from Nigeria and increased efficiency of the harbor, but also the decline in activity in the competitor Lomá harbor, which was adversely affected by social unrest.

Following the parity realignment, exports expanded vigorously in 1994, by 50 percent in volume terms, reflecting higher profitability, which boosted production of cotton and other export products, including textile products. In 1995, with cotton production declining by 5 percent, and tight constraints on ginning capacity, export volume rose by only 1 percent, but a sharp rise in cotton export prices (35 percent) resulted in an increase in export value (excluding re-exports) of 21 percent. Exports of petroleum declined by 40 percent during the period 1994-95, reflecting lower production of the Semá project, where no new exploration took place. Over the two-year period, re-export trade maintained a steady expansion (Annex V, Tables XXXVII-XXXVIII).

2. Imports

Reflecting the substantial economic expansion, imports (excluding imports for re-export), grew steadily in 1990-93, by 5.9 percent a year on average in volume terms. Their share in GDP rose from 16.1 percent in 1990 to 17.4 percent in 1993, reflecting in part the expansion in the public investment program (PIP), which has a high import content. Imports for re-export grew steadily throughout the period, by 11 percent a year on average in value terms. In 1994, following the devaluation, imports declined sharply in real terms (25 percent), responding to the increase in relative prices of import products; a rebound took place in 1995, when imports in volume terms rose by 38 percent, with a particularly strong rise in imports of intermediate and investment goods (Annex V. Table XXXIX).

3. Services and unrequited transfers

The service account registered a broadly stable deficit during the period 1990-93; the deficit surged in 1994, reflecting higher debt service charges in CFAF terms, and rose further in 1995 on account of higher freight and insurance outlays related to rising imports. Scheduled interest charged on public debt surged in 1994 following the devaluation (Annex V, Table XL).

A substantial increase in emigrant remittances took place in 1994 and 1995, estimated at 25 percent in CFA franc terms; this reflects the effect of the devaluation and the attraction of investment in real estate by emigrant workers. Official current grants rose markedly throughout the period under review, as a result of a substantial increase in budgetary assistance by external donors.

4. Capital accounts and balance of payments financing

During the period under review, Benin recorded large inflows of capital, reflecting the recovery of confidence in the economy and the increase in multilateral and bilateral assistance. Disbursements of medium and long-term project-related external assistance rose substantially in 1989-93. In addition, there were steady inflows of private capital, except in 1993 where the expectation of a devaluation led to some outflows. Commercial banks strengthened their net foreign asset position steadily in the period 1990-93; this trend accelerated in 1994-95, when their external position improved by the equivalent of 6 percent of GDP.

In 1990-94, the improvement in the balance of payments brought about a strong increase in the net contribution of Benin to the foreign reserves of the regional Central Bank. As a result, gross foreign assets of the Central Bank’s national agency represented 6.0 months of imports at end-1994, but they fell somewhat in 1995, to 5.9 months of imports. Balance of payments financing during the 1990-95 period was also secured through debt relief obtained from Paris Club members, from some non-Paris club members, and through large debt cancellations granted by France.

5. The stock of external debt and debt service obligation

During the period under review, the main debt indicators of Benin ameliorated markedly, reflecting improved economic performance and the acceleration of growth. Nonreschedulable external arrears were fully repaid in 1991. Benin benefited from debt relief operations from Paris Club creditors on concessional terms in 1989, 1991, and 1993; debt relief was also obtained from one non-Paris Club creditor in early 1996, while negotiations are still ongoing with the creditors, including Russia.

Outstanding official external debt increased steadily in 1989-93, rising from CFAF 302 billion at end-1989 (63 percent of GDP) to CFAF 410 billion (68 percent of GDP) in 1993. This was related to the rise in the indebtedness to multilateral creditors, which reached 50 percent of the total in 1993 (Annex V, Table XLI). The debt service ratio declined from 44 percent at end-1989 to 18.6 percent at end-1993, owing to rapid growth of exports, particularly of cotton.

The valuation effects of the parity change of the CFA franc increased the stock of debt in 1994, both in domestic currency terms and as a ratio to GDP. At end-December 1994, outstanding official debt amounted to CFAF 732.6 billion (equivalent to US$1.32 billion), or 86 percent of GDP. By end-1995, the stock of official debt had risen further, to CFAF 849 billion (US$1.70 billion), equivalent to 82 percent of GDP. At end-1995, the net present value of Benin’s debt was estimated at CFAF 541 billion (US$1.08 billion), equivalent to 64 percent of the face value of the debt. Multilateral financial institutions were the most important creditors of the country, holding, at end-1995, 58 percent of the total debt, followed by Paris Club countries (23 percent), and other bilateral countries’ creditors (18 percent). The World Bank was the most important creditor with US$500 million, or 29.3 percent of the total. The African Development Bank was the second largest creditor, with a total outstanding debt of US$203 million.

Total debt service decreased from 19.7 percent of goods and nonfactor service in 1994 to 17.5 percent in 1995, reflecting rising exports. Debt service obligations to the Fund represented 3.2 percent of exports. Debt relief was granted by Paris Club creditors in 1993, which provided for a 50 percent cancellation–in net present value terms–of obligations due in the period 1993-95; this followed rescheduling operations in 1989 and 1991, which granted cancellations in net present value terms, respectively of 33 percent and 50 percent, and obligations falling due in the period 1989-90 and 1991-92.

6. Effective exchange rate

The real effective exchange rate of the CFA franc, based on relative CPI and the pattern of trade of Benin remained broadly stable in the period 1989-93; it depreciated by 36 percent in 1994, and appreciated somewhat in 1995 by 7.5 percent (Chart 3). In this period, the terms of trade of Benin remained broadly stable from 1989-94, after a short-lived improvement in 1990, due to the increase in international petroleum prices; in 1994 and 1995 they improved markedly, reflecting higher international prices of cotton.



Sources: Information Notice System; ond staff estimates.

1/ Based on relative CPIs.

ANNEX I: The Cotton Sector in Benin

Cotton is a major crop in Benin, not only because of the number of farmers it employs but also because of its financial impact on the economy. In the 1994/95 crop year, budget revenue from this sector amounted to some CFAF 25 billion, while cotton sales abroad represented approximately 50 percent of Benin’s total exports.

During the past 35 years Benin’s cotton production has fluctuated considerably, owing to changes in development strategies and the organization of the sector, as well as to unforeseen trends in international cotton prices. The Société Nationale pour la Promotion Agricole (SONAPRA) is the main policymaker for the sector. It is fully government owned and it controls all of the sector’s operations, particularly cottonseed purchasing, agricultural credit, fiber manufacturing, and marketing. To ensure better risk management and good management within the cotton sector, the Government and donors (e.g., the World Bank and the Caisse Française de Développement) have provided technical assistance to establish a system of price fixing, stabilization, and redistribution of profits to benefit the Stabilization and Support Fund (FSS), producers, and SONAPRA.

These brief comments on Benin’s cotton sector will concentrate on the following areas:

  • The development of cotton growing in Benin as compared with other cotton-producing African countries.

  • The economic and financial impact of the cotton sector.

  • Development policy for the cotton sector.

  • Production prospects up to the year 2000.

I. Production and Development of Cotton Growing in Benin

Cotton growing in Benin is an old tradition, particularly in the central and southern regions. The introduction of the cash crop variety dates back to 1953 and 1970. Propelled by the French textile company Compagnie Française des Fibres Textiles (CFDT) and SATEC, the cotton crop yield increased by a record 50,000 tons of seed cotton in 1972/73, which can be attributed to the expansion of pest and disease control measures to cultivated areas. It should be noted that in 1972/73, fertilizer was used in 70 percent of the cotton growing areas. During 1973 to 1977, Nigeria’s oil boom and the rapid development of uranium in Niger diverted farmers from cotton growing to food-producing activities, as it was much more profitable to market food in these neighboring countries than cotton. This caused seed cotton production to plummet to 14,000 tons in 1977/78.

As the table below shows, cotton growing in Benin was a very small-scale activity at the beginning of the 1980s. The combination of a number of factors, particularly the establishment of incentive strategies and favorable economic developments, contributed to its rapid development in traditional areas at first, and later in the other areas of Benin.

The rehabilitation of this sector, which started in 1988, has revived the industry and made it fairly competitive. Incentive prices paid to producers and income distribution since 1989 through the stabilization and support mechanism has aroused considerable interest among farmers. This led to an increase in cultivated areas from 122,000 hectares in 1990/91 to 250,000 hectares in 1994/95; production in 1995/96 is estimated to cover some 254,000 hectares. At the same time, seed cotton output increased from 146,000 to 277,000 tons; 345,000 tons have produced in the 1995/96 crop year. Prices paid to producers rose from CFAF 60 per kg for premium cotton in 1980/81 to CFAF 110 per kg in 1985/86, CFAF 140 per kg in 1994/95, and CFAF 165 per kg in 1995/96.

Table 2 shows that Benin is the African country with the most spectacular output growth between 1980/81 and 1994/95. The country started out in 1980 as one of the smallest producers with 15,400 tons of seed cotton, trailing behind Senegal, Burkina Faso, Mali, Togo, and Chad. Its production has multiplied almost 20-fold, and today Benin is ranked, on a par with Mali, as one of the major African producers.

Table 1.Benin: Cotton Production, 1980/81-1995/96
Seed Cotton


(1000 t)
Fiber yield

(%) 1/
Buying price





(1000 ha)
Table 2.Benin: Cotton Output of Main African Producers, 1980/81-1994/95(In thousands of tons)
Burkina Faso66.5115.5189.5117.0145.0

During the same period, the rate of return on seed cotton and cotton fiber rose from 37.5 percent to 42.0 percent, one of the highest in Africa. The yield per hectare went from 617 kg in 1980/81 to 1,092 kg in 1994/95, peaking at 1,500 kg in 1984/85. The cotton boom can be attributed not only to the security provided by the current organization of the sector and the increase in producer prices after sectoral rehabilitation in 1988–farmers have an advance indication of the purchasing prices paid by SONAPRA and guaranteed payment for their crop–but also to other social and economic factors.

Farmers view cotton as an alternative to the difficulties they encounter in marketing traditional food crops, such as sorghum, corn, and taro. Good rainfall in the region and the political and economic crisis of the last few years have reduced potential demand for foodstuffs and profit-making prospects for Beninese farmers. Population growth in the northern areas, which are large cotton producers, has swelled the ranks of the working population, while, at the same time, the exodus toward the urban areas has declined in the face of growing unemployment in the large cities. As a result of the virtually assured cash income from cotton growing, there is a massive return of young people and women to the cotton fields.

This development is also related to the availability of cheap labor from other regions and from neighboring countries (Burkina Faso, Niger, and Nigeria). Also noteworthy is the increased yield in food production made possible by the effect of the fertilizers used for cotton, and by the resistance of cotton to climatic changes in the region. Finally, the good reputation of Benin’s cotton places it in a favorable position for upstream development.

II. Economic and Financial Impact

Agriculture, especially the cultivation of cotton, the only real income-earning product of Benin, employs a large proportion of the working population. Cotton contributed some 20 percent of GDP in 1995 and Benin holds 2.5 percent of the world cotton market. The sector has therefore become the resource producer and engine of growth of Benin’s economy.

The share of cotton and cotton derivatives in exports rose to CFAF 95.1 billion in 1995, that is, 50.1 percent of total exports, compared with 10 percent in 1980 and 28 percent in 1990. The redistribution of resources from cotton in the economy is based on preset criteria. Profits are subject to taxation under the corporate income tax (BIC) at the rate of 38 percent, and 15 percent of the remainder are allocated to reserves. Then, in accordance with the law governing state enterprises, 40 percent of profits net of taxes and reserves accrue to the Treasury. Finally, the remainder available for distribution is divided as follows: 40 percent goes to the Stabilization and Support Fund (FSS) for the cotton sector, 30 percent to farmers, 15 percent to SONAPRA, and 15 percent to the Government. This distribution, which is also applied to the 1995/96 crop, is expected to be changed for the next crop year in the context of the ongoing in-depth study of the cotton industry.

The contribution to government finances was insignificant from the mid-1980s to 1993, because of low world cotton prices and the inefficient organization of the sector.

Budget revenue from cotton was considerably strengthened with the reduction of the SONAPRA’s production costs after the implementation of the rehabilitation plan in 1988-90; fiscal revenue increased substantially after the devaluation of the CFA franc and the rise in world cotton prices in 1994 and 1995. Thus, budget revenue generated in 1995 by the cotton industry for the 1994/95 crop year amounted to CFAF 23.9 billion–CFAF 11.3 billion from the corporate income tax (BIC), CFAF 2.1 billion from the tax on income from dividends, and CFAF 6.8 billion from the Government’s share of net profit distribution (40 percent of net profits after allocations to reserves).

Moreover, an undetermined amount of additional budget revenue was obtained from cotton-related transport activities (which had a turnover of CFAF 4.6 billion in 1994/95), thereby further strengthening government revenue.

Taxes paid to the Government represented about 26 percent of the turnover of the cotton sector in 1994/95. Despite production increases and the opening of ginning to the private sector, the share of taxes on earnings is expected to decline in the medium term, given the projected downward trend of world prices from 1995 to 2000 and the expected rise in the prices paid to producers to secure them a larger share of the sector’s profit margins.

III. Sectoral Development Strategy

After the collapse of international cotton prices in 1986, the Government and donors thoroughly reorganized the cotton sector. The new system introduced at both the operational and marketing levels, which emphasized transparency, allowed SONAPRA to generate profits, making it possible to distribute surpluses and dividends and additional income in the form of value added to improve the conditions under which farmers produce.

In addition, in accordance with the rural development policy paper, the Government has undertaken the task of transferring know-how in primary marketing and input management to village associations and producer unions at the subprefecture level. The transfer is being carried out rapidly and the results are encouraging, with 60 percent of village associations and 80 percent of production being covered in 1994/95. In addition, since 1992/93, the supply of, and access to, inputs has been progressively privatized. It is now handled by authorized merchants, with SONAPRA playing a key role in determining the areas where credit is to be extended and collected.

The devaluation of the CFA franc in 1994 gave new impetus to cotton growing, as it created favorable conditions for the sector to be competitive, and enabled it to generate substantial profits. Following the exceptional harvest in 1993/94 and a rise in seed cotton output from 160,000 tons to 277,000 tons, the imbalance between production and the maximum ginning capacity of 170,000 tons was exacerbated. Thus, the Government accelerated the process of opening cotton manufacturing to the private sector. As a result, three private cotton ginning plants were built and entered into operation in early 1996, with a ginning capacity of 75,000 tons.

Lastly, the procedures by which producers can acquire 33 percent of SONAPRA’s share capital have been announced in early 1996. The Government’s divestment of industrial and commercial activities and private participation could influence how the industry operates in the future in relation to the functions assigned to SONAPRA, especially as regards the supply of seeds, primary marketing, management of agricultural credit, and sales of cotton fiber.

Cotton is one of the most integrated cash crop sectors. It is practically the only one that generates significant value added. In view of the sector’s peculiarities, its privatization involves social and political dimensions that need to be considered. Cotton brings into the monetary circuit several segments of the population that are often far removed from the decision-making centers; it is also one of the few export crops that grows in areas where there is low rainfall, and is the crop with the shortest maturity cycle.

The Government has been training farmers in input management and primary marketing of seed cotton. About 80 percent of these operations were conducted by farmers during the 1994/95 crop year. The most important issue at the primary level is the liberalization of input marketing, namely the sale to farmers of fertilizers and other inputs, which is now a monopoly of SONAPRA; at present, SONAPRA, as the only buyer, recuperates directly from the farmers the cost of inputs when it buys the crop.

Processing is a key activity in the cotton sector. Its profitability depends on the reputation and quality of the cotton marketed. As stated earlier, the private sector has responded very quickly in Benin and created three industrial plants that have begun operations in the 1995/96 crop year. The private plants have a capacity of 75,000 tons and the raw material is supplied to them by SONAPRA. Within this framework, the three industrial plants are not currently involved in supplying farmers with seeds, primary marketing, and agricultural credit. However, a radical reform of the operation of the industry and the role of private ginneries is being studied with World Bank assistance. This study, which will be completed during the second half of 1996, should make recommendations, particularly on the feasibility of maintaining SONAPRA’s current monopoly of seed cotton purchasing and the possibility of liberalizing the primary marketing of seed cotton. It will also study the various alternatives for integrating the industry, either through SONAPRA or through groups of private enterprises.

IV. Outlook for Seed Cotton Production Up to the Year 2000

The Ministry of Rural Development ordered a study by consultants in July 1995 on the cotton sector in Benin and the prospects for its development through the year 2000. As a basis for their projections, the authors, G. Raymond and V. Beauval, took into account a number of parameters, notably the continuation of the industry’s current operating level, namely, attractive returns and the difficulties in marketing foodstuffs, as well as the average cultivated areas dedicated to cotton growing, and the growth of the rural population at a rate of about 11 percent between 1995 and 2000.

The analysis of these parameters produced two types of working hypotheses. The first hypothesis is based on empirical projections at a subprefecture level based on trends observed since 1990. This method, which was applied with the assistance of agricultural extension services and by polling farmers’ opinions, yielded an estimated production of 458,000 tons by 2000, that is, an increase of more than 40 percent in the production expected during the 1995/96 crop year.

The second hypothesis is based on the expected 11-percent growth in the rural population, and the importance of cotton among the crops grown by farmers. This method takes, inter alia, the average expansion of cotton growing areas to be around 33 percent, which would yield an output of 437,000 tons for the 1999/2000 crop year.

The hypotheses used by the authors of this study yield fairly similar results. Nonetheless, in view of the fact that agricultural projections are difficult because of the complexity of the factors involved, one should bear in mind that future development may be largely influenced by exogenous factors.

ANNEX II: Recent Development in Informal Trade between Benin apd Nigeria

Aside from historical factors, developments in Benin’s informal transactions with Nigeria reflect the international specialization in both countries, the differences in trade and monetary policies, and the trends in real effective exchange rates in Nigeria and Benin. After increasing steadily during the 1989-92 period, Benin’s informal transactions with Nigeria declined in 1993-94 on the export side as well as on the import side, and remained below their 1992 level during 1994-95.

The main flows 15/ of the informal trade between Benin and Nigeria include (i) Benin’s imports of Nigerian manufactured products, (ii) imports of Nigerian petroleum products, and (iii) re-exports through Benin to Nigeria.

Regarding the impact of trade with Nigeria on Benin’s budgetary revenue, the share of revenue generated by re-export and transit operations fell during the last three years, reaching 20 percent of Benin’s total customs revenue in 1995.

1. Benin’s Imports of Manufactured Products from Nigeria

Nigeria’s diversified industrial capacity, and the lack of similar industries in Benin, have been a main factor explaining Benin’s imports of Nigerian manufactured products. In addition, the sharp depreciation of the exchange rate of the naira in the parallel market since 1986 has resulted in an increased competitiveness of nigerian products vis-à-vis the subregion as well as the world market. Benin’s informal imports from Nigeria include a wide variety of manufactured goods, such as soaps, cosmetics, household appliances, mopeds, kitchenware, fabrics, vegetable oils, soft drinks, and pharmaceuticals. These goods are transported mainly through overland routes and largely evade border taxation.

Benin’s imports from Nigeria also include re-exports of products imported by Nigeria from the rest of the world (mainly from Southeast Asia and Europe). These re-exports to Benin through Nigeria take advantage of the competitiveness of Nigerian importers as compared with direct imports by Benin, owing to imports in bulk, lower trade margins, and lax customs controls in Nigeria.

There are no comprehensive estimates of Benin’s informal imports of manufactured products from Nigeria. According to data from qualitative surveys, the devaluation of the CFA franc in January 1994 was followed by a decline in the volume of imports from Nigeria during the first eight months of 1994. The decline resulted from the rise in the price in CFA francs of Nigerian products, and the increase of the debt obligations of Beninese importers vis-à-vis their foreign suppliers in terms of CFA francs. In addition, transport costs soared in Nigeria during July and August 1994 as a result of the strikes in the petroleum sector. Imports picked up in September-October as the debt obligations of the Beninese importers were refinanced by commercial banks, and because the exchange rate of the naira fell in the parallel market to its end-1993 level, largely offsetting the effect of the CFA franc devaluation. Imports declined again in November owing to the tightening of controls at the land borders by Nigerian customs. During 1995, the imports remained below their 1994 level, owing to the cautious attitude of businesses after the announcement by the Nigerian authorities of changes in economic policy (speech on the 1995 budget), the political unrest, and the increase in the Nigerian customs duties. 16/

II. Benin’s Imports of Petroleum Products

Benin has a limited production of crude oil (about 1 million barrels a year) from the Semé oil field. In the absence of a refinery, Benin exports the crude oil and imports petroleum products for domestic consumption. The state company SONACOP has the monopoly 17/ for the import and distribution of petroleum products. By contrast, Nigeria is a large producer of crude oil and petroleum products, with a vast distribution network. The production costs are low, thanks to the quality of the fields, and the domestic retail price of gasoline is set well below the world price of gasoline valued at the parallel exchange rate, thereby generating a large implicit subsidy. In addition, the Nigerian Government subsidizes the transport of petroleum products through the Equalization Fund Management Board in order to ensure uniform prices across the territory.

Therefore, taking into account the depreciation of the exchange rate of the naira in the parallel market, Nigerian petroleum products reach Benin at a very low price. During the 1986-93 period, the ratio of the official price of ordinary gasoline in Benin to that in Nigeria fluctuated between 4 and 20, which led to a huge volume of informal trade between Nigeria and Benin.

Given the difficulty in controlling the borders, and for social reasons, this informal trade has been tolerated in Benin, although it resulted in a fall in SONACOP’s turnover and losses in fiscal revenue for the State. In 1994, the Nigerian Government attempted to control the informal exports of petroleum products by creating a 20-kilometer-deep “border zone” where the sale of gasoline is prohibited. In 1996, Nigeria lifted the prohibition on official petroleum exports to West African countries. The “border zone” had a limited impact and the authorities canceled it in June 1995.

However, since 1993, the informal trade in petroleum products between Nigeria and Benin has been adversely affected by measures taken by both countries, by unrest in Nigeria and by technical problems in Nigeria’s petroleum industry (see Table 1). The Nigerian authorities increased sharply the retail price of petroleum products in two steps (November 1993 and October 1994). As a result, the price of ordinary gasoline in Nigeria increased from N 7 per liter in October 1994 (about CFAF 56) to N 11 per liter (about CFAF 88) in November 1994, which compares with an official price of CFAF 175 per liter in Benin. In addition, further to the devaluation of the CFA franc in January 1994, the Beninese Government decided to keep the retail price of petroleum products sold by SONACOP unchanged, through a cut in taxes. These developments resulted in a narrowing of the price differential. Furthermore, the social unrest in Nigeria and the strikes in the petroleum sector during July-August 1994 created a shortage and a temporary reversal of the flows: neighboring countries supplied Nigeria with petroleum products, and SONACOP recorded exceptional sales during this period. As a result, SONACOP sales of petroleum products rose from 143 million liters in 1993 to 273 million liters in 1994.

During the rest of 1994, the informal trade in petroleum products from Nigeria picked up somewhat, although at lower levels than those reached before 1994. This slowdown persisted through 1995, owing to a decline in Nigeria’s supply following the closing of two main refineries; 18/ in 1995 SONACOP sales of petroleum products amounted to 259 million liters, or 5 percent less than the peak level reached in 1994.

III. Re-Exports Through Benin to Nigeria

The divergence in trade policy between Nigeria and Benin is the basis for the re-export flow. Nigeria maintains several complex import and export restrictions for the purpose of protecting the domestic market. Rice imports were banned in 1985, wheat, wheat flour, and vegetable oils in 1986, and imports duties for many nonprohibited products are very high. During more recent years, restrictions were somewhat relaxed; the ban on imports of several products was lifted and replaced by a licensing system: for wheat and flour in October 1992, and for rice in mid-1994. In February 1995, the Nigerian authorities decided to lift the licensing requirements for rice imports and to increase the import duties to 100 percent. However, as of April 1996, the lifting of the licensing requirements on rice imports had not been implemented.

By contrast, Benin currently has one of the most liberal trade policies among the countries of the subregion. In 1985, the state monopoly on imports was abolished and replaced by a license system. In 1987, the import licensing requirements were abolished for goods originating from the European Union, the franc zone, and countries belonging to the Africa, Caribbean and Pacific (ACP) group under the Lomé Convention. In 1993, all remaining imports restriction were abrogated, and most export taxes have been removed. In early 1994, a new customs duty (Droit Fiscal) with four rates (5, 10, 15, and 20 percent) was introduced, the rates for several essential consumer goods were reduced to alleviate the impact of the devaluation, and the exemption of customs duty for rice and cotton fabric (the main re-export commodities) imports was maintained.

Benin’s imports re-exported to Nigeria can be divided into two categories: (i) the goods for which imports are prohibited in Nigeria, and are therefore sent by the overland route from Benin or via waterways, where border controls can be evaded; they include rice, flour, wheat, certain textile products, second-hand clothing, certain alcoholic beverages, and used tires; these products, when imported in Benin, are declared to be destined for Benin and are subject to full customs duties, like any products imported for Beninese residents; 19/ and (ii) products that are not prohibited for import into Nigeria, but are channeled through the Cotonou harbor because of its relative efficiency as compared with the Lagos harbor. The latter (mainly cigarettes and certain types of textile products) benefit from transit status; as such they are subject only to a statistical tax of 3.27 percent.

After rising considerably in volume terms during 1989-92, re-exports from Benin to Nigeria declined sharply during 1993-95 owing to the decline in domestic absorption in Nigeria prompted by the drop in real incomes, financial difficulties experienced by importers in 1994 as a result of the devaluation of the CFA franc, and the increase in the world price of cereals in 1995 (see Table 2).

IV. Impact of Trade with Nigeria on Benin’s Budgetary Revenue

After reaching nearly CFAF 11.8 billion in 1992, customs revenue generated by re-export and transit operations with Nigeria is estimated to have declined in 1993 and 1994, and to have increased to CFAF 12.1 billion in 1995. The share of revenue generated by trade with Nigeria in Benin’s total customs revenue fluctuated in a range of 36-46 percent during the 1988-92 period, and fell during the next three years, reaching 20 percent in 1995 (see Table 3).

Table 3.Benin - Fiscal Revenue and Dividends Paid by SONAPRA(In millions of CFA francs)
YearBIC 1/IRVM 2/Dividends 3/Total
Source: Services des impôts directs [Office of Direct Taxes]; and staff estimates.

As indicated above, official transit operations (allowed for goods not subject to import restrictions in Nigeria) are subject only to a statistical tax of 3.27 percent. Reflecting the significant increase in transit operations during the period 1988-95, customs revenue from these operations is estimated to have risen from CFAF 42 million in 1988 to CFAF 2,587 million in 1995.

Revenue from “special” transit operations rose from CFAF 394 million in 1988 to CFAF 2,651 million in 1993, and collapsed in 1994 following the decision by the Beninese authorities to extend the pre-shipment inspection to the imports under “special” transit status. 20/ It is estimated that these imports were recorded in 1994 and 1995 as destined for Benin, without effect on revenue because, as indicated above, “special” transit operations are subject to full customs duties.

Customs revenue from imports not registered with transit status, but destined for Benin and informally re-exported to Nigeria, is estimated to have been in the range of CFAF 8-10 billion over the last eight years, with the exception of 1989, when financial disruptions in Benin sharply reduced harbor traffic. Receipts from rice and textiles account for more than 60 percent of this customs revenue. Customs duty rates (including VAT) in 1994-95 ranged from 21 percent for rice, to 23 percent for textiles, 31 percent for liquor, and 39 percent for flour. The revenue loss due to the informal imports of petroleum products from Nigeria offsets in part the customs revenue generated by re-exports to Nigeria. At the 1995 official c.i.f. prices and using an average customs duty including VAT of 25 percent, this loss is estimated at about CFAF 1 billion.

Table 1.Benin: Official and Informal Imports of Petroleum Derivative, 1987-95
(In thousands of cubic meters)
I. Official Imports149.1132.4155.198.685.2103.5150.7340.4305.8
Regular gasoline43.732.
Premium gasoline18.512.811.
II.Informal Imports77.298.9131.1154.7174.4183.9162.620.356.1
Regular gasoline30.540.448.759.470.
Premium gasoline11.017.221.424.427.329.
III.Total imports226.3231.3286.2253.3259.6287.4313.4360.7361.9
Memorandum items:
Official import volume in percent of total imports65.957.254.238.932.836.048.194.484.5
Sources: SONACOP and staff estimates
Table 2.Benin: Imports Through Cotonou Harbor Re-exported to Nigeria, 1988 -95 1/(In thousands tons and millions of CPA francs)
(In thousands tons)
Used clothes21.915.219.615.720.223.814.218.8
Alcoolic beverages3.
(In millions of CPA francs)
Used clothes4,1182,9543,9883,3234,3997,3925,3525,960
Alcoolic beverages1,9648889098271,197630463789
Sources: Customs statistics for the Cotonou harbor; and staff estimates.
Table 3.Benin: Estimated Customs Revenue Generated by Transactions with Nigeria, 1988-95(millions of CFA francs)
I. Imports with no transit status1/ (informal trade)9,7905,8518,7728,0349,3996,9687,9659,475
Used clothes1,0097249778141,0781,7221,7612,062
Alcoolic beverages636288295268388197152241
II. Imports with “special” transit status1/3944861,0111,5101,7462,6514911
III. Imports with official transit status2/42511574916991,0101,7192,587
TOTAL (I+II+III)10,2266,3889,94010,03511,84410,6299,73312,073
IV. Total customs revenue25,66017,52121,41325,74028,48432,72142,36060,295
Memorandum items:
In percent of total customs revenue:
Total trade with Nigeria39.936.546.439.041.632.523.020.0
Informal trade38.233.441.
Transit trade0.
Sources: Data provided by the Beninese authorities; and staff estimates.
ANNEX III: Growth Accounting. 1970-93

In the past three decades, sub-Saharan Africa has had the lowest growth rate in GDP per worker equal to 0.5 percent which compares with East Asia with 4.2 percent, South Asia 2.0 percent, the industrial countries 2.7 percent, and Latin America with 0.8 percent. It is only recently that sub-Saharan Africa has recorded positive rates of real GDP growth with an average GDP growth rate of 2.3 percent in the 1989-93. Nevertheless, during that same period, the CFA franc zone experienced negative growth with an annual average rate of -0.6 percent.

The purpose of this work is to evaluate the growth of total factor productivity (ΔA/A), with the assumption of a simple Solow-Swan production function (two factors production function) which relates output (Y) to the quantities of physical capital (K) and labor (L), according to the standard formula:

ΔY/Y is the growth rate of total output obtained by the statistical series of gross domestic product (GDP), as published in the World Tables of the World Bank Data Base, which provides information for a time period of 23 years, from 1970 until 1993; these data are based on GDP at market price measured in national prices.

ΔK/K is the growth rate of the capital stock, calculated starting from the following formula:

where I is the domestic investment, also obtained from the World Bank data base, and 0.05 the annual capital depreciation rate. An estimation of the capital stock was obtained with an initial capital-output ratio of 1.5 for the year 1970, and the capital income share in GDP, a, was set equal to 0.3. 21/

ΔL/L is the growth rate of the labor force, defined as the “economically active” part of the population, including armed forces and the unemployed but excluding homemakers and other unpaid caregivers. The series is also obtained from the World Bank data base.

ΔA/A is the growth rate of total factor productivity (TFP), which is obtained as a residual. The data confirm the results of a number of studies on total factor productivity in Africa (see Bosworth and others), which indicate that TFP has been negative over the last two decades for most of the countries in the region. This result does not appear to vary with different assumptions about the initial capital stock, and the share of capital in total income. The data indicate that the growth of the capital stock decelerated sharply between the 1970s and the 1980s in all the countries of the region. The labor force growth, on the other hand, has been quite stable during the whole period, of about 2.3 percent per year in the region, with the highest growth recorded in Cote d’Ivoire, of about 2.5 percent per year on average.

During the period 1971-82, Benin recorded a significant capital accumulation, with a capital stock growth rate of about 5.2 percent on annual average. In the same period, TFP fell by 0.05 percent on annual average. The WAEMU zone as a whole shows an even stronger rate of capital accumulation (6.3 percent on average) and more negative TFP (0.16 percent, on average) (Tables 1-4 and Charts 1 and 2). In this period, three countries of the zone, Burkina Faso, Côte d’Ivoire, and Mali, recorded positive TFP growth.

Table 1.Benin and WAEMU zone: Average Growth Rates, 1970-1993 1/(Annual percentage rate of change, geometric averages)
Region/PeriodGDPCapital StockLabor ForceTotal Factor

Sources: Staff estimates.
Table 2.Benin and WAEMU zone: Sources of Growth, 1970-1993 1/(Annual percentage rate of change)
Region/PeriodGDPContribution of:
Capital StockLabor ForceFactor Productivity
Sources: Staff estimates.
Table 3.WAEMU Countries: Average Growth Rates, 1970-1993 1/(Annual percentage rate of change, geometric averages)
Region/PeriodGDPCapital StockLabor ForceTotal Factor

Burkina Faso
Cote d’Ivoire
1971 -19822.578.082.05-1.30
Sources: Staff estimates.
Table 4.WAEMU Countries: Sources of Growth. 1970-1993 1/(Annual percentage rate of change)
Region/PeriodGDPContribution of:
Capital StockLabor ForceFactor Productivity
Burkina Faso
Cote d’Ivoire
Sources: Staff estimates.


Sources: Staff estimates.

1/ Assumed a capital-output ratio of 1.5 in 1970, an annual depreciation rate of 0.05 percent and a copitol share in income of 3 percent.

2/ GDP growth in annual percentage change and factors contribution to growth.


Sources: Staff estimates.

1/ Assumed a capital-output ratio of 1.5 in 1970, an annual depreciation rate of 0.05 percent and a capital share in income of 3 percent.

2/ GDP growth in annual percentage change and factors contribution to growth.

In the 1983-88 period, the Beninese economy witnessed a sharp decrease in its capital stock growth rate, accompanied with an improvement in the TFP pattern, which became positive, at 0.21 percent a year. A deceleration in the capital stock growth rate occurred also in the WAEMU zone in the same period, with TFP growth remaining negative.

In the period 1989-93 Benin appears also to record positive TFP growth rates, close to 0.3 percent a year, while the contribution of capital stock is still diminishing. In this period, Benin appears to be the only country of the WAEMU with a positive TFP growth. In the WAEMU zone as a whole, the contribution of capital growth continues to decline, and the TFP continues to be negative.

Benin: Summary of Tax System as of December 1995(All amounts in CFA francs)
TaxNature of TaxExemptions and DeductionsRates
1.1.3General income tax (Impôt général sur les revenus) (Tax code Art. 152-186)An annual tax levied on the total net income of individuals from all sources except employment (see 1.1.2)Deduction of the scheduler tax, maintenance costs, Interest, and a 30 percent deduction for managements, insurance, and depreciation are permitted against rental income. Personal deductions for dependents are allowed as a percentage of taxed income renging from 10 percent for a married taxpayer with no children to 40 percent for a married person with six children. The tax payable is increased by 30 percent for single, widowed, or divorced taxpeyers without dependent children, total annual income of less than CFAF 100,000 is exempt.The general income tax consists of two levies: (a) a fixed progressive levy of 2,000 to 15,000 and (b) a progressive levy according to the following scale:
Taxable incomeRate
Up to 100,000Exempt
100,001- 600,0006 percent
600,001- 800,00015 percent
800,001-1,600,00020 percent
1,600,001-2,500,00025 percent
2,500,001-3,500,00030 percent
3,500,001-4,500,00040 percent
4,500,001-5,500,00050 percent
Over 5,500,00060 percent
1.1.4Tax on rental income (Taxe immobilière sur les lovers) (Tax code Art. 198-204)A scheduler tax on gross rental income received by individuals and companiesNoneMonthly rental income brackets
per unitRate
0 - 50,00010 percent
Over 50,00020 percent
1.2Companies, partnerships, and individual enterprises
1.2.1Tax on industrial, commercial artisanal, and agricultural profits (Impôts sur les bénéfices industrials, commerciaux, artisanaux et agricoles) (Tax code Art.1-32)An annual schedular tax levied on the net profits realized from activities carried on within the country. There is a 3-year carry-over for business losses.Cooperatives, agricultural credit unions, and mutual associations are exempt. Realized capital gains are exempt if reinvested within three years. General expenses, depreciation actually taken; taxes paid; reserves for losses and losses during the previous five years can be deducted.(i) Companies: 38 percent Petroleum and mining companies: 58 percent (no surcharge)

(ii) Individuals: 35 percent Artisans: 17.50 percent

FNI subscription: 10 percent of taxable income (0.20 percent of turnover), reimbursable in proportion to reinvestment.
1.1.3General income tax (Impôt général sur les revenus) (Tax code Art. 152-186)An annual tax levied on the total net income of individuals from all sources except employment (see 1.1.2)Deduction of the schedular tax, maintenance costs, interest, and a 30 percent deduction for managements, insurance, and depreciation are permitted against rental income. Personal deductions for dependents’ are allowed as a percentage of taxed income ranging from 10 percent for a married taxpayer with no children to 40 percent for a married person with six children. The tax payable is increased by 30 percent for single, widowed, or divorced taxpayers without dependent children, total annual income of less then CFAF 100,000 is exempt.The general income tax consists of two levies: (a) a fixed progressive levy of 2,000 to 15,000 and (b) a progressive levy according to the following scale:
Taxable incomeRate
Up to 100,000Exempt
100,001- 600,0006 percent
600,001- 800,00015 percent
800,001-1,600,00020 percent
1,600,001-2,500,00025 percent
2,500,001-3,500,00030 percent
3,500,001-4,500,00040 percent
4,500,001-5,500,00050 percent
Over 5,500,00060 percent
1.1.4Tax on rental income (Taxe immobilière sur les loyers) (Tax code Art. 198-204)A schedular tax on gross rental income received by individuals and companiesNoneMonthly rental income brackets
per unitRate
0 - 54,00010 percent
Over 50,00020 percent
1.2Companies, partnerships, and individual enterprises
1.2.1Tax on industrial, commercial artisanal, and agricultural profits (Impôts sur les bénéfices industrials, commerciaux, artisanaux et agricoles) (Tax code Art.1-32)An annual schedular tax levied on the net profits realized from activities carried on within the country. There is a 3-year carry-over for business losses.Cooperatives, agricultural credit unions, and mutual associations are exempt. Realized capital gains are exempt if reinvested within three years. General expenses, depreciation actually taken; taxes paid; reserves for losses and losses during the previous five years can be deducted.(i) Companies: 38 percent Petroleum and mining companies: 58 percent (no surcharge)

(ii) Individuals: 35 percent Artisans: 17.50 percent

FNI subscription: 10 percent of taxable income (0.20 percent of turnover), reimbursable in proportion to reinvestment.
1.2.2Unified professional tax (Taxe professionnelle unique, TPU)Based on rental value of business premises. Applied to small business (turnover of CFAF 40 million for purchases and sales and CFAF 10 million for services), in the towns where there is an urban land register (RFO)Are exempt:

- Government activities,

- moral entities,

- taxpayers subject to BNC,

- pharmacies,

- construction businesses.
13 percent of business rental value; includes all taxes due (BICC, IGR, TA, VAT, VP).
1.3.1Tax on income from movable capital (Impôt sur les revenus des capitaux mobiliers) (Registration code Art. 72-151)A schedular tax levied on dividends, interest, attendance fees, and other corporate distribution, paid by companies to companies and individuals. Tax withheld at sourceCertain exemptions (e.g. interest paid by credit unions) and reductions (e.g., on tax payable on transfers to holding companies) are permitted. Tax withheld is deductible from the base of the general income taxInterest on deposits and guarantees: 15 percent

Other: 18 percent (9 percent on payments by new companies for the first three years)
2. Social Security Contributions (Charges)(i) Retirement

(ii) Family allowance

(iii) Worker’s compensation
No celling on contribution base(i) Employer: 5.40 percent in the private sector and 14 percent in the public sector.

Employee: 3.60 percent in the private sector and 6 percent in the public sector.

(ii) Employer: 10 percent

(iii) Employer: 1 to 4 percent
3. Employer’s payroll taxes
3.1Payroll tax (versement patronal à la charge des employeurs)

(Tax code Art. 67-70
Levied on individual or corporate employers on the total amount of salaries, wages, allowances, and benefits in kind paid, including family allowances.The Central Government and local authorities are exempt. Also exempt are public entities, nonprofit organizations, diplomatic offices, and taxpayers subject to the unified professional tax (TPU). Retirement contributions are not deductible8 percent
3.2A prenticeship tax (Taxe d’apprentissage) (Tax code Art. 187-197)Annual tax levied on the same base as 3.1. Also paid by liberal professional employers subject to the tax on noncommercial profits. Since 1977 credited to a Treasury special account.Total or partial exemption may be granted to enterprises conducting special technical training or regular apprenticeship program2 percent
4. Taxes on property
4.1State inheritance and gift taxes
Inheritance end gift duty (Droits progressifs sur les mutations à titre gratuit) (Taxe code Art. 593-612)Imposed on the net value of property transferred free of chargeTransfers to the survivor of the military and civilian employees killed on duty are exempt. A deduction of CFAF 6 million is allowed for the children and the spouse and CFAF 4 million for each child, up to six. Tax reduced by 25 percent on transfers under a marriage contractRates are fixed by brackets of the net value of the property and by relationship of the recipients and very between 3 percent and 45 percent
4.2Financial and capital transactions
4.2.1Registration duties (Droits d’enregistrement) (Tax code Art. 541-586)Levied on property transfers, leases, increases in capital, company mergers, and other transactionsFixed duties of 1,000 to 7,000 plus a proportional duty varying from 1 (e.g. limited leases) to 12 percent (e.g., real estate sales, unlimited leases)
4.2.2Mortgage duty (Droit d’hypothèque) (Tax code Art. 955-961)(i) Registration

(ii) Recording of new titles, title transfers and title termination
0.50 percent0.25 percent
0.20 percent0.10 percent
5. Taxes on goods and services1/
5.1.1Value added tax (VAT) (Taxe sur la valeur ajoutée. TVA)

(TVA) GTC Art. 219-272)
Levied on receipts from the sale of goods and services, as well as on production and importsExemptions:

- Resale “as is” to retailers

- Products listed in Appendix I

- Medical consultations

- Construction of a first home

- Printing of newspapers and periodicals

- Sales of nonprofit organizations

- Public or private conveyors of passengers

- Insurance, banks and financial institutions

- Operations subject to registration

- Construction of low-rent housing


Deduction of upstream taxes. In production, processing, and wholesale importing, deduction of taxes paid upstream on goods, materials, and equipment used in the taxable activity.


18 percent

(Zero rate for exports)
5.1.2.Taxes on financial activitiesLevied on activities of banks and financial institutions.5 percent of value.
5.2Selective excises on goods
5.2.1Petroleum products (Taxe sur les hydrocarbures) (Tax code Art. 261-268)Rates applied to retail price:

Gasoline - 20 percent

Petroleum & Gas-oil - 0.5 percent

Oil and grease - 2 percent
5.2.2Beverages (Taxe intérleur sur les boissons) (Tax code Art. 261-268)Exemptions:

(i) Imported beverages

(ii) Those already taxed in Benin

(iii) Exports
13 percent of sale price.
5.2.3Cement (Taxe spécifique sur le ciment) (Tex code Art. 257-260)Levied on cement produced (pulverization of imported clinker) end used locally.1.1 percent of sale price.
5.2.4Wheat flour (Taxe spécifique sur le ferine de blé)

(Tax code Art. 269-272)
Levied on locally milled wheat flour.1.2 percent of sale price.
5.2.5Textiles (Taxe spécifique sur le textile fabriqué et consommé au Bénin) (Tex code Art. 273-276)Levied on locally produced and used textiles.6 percent of sale price.
5.2.6Soapa (Taxe spécifique sur le savon) (Tax code Art. 277-280)Levied on locally produced and consumed soap.5.5 percent of sale price.
5.5Taxes on use of goods and property, etc.
5.5.1Business and professional licenses license tax (Contribution des patentes) (Tax code Art. 997-1032)Levied on corporations or individuals engaged in commercial and industrial activities or professional services.Public entities, artists, fisherman, farmers, artisans are exempt. Newly established enterprises are granted a five-year exemptionConsists of two levies:

(i) Fixed levy based on the type of activity, number of employees and equipment

(ii) Proportional levy based on the rental value of premises, ranging from 6 percent to 17 percent.
5.3Selective taxes on services
5.3.1Insurance tax (Taxe sur les contrats d’assurance) (Tax code Art. 913-934)Levied on insurance premiums paid.Premiums paid by nonresidents to local insurance companies and premiums collected by agricultural mutual insurance companies are exempt.Fire30 percent
Life10 percent
Export credit guarantees0.25 percent
Other7.0 percent
5.4Tax on use of goods and property, etc.
5.4.1.Taxes on motor vehicles of companies

(Tax code Art. 326-32 V)
To be paid quarterly.Vehicles used only for achievement of company objectives.Motor vehicles with less than 7 HP; FCFA 150,000; others CFAF 200,000.
5.4.2Motor vehicle tax (Taxe sur les véhicules à moteur) (Tex code Art. 281-289)An annual tax on motor vehicles with two or more wheels.Government and diplomatic vehicles are exempt.A fixed tax ranging from CFAF 7,000 to 300,000 according to type, weight, or horsepower.
5.4.3Radio and TV tax (Taxe radiophonique et télévisuelle) (Tax code Art. 290-293)Levied on the import and on the use of radio and television sets for the benefit of the broedcasting authority.Annual tax of CFAF 500 per radio set

owned by texpeyer

CFAF 700 for 2 redio sets

CFAF 900 for 3 radio sets

CFAF 1,200 for more then 3 sets

CFAF 3,000 per television set
5.4.4Transit tax (Taxe de circulation)Levied on a few commodities, such as cigarettes and alcoholic beverages, in transit from Togo to Nigeria and on the trucks carrying them.NoneSpecific, rates range from CFAF 35 to CFAF 3,000, plus 2,000 per truck.
6. Other taxes
6.1Stamp dutiesLevied on

(i) stamped paper

(ii) commercial instruments

(iii) receipts
None(i) Fixed duty of 350 to 1,200

(ii) A proportional duty of 5 per thousend

(iii) A fixed duty on amounts of:
6.1.1Stamp duties (Droits de timbre) (Tax code Art. 613-777)Up to 100Exempt
101 to 100010
1,001 to 500025
5,001 to 10,00050
10,001 to 50,000100
Over 50,000
By tranche of 50,00030
7. Local authorities
7. Taxes on property
7.1.Real estate taxes
7.1.1.Tax on reel estate with buildingCollected on the rental value of buildings on real estate for industrial and commercial use.Exemptions: Public buildings, harbors, schools, religious buildings, medical and social facilities. 5-year exemptions for new buildings. Deductions: 45 percent for lodgings and 50 percent for factories.32 percent in Cotonou. Different rates in other localities.
7.1.2.Tax on real estate, not builtAssessed on the sale value of the property, as established by the Tax Directorate.Public properties, and land up to 5 hectares belonging to individuals. Land recently put under cultivation is exempt for 30 years.6 percent of the value in Cotonou, Porto Novo, Parakou, Natitingou, Djougou. Lower rates in other localities.
7.1.3Unified real estate tax (Taxe foncière unique TFU)Based on rental value in the area where the land registry (RFU) has been established. In this case, it replaces all other real estate taxes, the tax on rental income and the IGR.5 years exoneration for building for lodging purposes.(i) 13 percent when building is not rented.

(ii) 26 percent when building is rented.
7.2.License fees
7.2.1.PetenteCollected on companies and individuals practicing a commercial, service, or industrial activity.Public agencies, fishermen, farmers, and craftsmen are exempted. 5 years exemption for new industrial enterprises.Rates

Two rates:

(i) fixed amount according to the nature of activity and number of employees,

(ii) proportional rate on the basis of rental values (between 6 and 7 percent).
7.2.2LicensesLevied as under 7.2.1. on businesses that sell alcoholic beverages.None.Fixed amount according to size of enterprise and type of product sold.
7.2.3Unified professional tax (Taxe professlonnelle unique. TPU)Paid by taxpayers under 1.2.2; it replaces licenses, and patentes.See percent of rental value.
8. Other taxes: for garbage collection, on boats and motorized pirogue, on performance, local beer, furnished lodgings, advertising, electricity and water consumption.
Table I.Benin: Gross Domestic Product (GDP) by Sector of Origin at Current Prices, 1990-95
(In billions of CFA francs)
Primary sector181.4181.2198.4209.8215.3292.2351.5
Livestock, forestry, and fishing49.249.550.251.253.375.588.5
Secondary sector61.266.567.172.677.4114.8147.4
Manufacturing and handicrafts37.639.440.144.947.164.583.7
Construction and public works13.916.617.619.321.337.649.6
Mining and petroleum4.
Water, gas, and electricity5.
Tertiary sector218.6233.8244.6261.2279.4398.0476.9
Transport and other services36.638.241.244.747.867.678.0
Public administration50.252.350.552.855.172.479.8
Other services57.059.663.868.072.993.6103.6
GDP at factor cost461.2481.5510.2543.7572.1804.9975.8
Indirect taxes (net)18.020.825.627.229.742.860.0
GDP at market prices479.2502.3535.7570.8601.7847.71035.8
(In percent of GDP)
Primary sector37.936.137.036.835.833.433.9
Livestock, forestry, and fishing10.
Secondary sector12.813.212.512.712.913.514.2
Manufacturing and handicrafts7.
Construction and public works2.
Mining and petroleum0.
Water, gas, and electricity1.
Tertiary sector45.646.545.745.846.448.046.0
Transport and other services7.
Public administration10.510.
Other services11.911.911.911.912.111.010.0
GDP at factor cost96.295.995.
Indirect taxes (net)
GDP at market prices100.0100.0100.0100.0100.0100.0100.0
Sources: Institut National de la Statistique et de l’Analyse Économique (INSAE); the World Bank; and staff estimates.
Table II.Benin: Gross Domestic Product (GDP) by Sector of Origin at Constant 1992 Prices, 1990-95


(In billions of CFA francs)
Primary sector186.9202.8210.7214.6237.4238.9
Livestock, forestry, and fishing49.750.251.952.956.458.1
Secondary sector67.269.172.976.278.483.0
Manufacturing and handicrafts41.142.044.946.047.650.1
Construction and public works17.618.119.220.521.423.5
Mining and petroleum4.
Water, gas, and electricity4.
Tertiary sector250.7254.2262.2271.6278.2296.3
Transport and other services39.841.643.645.846.348.1
Public administration58.355.
Other services62.765.467.871.273.576.3
GDP at factor cost504.9526.1545.7562.3593.9618.2
Duties and taxes on imports22.
GDP at market prices527.0551.3573.7592.0617.7647.2
(Annual changes in percent)
Primary sector0.
Livestock, forestry, and fishing0.
Secondary sector9.
Manufacturing and handicrafts8.
Construction and public works14.
Mining and petroleum1.82.3-15.412.1-10.8-14.7
Water, gas, and electricity3.
Tertiary sector2.
Transport and other services3.
Public administration-1.5-5.3-2.0-
Other services1.
GDP at factor cost2.
Duties and taxes on imports22.814.011.16.0-20.022.1
GDP at market prices3.
Sources: Institut National de la Statistique et de l’Analyse Économique (INSAE); the World Bank; and staff estimates.
Table III.Benin: Supply and Use of Resources at Current Prices, 1990-95
Supply of resources655.6710.9761.2797.51127.01401.3
Gross domestic product502.3535.7570.8601.7847.71035.8
Imports of goods and nonfactor services153.3175.2190.4195.8279.3365.5
Domestic needs81.091.6101.5104.5153.9217.5
Nonfactor services36.839.
Use of resources655.6710.9761.2797.51127.01401.3
Gross domestic expenditure546.2581.4625.2662.1898.71136.3
Gross investment71.577.879.389.7133.5196.6
Fixed and portfolio investment67.572.876.387.4131.5172.6
Central government27.
Public enterprises and local authorities10.411.113.314.023.525.6
Private sector30.132.538.046.951.468.7
Change in stocks4.
Exports of goods and nonfactor services109.4129.5136.1135.5228.3265.0
Domestic exports32.137.134.931.696.9117.3
Nonfactor services31.234.637.838.957.162.8
Domestic savings27.632.125.029.382.596.1
Resource gap43.945.654.360.351.0100.5
Private transfers23.523.725.226.728.034.0
Public transfers (current)
Factor income paid abroad (net)-10.6-8.7-16.3-11.3-19.5-22.9
Gross national savings58.
Current account deficit-31.0-30.6-45.4-44.9-42.5-89.4
Sources: Beninese authorities (MPS and INSAE); World Bank; and staff estimates.
Table IV.Benin: Supply and Use of Resources at Current Prices, 1990-95(In percent of GDP)

Supply of resources130.5132.7133.4132.5131.4135.3
Gross domestic product100.0100.0100.0100.0100.0100.0
Imports of goods and nonfactor services30.532.733.432.531.435.3
Benin’s needs16.117.117.817.417.821.0
Nonfactor services7.
Use of resources130.5132.7133.4132.5131.4135.3
Gross domestic expenditure108.7108.5109.5110.0104.7109.7
Gross investment14.214.513.914.914.319.0
Fixed and portfolio investment13.413.613.414.514.016.7
Central government5.
Public enterprises and Local authorities2.
Private sector6.
Change in stocks0.
Exports of goods and nonfactor services21.824.223.822.526.625.6
Domestic exports6.
Nonfactor services6.
Domestic savings5.
Resource gap8.78.59.510.04.79.7
Private transfers4.
Public transfers (current)
Factor income paid abroad (net)-2.1-1.6-2.9-1.9-2.7-2.2
Gross national savings9.
Current account deficit-6.2-5.7-8.0-7.5-3.1-8.6
Sources: Beninese authorities (MPS and INSAE); World Bank; and staff estimates.
Table V.Benin: Producer Prices of Main Cash Crops, 1990-95(In CFA francs per kilogram)
Palm fruit303035353030
Seed cotton
High quality100100100100110110
Average quality758080808585
Groundnuts (unshelled) 1/506565858585
Cashew nuts90100115115115115
High quality160160140115115115
Average quality10010090606060
First quality135135135135135135
Second quality115115115115115115
Third quality707070707070
Sources: Ministry of Rural Development, Department of Planning and Research;and Société Nationale pour la Promotion Agricole (SONAPRA).
Table VI.Benin: Production and Cultivated Area of Principal Food Crops, 1989/90–1994/95
(In thousands of metric tons)
Rice (paddy)91110111214
Total cereals562542583607625644
(In thousands of hectares)
Cultivated area
Rice (paddy)788889
Total cereals660641659661676671
Source: Ministry of Rural Development, Department of Planning and Research.
Table VII.Benin: Marketed Production of Main Cash Crops, 1989/90–1994/95(In thousands of tons)
Palm fruit55.0
Palm kernels9.0
Seed cotton104.7146.1177.1162.0277.3266.5
Groundnuts (unshelled)69.263.974.173.773.877.6
Source: Ministry of Rural Development, Department of Planning and Research.
Table VIII.Benin: Production and Exports of Palm Products, 1990–95 1/(In thousands of metric tons)
Palm oil mills
Palm fruit processed65.957.449.355.954.325.7
Palm oil produced12.210.78.910.39.45.0
Palm kernel produced2.
Palm kernel oil mills
Palm kernels processed5.
Palm kernel oil produced2.
Palm kernel cake produced2.
Export volumes
Palm oil10.
Palm kernel oil5.
Palm kernel cake3.
Source: Société Nationale pour I’Industrie des Corps Gras (SONICOG).
Table IX.Benin: Energy Supply and Consumption, 1990–95
(In millions of barrels)
Production of crude oil1.
(In metric tons)
Official imports and sales
Sales of petroleum products 1/
Jet fuel16,14915,08816,15717,99717,06613,927
Gasoline: regular11,6786,60211,39217,86143,27937,053
Diesel fuel31,71130,97734,48941,17066,90367,926
Fuel oil and light distillates 2/6,0177,41110,58226,2189,028
Of which:
local network sales(31,385)(23,455)(29,161)(39,817)146,387150,932
direct sales to enterprises(45,416)(51,234)(48,872)(76,479)74,40054,789
Imports of petroleum products76,80174,14680,923119,926262,326238,005
Estimated unrecorded imports of petroleum products 3/109,797133,159135,77799,23713,39548,333
Estimated consumption of petroleum products 3/186,598209,830220,322231,338242,904255,050
(In thousands of kilowatt-hours)
Production available203,044221,698239,119259,000262,900289,600
Of which:
imported from Ghana(181,550)(198,730)(214,310)(233,000)(210,200)(256,400)
Sources: Société Nationale de Commercialisation des Produits Pétroliers (SONACOP); Société Béninoise d’Electricite et d’Eau (SBEE); and Projet Pétrolier de Sèmè.
Table X.Benin: Retail Price of Major Petroleum Products, 1990-95(In CFA francs per liter)
Premium gasoline175175175175175175
Regular gasoline170170170170170170
Source: Société Nationale de Commercialisation des Produits Pétroliers (SONACOP).
Table XI.Benin: Transportation Activity, 1990-95
(In thousands of metric tons)
Port traffic
Of which:
palm products(7.0)(—)(10.1)(2.6)(12.5)(0.5)
cotton products(83.0)(90.0)(177.4)(149.1)(198.7)(196.0)
Of which:
Of which to:
Burkina Faso(17.0)(51.0)(44.2)(47.6)(33.7)(20.8)
(In units indicated)
Rail traffic
Passengers (in millions/kilometer)
Freight (in millions of tons/kilometer)148.0163.0238.0225.3253.0388.4
Upfreight (in thousands of metric tons)267.0284.0246.6244.9268.0211.0
General merchandise 1/
To Benin60.
To Niger144.0190.0154.7138.1155.0116.0
To Benin27.
To Niger36.020.034.745.454.048.0
Downfreight (in thousands of metric tons)
From Benin73.
From Niger5.
Air traffic (Cotonou)
Passengers (in thousands) 2/112.4
Freight (in tons)2,636.0
Mail (in metric tons)248.0
Sources: Ministère des Transports, Direction du Port Autonome de Cotonou; Organisation Commune Benin-Niger de Chemins de Fer et des Transports (OCBN).
Table XII.Benin: Distribution of Paid Employment by Category of Employer and by Qualification, 1989-95
Distribution by category of employer
Civil service 1/46,28044,41943,84635,42833,38532,69732,277
State enterprises23,453
Private sector and international organizations45,000
Distribution by qualification
Middle management and foremen7,4157,1407,156
Skilled and semiskilled27,58326,44225,967
Unskilled labor4,3934,1414,066
Source: Ministry of Labor and Social Affairs.
Table XIII.Benin: Retail Prices of Selected Products, 1990-95 1/


Bread 2/MaizeCassava



(In CFA francs/kilogram)(In CFA francs/liter)
Dec. 1987355170210147203349465715
Dec. 1988300295210191228443450781
Dec. 1989350340210200190340450675
Dec. 199033724921074169286775530
Dec. 199130030021010099269400475
Dec. 199225128821050102219375276
Dec. 199324029421050102158382338
Dec. 1994 3/418350101325800500
Dec. 1995 3/450312350144126306700450
(Monthly average)
1994 3/44232090313604329
1995 3/472298350119123309759494
(Annual changes in percent)
1994 3/11.555.2-
1995 3/6.89.432.2-1.325.750.2
Source: BCEAO, Statistiques économiques et monétaires, and Institut National de la Statistique et l’Administration Economique (INSAE)
Table XIV.Benin: Controlled Prices of Selected Consumer Products, 1989-95
(Unit prices, in CFA francs)
Flour, wheat146162162209228
Milk, formula Nestlé210210213201203330320
Sugar, lump252286240380455
Cloth, wax lock20,37220,71018,63141,81744,117
Corrugated iron sheets1,4081,0801,9281,983
(Index 1985=100)
Flour, wheat93103103133145
Cloth, wax lock979989200211
Corrugated iron sheets9573130134
Source: Ministère du Commerce, Direction du commerce extérieur.
Table XV.Benin: Consumer Price Index in Urban Areas, 1992-95 1/(Index, December 1991=100)
Changes in percent5.90.438.514.5
Source: Institut National de la Statistique et l’Administration Economique (INSAE).
Table XVI.Benin: Industrial Minimun Legal Wage, 1985-95(In CFA francs per hour)
January 198581.21
January 198681.21
January 198781.21
January 198881.21
January 198981.21
January 199081.21
January 199181.21
January 199281.21
January 199381.21
May 1994117.12
January 1995117.12
Source: BCEAO, Ministère du Travail et des Affaires Sociales.
Table XVII.Benin: Consolidated Government Operations, 1989-95

(In billions of CF francs)
Total revenue44.949.961.569.877.7106.2149.1
Tax revenue34.439.647.257.465.891.6123.0
Customs duties17.520.825.528.232.742.160.3
Direct and indirect taxes10.518.221.728.932.849.362.7
Nontax revenue10.610.314.312.411.814.526.1
Total expenditure96.0100.1100.3115.2106.1164.4221.9
Primary expenditure 1/54.556.358.862.664.788.3126.0
Salaries, pensions, and scholarships44.143.445.548.246.556.165.4
Of which: wage bill36.936.337.339.237.745.753.9
pensions and scholarships7.
Other expenditure and current transfers9.011.911.712.915.227.947.5
Of which: externally financed social outlays0.91.5
Budgetary contribution to investment1.
Primary balance 2/-9.6-
Interest due15.015.313.920.815.926.227.9
Domestic debt2.
External debt12.210.68.716.011.322.525.2
Investment expenditure (financed from abroad)24.526.026.622.625.549.965.0
Emergency social program2.
Net lending1.03.0
Overall deficit (commitment basis) 3/-51.1-50.1-38.8-45.4-28.4-58.3-72.7
Change in domestic arrears 4/-13.7-7.71.1-6.4-9.5-10.6-17.0
Overall deficit (cash basis)-64.8-57.8-37.7-51.8-37.9-68.9-89.7
Bank financing-4.64.3-7.4-1.6-2.4-9.49.3
Net use of Fund resources2.
Nonbank financing2.3-
Sales of assets3.
Rehabilitation of the banking system-0.4-4.1-4.6-1.4-2.6-3.1
Projects grants29.712.08.89.410.421.526.6
Drawings on project loans11.414.017.812.013.324.335.4
Amortization due-30.2-11.1-9.5-30.9-11.1-22.1-19.4
Foreign bank bond financing 5/6.9-3.2
Change in principal arrears-66.42.1-9.41.6-3.2
Program assistance23.526.116.616.120.430.915.6
Debt relief obtained99.45.926.238.57.923.722.3
Of which: impact of debt cancellation by Franc0.61.8
Financing gap 6/
(In percent of GDP)
Memorandum items:
Primary expenditure11.411.
Primary balance-2.0-
Overall balance, commitment basis (deficit—)-10.7-10.0-7.2-8.0-4.7-6.9-7.0
Government investment outlays5.
Wage bill as a ratio of total revenue (in percent)82.272.760.756.248.543.136.1
Education expenditure2.32.82.6
Health expenditure0.50.70.6
Military expenditure1.00.90.9
Sources: Data provided by the Beninese authorities; and staff estimates and projections.
Table XVIII.Benin: Central Government Investment Expenditure, 1990-95(In billions of CFA francs)
Rural development12.
Tourism and commerce0.
Sources: Ministry of Planning and Statistics, Direction de la Planification et de la Coopération Technique; and staff estimates.
Table XIX.Benin: Public Enterprises and Local Government Investment Expenditure, 1990-95(In billions of CFA francs)
Rural development0.
Tourism and commerce2.
Sources: Ministry of Planning and Statistics, Direction de la Planification et de la Coopération Technique; and staff estimates.
Table XX.Benin: Public Enterprises and Local Government Investment Expenditure, 1990-95(In billions of CFA francs)

Domestic financing1.
National budget1.
CAA/FNI 1/0.4
Other 2/
External financing27.427.021.527.953.762.0
Sources: Ministry of Planning and Statistics; and staff estimates.
Table XXI.Benin: Local Government Investment by Source of Financing, 1990-95(In billions of CFA francs)
Domestic financing0.
Local government budget0.
Self— financing and other0.030.04
External financing0.020.430.750.600.43
Sources: Ministry of Planning and Statistics, and staff estimates.
Table XXII.Benin: Public Enterprise Investment by Source of Financing, 1990-95(In billions of CFA francs)
Domestic financing1.201.300.980.960.760.46
National budget
Self financing1.200.900.780.960.760.46
External financing7.359.5711.7913.5223.9721.05
Plan target15.00
Implementation rate (in percent)57
Sources: Ministry of Planning and Statistics, and staff estimates.
Table XXIII.Benin: Nonwage Current Expenditure, 1990-95(In millions of CFA francs)
Material expenditures (budget)6,3377,58613,54211,63521,05330,950
Of which: education(…)(3,100)(…)(…)(2,156)(5,462)
Operating expenditure of the Autonomous Amortization Fund469330344366479539
Road Fund9849931,0301,0351,5661,639
Deficit of Cotton Support Fund
Counterpart of earmarked taxes 1/12566103137153945
Equipment budget 2/8006795886729981,059
Source: Ministry of Planning and Statistics, and staff estimates
Table XXIV.Benin: Central Government Revenue, 1990-95
(In millions of CFA francs)
Taxes on income and profits11,46512,05215,04118,07830,47640,159
Arrears of taxes on income and profits3,3112,4891,3292,1711,4162,493
Other taxes on income and profits2112687581,1301,3043,012
Taxes on payroll and work force9171,1131,3501,3271,7362,032
Taxes on property5331,2311,55788811711,328
Domestic taxes on goods and services5,3097,11210,83512,81415,56519,206
Turnover taxes2,0773,9836,6017,76111,38510,434
Taxes on specific services2792363254739151,005
Motor vehicle taxes314523509583715796
Arrears of taxes on goods and services6524903006025805,203
Taxes on international trade and transactions21,41325,74028,48432,72142,12060,295
Import duties20,87425,14427,92129,97538,54356,378
Export duties539596563563350350
Total tax revenue39,63747,24857,26765,82891,068123,020
Nontax revenue10,29814,31412,40811,82614,54926,127
From nonfinancial public enterprises1,9831,4721,6322,3243,14810,698
Contribution to government employees pension fund4,2005,8504,7705,0035,5027,307
Repayment on on-lending1,6192,4263,3382,5324,1854,768
Other nontax revenue2,4964,5662,6681,9671,7143,355
Total revenue49,93561,56269,67577,654105,617149,147
(In percent of GDP)
Taxes on income and profits2.
Payroll taxes0.
Domestic taxes on goods and services1.
Taxes on international trade4.
Total revenue9.911.512.212.912.514.4
(In percent of tax revenu)
Taxes on income and profits28.925.526.327.533.532.6
Taxes on property1.
Payroll taxes2.
Domestic taxes on goods and services13.415.118.919.517.115.6
Taxes on international trade54.054.549.749.746.349.0
Total revenue100.0100.0100.0100.0100.0100.0
Source: Ministry of Finance, Cotonou.
Table XXV.Benin: Operations of the Social Security Fund, 1990-95(In millions of CFA francs)
Family allowances1,7821,9962,0252,2192,2712,817
Workmen’s compensation417467474519595738
Other revenue98106142511129360
Total receipts3,8664,3524,4515,2325,5377,068
Family allowances581478576554537527
Workmen’s compensation191160142124114126
Other expenses1,8711,8571,5041,3031,0311,374
Total expenditure5,2504,6094,5743,9833,9184,467
Surplus/Deficit (-)-1,384-257-12312491,6192,601
Source: Office Béninois de Sécnrite Sociale (OBSS).
Table XXVI.Benin: Monetary Survey, 1990-95 1/
(In billions of CFA francs)
Net foreign assets 2/16.648.572.881.2122.7145.2
Net domestic assets73.472.376.380.4106.6117.8
Domestic credit79.274.481.984.2107.2118.4
Net claims on Government76.365.763.357.166.074.3
Net claims on Central Government77.770.366.464.167.276.5
Net credit to Central Government26.920.016.113.867.276.5
Other claims (BCEAO)50.850.350.350.3
Other government deposits (projects)
Credit to nongovernment sector2.98.718.627.140.644.1
SDR Allocations3.
Medium- and long-term liabilities of the commercial banks0.
Other items, net3.
Revaluation account8.08.0
Broad money (M2)88.6116.2146.0154.6217.8252.8
Currency 2/39.246.351.825.541.551.6
Bank deposits47.868.292.3128.5174.3198.4
Deposits with CCP1.
Memorandum items:
(In percent of broad money at the beainning of the period)
Net foreign assets54.836.020.95.829.010.3
Net domestic assets9.6-
Domestic credit21.3-
Net claims on Government17.7-12.0-2.1-4.2-2.33.8
Net claims on Central Governmentt20.1-8.4-3.4-1.6-6.14.3
Credit to nongovernment sector3.
Broad money62.
Velocity of broad money7.
Net domestic assets of the Central Bank69.067.372.725.050.3
Bank deposits at the BCEAO52.869.981.330.92.0
Interbank lending to WAEMU banks27.3
Sources: BCEAO and, staff estimates.
Table XXVII.Benin: Summary Accounts of the Central Bank (BCEAO), 1990-95(In billions of CFA francs)
Gross foreign assets21.249.767.568.8138.197.3
Franc zone currency
Reserve tranche position at the IMF
Operations account
Gross claims on the Government81.479.879.073.740.853.7
Central Administration81.479.879.073.740.553.7
Treasury overdraft27.222.922.410.91.78.94
Discount of public bills0.80.3
Trust Fund and SAF on-lending2.66.36.312.538.844.8
Other claims (consolidated debt)50.850.350.350.3
Other public bodies
Bank notes and coin outside the banking system39.246.551.841.077.551.6
Government deposits and cash8.316.711.617.519.024.9
Central Administration4.79.910.012.710.510.7
Other public bodies2.
Cash held by the Treasury0.
Commercial banks deposits and cash35.352.869.991.030.928.4
Public enterprises deposits3.
Short—term foreign liabilities1.
Of which: operations account(—)(—)(—)(—)(—)(—)
SDR allocations3.
Long-term foreign liabilities 1/
Other items, net8.90.20.4-27.1-0.5-8.6
Source: Central Bank of the West African States (BCEAO).
Table XXVIII.Benin: Summary Accounts of the Commercial Banks, 1990-95 1/(In billions of CFA francs)
Cross foreign assets2.86.013.419.729.376.3117.1
Gross claims on the Government37.432.9
Central administration37.432.9
Other public bodies
Credit to the private sector0.92.98.718.626.540.644.1
Total assets11.644.574.7108.3146.8184.4226.4
Total liabilities11.644.574.7108.3146.8184.4226.4
Government deposits3.
Central administration3.
Other public bodies4.07.37.519.229.525.5
Private sector deposits7.837.656.782.498.4137.0159.7
Central bank refinancing
Short-term foreign liabilities6.
Long-term foreign liabilities0.
Other items, net-5.7-
Source: Central Bank of the West African States (BCEAO).
Table XXIX.Benin: Net Claims on the Government, 1990-95 1/(In billions of CFA francs)
Central Bank26.619.621.016.230.443.7
Gross Claims on Central Government30.629.528.723.240.853.7
Advances to the Treasury27.222.922.410.71.78.9
Public bills rediscounted0.80.3
Trust Funds on-lending
SAF and ESAF on-lent2.66.36.312.539.144.8
Autonomous Amortization Fund (CAA) and National Investment Fund (FNI)
Road Fund
Central Government Deposits4.
Fund for Indemnity and Rehabilitation (FIR)
Autonomous Amortization Fund (CAA) and National Investment Fund (FNI)
Road Fund0.
Cash held by the Central Government0.
Commercial Banks-1.3-1.1-6.8-3.134.730.0
Gross Claims on Central Government0.136.032.9
Treasury bonds36.032.5
Central Government Deposits1.
Autonomous Amortization Fund (CAA) and National Investment Fund (FNI)
Fund for Indemnity and Rehabilitation (FIR)
Road Fund0.
Deposits with the Postal Checking System1.
Central bank’s other claims on Government50.850.350.350.3
Project-related deposits with the BCEAO1.
Total net claims on the Government76.365.763.357.166.674.3
Source: Central Bank of the West African States (BCEAO).
Table XXX.Benin: Distribution of Credit to the Economy, 1990-94 1/(In billions of CFA francs: end of period)
Of which: public and semipublic enterprises(24,148)(22,394)(4,359)(4,279)(694)
Of which: public and semipublic enterprises(8,987)(7,693)(5,494)(5,220)(4,546)
Of which: public and semipublic enterprises(1,342)(1,340)(648)(648)(47)
Grand total81,44674,55360,78863,74466,070
Of which: public and semipublic enterprises(34,477)(31,427)(10,501)(10,147)(5,287)
Source: Central Bank of West African States (BCEAO)
Table XXXI.Benin: Central Bank Lending Rates, 1975-96(Percent per annum, end of period)
Preferential discount rate (TEP) 1/Norm: discount rate (TEN)Advances against securities (TEN + 1.5 %)Rediscount rate (IBS)Special rate for advances to Treasury 1/Repurchase rateAvg. monthly money market rate (TMM)Interbank rate
1975 - July5.58.09.5
1980 - April8.010.512.0
1982 - April10.012.514.0
1983 - April8.010.512.0
1986 - March7.09.511.0
1988 - December7.59.511.0
1989 - March9.010.011.5
October 2/10.59.25010.250
1991 - November11.09.72510.725
1992 - August13.09.72512.725
1993 - April12.59.72511.225
October 3/12.59.72510.509.350
1994 - January14.57.79412.757.9408.19-12.00
1995 - January9.04.5007.005.5005.00-6.25
1996 - January7.54.5056.505.5005.25-6.50
Source: Central Bank of the West African States (BCEAO).
Table XXXII.Benin: Commercial Bank Interest Rates, 1986-95(In percent per annum, end of period)
Rates applicable after
Sept. 22,








Jan. 19,







Demand deposits 1/susp.susp.susp.freefreefreefreefreefreefreefreefreefreefreefree
Time deposits from CFAF 500,001 to 5,000,000 2/3/
Less than 6 months5.256.006.506.50 min.7.00 min.9.00 min.8.50 min.TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/
Six months to one year6.507.257.757.50 min.8.00 min.10.00 min.9.50 min.TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/
Over one year7.50 min.8.50 min.9.00 min.8.50 min.9.00 min.11.00 mtn.10.50 min.freefreefreefreefreefreefreefree
Certificates of deposit over

CFAF 500.000 2/3/
Six months to one year6.507.257.757.50 min.8.00 min.10.00 min.9.50 min.TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/TMM-2% 4/
Over one year7.50 min.8.50 min.9.00 min.8.50 min.9.00 min.11.00 min.10.50 min.freefreefreefreefreefreefreefree
Passbook savings6.507.007.506.507.00 fixed9.00 fixed8.50 fixed4.50 mi:8.00 mi:5.00 mi:4.50 mi:4.50 mi:4.50 mi:4.50 mi:4.50 mi:
Lending rates 57.00-13.508.50-14.5010.00-15.0015.50 max.16.00 max.18.00 max.17.50 max.21.00 ma29.00 ma24.00 ma20.00 ma20.00 ma18.00 ma17.00 ma15.00 ma
Source: Central Bank of the West African States (BCEAO).
Table XXXIII.Benin - Blocked Assets and Frozen Deposits of the Banking System, 1990-95 1/
Blocked assetsFrozen Deposits
Claims on private sector at end-June 1990144.7Frozen deposits at end-June 199070.8
Public enterprises(62.0)Government deposits13.6
Private enterprises(82.7)Private sector deposits57.2
Liquid recovery during 1990-9514.6Cash reimbursements, 1990-9528.0
Public enterprisesFIR16.0
Private enterprises14.6Public agencies outside the Government8.4
Private sector7.6
Offsets during 1990-9548.5Syndic12.0
Public sector39.6Private sector deposits12.0
Private enterprises8.9
Offsets. 1990-9519.6
Liquidation losses12.4
Public enterprisesSituation at end–Dec. 1995 2/23.2
Private enterprises12.4Government deposits13.5
Private sector deposits9.7
Claims on private sector at end–Dec. 199569.2
Public enterprises 2/30.0
Private enterprises39.2
Sources: BCEAO, Cotonou and “Rapports d’activité du Syndic.”
Table XXXIV.Benin: Reimbursement of Frozen Deposits, 1990-95 1/

Cash ReimbursementsFrozen deposits
Sept. 19891990-93199419951990-95Dec. 1995
Operations of the FIR37.313.32.10.616.0
Public agencies13.
Of which: OBSS(2.7)(1.7)(—)(—)(1.7)
Small private depositors24.
Operations of the Syndic37.
Sources: BCEAO. Cotonou, and “Rapports d’activité du Fonds d’Indemnisation et Réhabilitation (FIR) et du Syndic.”
Table XXXV.Benin: Balance of Payments, 1990-95

(In billions of CFA francs)
Trade Balance-38.3-41.1-50.1-56.1-35.8-76.0
Exports, f.o.b.
Domestic exports32.137.134.931.696.9117.3
Re-exports, f.o.b.46.257.963.364.974.485.0
Imports, f.o.b.-116.5-136.1-148.4-152.6-207.0-278.2
Domestic imports-81.0-91.6-101.5-104.5-153.9-217.5
Imports for re-exports-35.5-44.5-46.9-48.1-53.1-60.7
Services (Net)-16.2-13.2-20.5-15.5-34.7-47.4
Nonfactor services-5.6-4.5-4.2-4.2-15.2-24.5
Factor services-10.6-8.7-16.3-11.3-19.5-22.9
Of which: interest due-10.6-8.7-16.3-11.3-22.5-25.9
Unrequited Private Transfers (Net)23.523.725.226.728.034.0
Current balance before grants-31.0-30.6-45.4-44.9-42.5-89.4
Official grants (net)36.128.735.040.946.753.4
Current Account after grants5.1-1.9-10.4-4.04.2-36.0
Capital Movements (Net)11.322.0-3.84.620.336.0
Medium- and long- term capital17.520.9-11.912.916.030.6
Disbursements 2/28.630.419.526.838.150.1
Amortization due 3/-11.1-9.5-31.4-13.9-22.1-19.4
Long-term private capital0.51.07.0-
Short-term capital and errors and omissions-
Overall Balance16.420.1-14.20.624.50.2
Change in net foreign assets-29.9-32.0-24.2-10.1-44.9-22.5
Central Bank-26.0-24.5-18.43.9-13.17.9
Deposit money banks-3.9-7.5-5.8-14.0-31.8-30.4
Change in external arrears7.6-14.31.6-3.3
Debt relief5.926.238.47.923.722.3
Remaining Financing Gap
Memorandum items
Current account deficit (excluding official grants)-6.2-5.7-8.0-7.5-5.0-8.6
Overall balance3.33.8-
Source: Data provided by the Beninese authorities; and staff estimates.
Table XXXVI.Benin: Balance of Payments, 1990-95

(In millions of U.S. dollars)
Trade Balance-140.6-145.8-189.4-198.1-64.4-152.2
Exports, f.o.b.287.2336.7371.2341.0308.4405.2
Domestic exports117.7131.6132.0111.7174.5234.9
Imports, f.o.b.-427.9-482.5-560.7-539.1-372.8-557.4
Domestic imports-297.5-324.7-383.5-369.2-277.1-435.8
Imports for reexport-130.4-157.7-177.2-169.9-95.7-121.6
Services (Net)-59.4-46.7-77.5-54.9-62.6-95.0
Nonfactor Services-20.4-16.0-15.9-15.0-27.4-49.2
Factor services-38.9-30.7-61.6-39.9-35.1-45.9
Of which: interest due-38.9-30.7-61.6-39.9-40.5-51.9
Unrequited Private Transfers (Net)86.384.095.294.350.468.1
Current Account before grants-113.7-108.5-171.7-158.7-76.5-179.1
Official grants (net)132.6101.7132.3144.484.0106.9
o/w: Projects grants58.845.459.362.954.570.5
Program grants55.136.953.463.221.627.6
Current Account after grants18.9-6.7-39.4-14.27.5-72.1
Capital Movements (Net)41.378.0-14.316.436.672.6
Medium- and long-term64.374.1-45.045.628.861.3
Amortization due-40.7-33.7-118.6-49.1-39.8-39.0
Long-term private capital1.83.526.4-
Short-term capital and errors and omissions-
Overall Balance60.271.2-
Change in net foreign assets-109.8-113.4-91.4-35.7-80.9-45.1
Central Bank-95.5-86.8-69.513.8-23.615.8
Deposit money banks-14.3-26.6-21.9-49.4-57.3-60.9
Change in ext arrears (+ incr)27.9-50.75.7-5.9
Debt relief21.792.9145.127.842.744.6
(In percent of GDP)
Current account deficit (excluding official grants)-6.2-5.7-8.0-7.5-5.0-8.6
Overall balance3.33.8-
Sources: Data provided by the Beninese authorities; and staff estimates.
Table XXXVII.Benin: Value, Volume, and Unit Value of Recorded Exports, 1990-95

(In billions of CFA francs)
Ginned cotton19.926.225.120.968.386.9
Seed cotton1.
Cotton cake0.10.1
Palm oil0.
Palm kernel oil0.
Palm kernel cake0.1
Sheanut butter0.10.30.1
Crude oil7.
Other products2.
(In thousands of tons)
Ginned cotton42.
Seed cotton52.254.689.082.5154.4134.0
Cotton cake1.
Palm oil10.
Palm kernel oil2.
Palm kernel cake3.
Sheanut butter0.52.20.5
Crude oil175.0188.9136.9150.8134.296.5
conversion factor7.
In millions of barrels1.
(In thousands of CFA francs/kg)
Unit value
Ginned cotton472.2441.8338.1318.3674.7908.4
Seed cotton34.737.727.430.164.861.2
Cotton cake25.425.020.529.766.025.0
Palm oil84.8110.795.798.6202.1310.0
Palm kernel oil100.2147.0182.1320.6325.0
Palm kernel cake19.020.211.820.027.525.0
Sheanut butter125.0124.8125.0297.2297.2
Crude oil40.333.031.431.553.652.3
conversion factor7.
In CFAF/barrel5,5704,5704,3414,1077,4167,237
In U.S. dollars/barrel20.516.216.414.313.414.5
Sources: BCEAO; Sèmè Oil Project; and SONAPRA.
Table XXXVIII.Benin: Exports of Crude Oil, 1990-95
Price obtained by Benin
U.S. dollars per barrel20.4616.5916.2014.6313.4014.50
CFA francs per barrel5,5744,6034,3154,1077,4167,237
Volume exported

(in millions of barrels)
Export receipts

(in billions of CFA francs)
Source: Sèmè oil project.
Table XXXIX.Benin: External Trade Indices, 1990-95
(1985 = 100)
Merchandise exports, f.o.b. (excluding re-exports)
Value index 1/91.7106.2100.090.5277.2335.5
Volume index70.886.0100.094.7142.3143.6
Unit value index 1/134.8125.6100.0101.0210.9264.4
Merchandise imports, f.o.b.
Value index 1/79.890.3100.0103.0151.6214.3
Volume index84.887.3100.0100.875.9104.9
Unit value index 1/94.1103.4100.0102.2199.8204.4
Terms of trade index143.3121.5100.098.8105.6129.4
(Annual percentage change)
Merchandise exports, f.o.b.
Value index 1/8.815.8-5.9-9.5106.321.1
Volume index8.421.416.3-5.350.20.9
Unit value index 1/8.6-6.8-20.61.0108.925.4
Merchandise imports, f.o.b.
Value index 1/
Volume index47.62.914.60.8-24.738.2
Unit value index 1/-22.79.9-
Terms of trade index40.5-15.3-17.7-1.26.922.5
Sources: Data provided by the Beninese authorities; and staff estimates.
Table XL.Benin: Services and Private Transfers, 1990-95(In billions of CFA francs)
Services, net-16.2-13.2-20.5-15.5-34.7-47.4
Freight and insurance2.
Investment income
Government operations5.
Other services1.
Other transport15.116.618.518.526.127.6
Freight and insurance-20.6-24.0-26.2-26.9-36.5-43.4
Investment income-10.6-8.7-16.3-11.3-19.5-22.9
Government operations-4.0-4.0-4.1-4.1-9.5-10.0
Other services-4.0-4.2-4.5-4.5-12.7-13.3
Other transport-5.0-4.0-4.0-4.4-10.3-10.4
Private transfers23.523.725.226.728.034.0
Sources: Data provided by the Beninese authorities; and staff estimates.
Table XLI.Benin: Stock of Public and Guaranteed External Debt, 1990-95(In billions of CFA francs)
Medium- and long-term debt
Multilateral institutions 1/152.7162.5176.5201.7462.2497.0
Bilateral creditors172.3176.9212.4208.6270.4352.4
Paris Club93.7100.0140.2133.2143.1200.4
Of which:
United Kingdom(2.4)(2.3)(1.6)(1.7)(3.0)(2.9)
Other creditors78.676.972.275.4127.3152.0
Total debt outstanding325.0339.4388.9410.3732.6849.4
Memorandum items:
Stock of external arrears15.13.2
Debt outstanding, in percent of GDP64.763.467.869.286.477.3
Source: Caisse Autonome d’Amortissement.
Table XLII.Benin - Debt Service Obligations on Public and Publicly Guaranteed Debt, 1990-95(In billions of CFA francs)
Multilaterals (excluding IMF)
Paris Club (Meduim-term debt)4.83.410.34.68.810.7
Other bilateral creditors2.
Short–term debt0.20.31.1
Postal debt1.81.6
Other (dette Hospitalière)
Multilaterals (excluding IMF)
Paris Club (Meduim term debt)1.42.324.
Other bilateral creditors5.
Short-term debt1.
Postal debt2.12.3
Other (dette Hospitalière)
Total debt service due21.718.147.725.245.145.7
Rescheduling obtained5.926.738.47.923.722.3
Of which: Paris Club(5.9)(20.7)(32.3)(1.9)(5.6)(5.9)
Debt service actually paid15.85.29.317.321.423.4
Sources: CAA; and staff estimates.

The public sector in Benin comprises the Central Government, local authorities, and nonfinancial public enterprises. The Central Government’s budget covers the financial operations of the Treasury, the Autonomous Amortization Fund (Caisse Autonome d’Amortissement), the National Investment Fund (Fonds National d’Investissement), the Road Fund (Fonds Routier) and the Stabilization Fund (Fonds de Stabilisation).

Although the institutional structure of the Central Government’s operations remains as described in SM/87/220, remarkable efforts have been made since 1989 to improve budgetary procedures. Specific measures taken to this end have included the strengthening of budget execution and control procedures, the adoption of a new budget nomenclature, and the integration of special accounts of the Treasury into the Central Government’s budget. In 1995, the Budget directorate has begun to monitor budget execution on a quarterly basis.

After debt relief.

Since late 1994, a new system of taxation of foreign-financed public investment outlays has been implemented. Investment expenditures are subject to both customs and indirect domestic taxation, and revenues appear both on the revenue side and on the expenditure side of the Government’s balance.

In 1993, the wage bill dropped by 3.1 percent, reflecting the impact of the program of voluntary departures from the civil service (PDV). Under the voluntary departure program of 1992-93, 2,610 employees left the civil service in 1992 and 2,338 in 1993, including 1,619 nonpermanent employees, corresponding to 9.6 percent of the civil service at end-1991. This follows 1,560 departures in the first phase of voluntary departures in 1989-90.

The adjustment implies more spending on gross wages and more resources for the Civil Service Retirement Fund, which is included in the Government Budget.

For a description and analysis of the monetary arrangements in the WAEMU, see Annex III of the IMF Occasional Paper No. 138, Aftermath of the CFA Franc Devaluation. Washington, May 1996.

The consolidated claims are on WAEMU member governments and arose from the restructuring operations of the national banking systems in the late 1980s. The claims, carrying an original maturity of 15 years and an interest rate of 3 percent, totaled some CFAF 440 billion, including CFAF 44 billion initially from Benin. The claims were securitized in July 1994; the bonds were offered with a tax-free interest rate of 5 percent, with the BCEAO paying the difference between that rate and the nominal interest rate.

For a discussion on the monetary policy framework in the WAEMU as well as an overview on the BCEAO’s monetary policy instruments, see Annex III of the IMF Occasional Paper No. 138, Aftermath of the CFA Franc Devaluation. Washington, May 1996. In addition, the latest report on recent economic developments in Benin (SM/94/72) provides a description of the previous system of monetary control and the beginning of the reform process.

For a description of the factors leading to the banking crises and the strategy adopted to rehabilitate the financial system, including the role of the SYNDIC, see the latest report on recent economic developments (SM/94/72).

The prudential ratios currently in force are as follows: (a) a risk-weighted capital asset ratio of 4 percent, which in the future is to be raised gradually to the international standard of 8 percent; (b) a maximum ratio of 100 percent of fixed assets and participation relative to the capital base; (c) a maximum ratio of 100 percent of loans and commitments to a single borrower relative to the capital base; (d) a minimum liquidity ratio of 60 percent, defined as liquid assets in relation to short-term liabilities; (e) a maximum rate of 20 percent of the capital base for loans and commitments to a bank’s staff and management; (f) a minimum ratio of long-term bank resources to long-term credit of 75 percent, intended to prevent maturity mismatching; and (g) a ratio measuring the structure and quality of a bank’s credit portfolio, defined as the quotient of credits admissible to central bank refinancing to total credit, to be at least 60 percent.

Measures of money growth in CFA franc zone countries must be interpreted with care because of the difficulties associated with the computation of currency in circulation in each country.

In September 1994, the BCEAO increased the bonds’ attractiveness by guaranteeing that the bonds could be redeemed at par at the BCEAO at the purchaser’s own initiative and be used in the fulfillment of minimum reserve requirements.

Some 1,800 customers, 75 percent of them women, made use of PADME between August 1993 and July 1995. The average loan size was US$500.

Several weaknesses exist in the balance of payments data; in particular, informal imports are not registered, service items and worker’s remittances are estimated, and there is limited knowledge of private capital flows. Assistance has been provided to the BCEAO to improve the external accounts.

Informal trade flows between Benin and Nigeria also include border trade of staples (maize, cassava, yams, and beans), smuggling of seed cotton to take advantage of the producer price differential, and exports of Beninese-printed cotton fabric (“fancy” made by the SOBETEX).

Although the rates remained unchanged, the cost of import duties rose as a result of the increase in the exchange rate (from 22 to 83 naira per U.S. dollar) used to calculate the c.i.f. value of imported products.

In early 1996, the Beninese authorities decided to liberalize the import and distribution of petroleum products.

Following the closing of the Kaduna refinery in July 1995 for maintenance, and that of Port-Harcourt (Nigeria’s most important refinery) in November because of sabotage, Nigeria had to import petroleum products.

These products prohibited in Nigeria are also imported under the “special transit” customs regime reserved for nonresident importers (mainly Nigerian), and are subject to full customs duties.

Since 1991 imports destined for Benin are subject to pre-shipment inspection in order to limit fraud and reduce undervaluation. Imports with transit status, including “special” transit, have been exempted from the pre-shipment inspection. However, since “special” transit imports are cleared by customs for Benin consumption, and as customs officials have noted the large undervaluation on these operations, in 1994 the authorities decided to extend the pre-shipment inspection to the “special” transit imports as well.

Alternative calculations were made with an initial capital-output ratio of 1.3 and 1.8 in 1970, depreciation rates of 0.03 and 0.1 and a capital share of 0.4. A detailed report on empirical studies of growth accounting for developing countries is contained in B. Bosworth, S. Collins, and Y. Chin, Accounting for Difference in Economic Growth. 1995, paper prepared for a conference on Structural Adjustment Policies in the 1990s; Institute of Developing Economies, Tokyo, Japan.

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