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This article is part of a series produced in collaboration with the African Development Bank in light of its sixtieth anniversary. Please visit our dedicated portal to read about the Bank's history and its activities on the continent.
Benin has experienced a decade of robust economic growth and is poised to continue on this trajectory, with the African Development Bank projecting GDP growth of 6.4% in 2024. This growth positions Benin among the top 11 fastest-growing economies in Africa.
Despite this impressive economic performance, Benin faces significant challenges. The country struggles with underdeveloped and poorly maintained transport infrastructure, low integration of agricultural and industrial value chains, and high climate vulnerability.
To overcome these challenges and improve the quality of life for its citizens, the African Development Bank has urged policymakers in the West African country to step up the pace of structural economic transformation.
Notably, officials need to expand efforts to support agricultural transformation and industrial development, as agriculture accounts for approximately 25% of the country’s GDP, 70% of employment, and 80% of official export receipts, primarily driven by cotton.
In its latest strategy paper for Benin, the African Development Bank outlines its commitment to creating conditions conducive to agribusiness development. The Bank’s priorities include increasing agricultural production to enhance food security and climate resilience, developing agricultural value chains, fostering a favourable environment for private investment in agribusiness, and promoting industrialisation chiefly through special economic zones.
Boosting competitiveness and regional integration
Additionally, the African Development Bank is leading efforts to secure more public and private investments in Benin’s critical infrastructure in a bid to boost the country’s competitiveness and enhance its access to regional markets. Notably, the Bank has backed a major upgrade of the Port of Cotonou, a crucial maritime access point for landlocked countries in West Africa.
In July last year, the African Development Bank approved an €80m loan to Benin for the port’s upgrade and extension. The loan includes €55m from the African Development Bank and €25m from the Africa Growing Together Fund, which is co-financed by the Bank and the People’s Bank of China. The funding will facilitate the construction of a new container terminal, with the project expected to take three years to complete.
The Port of Cotonou manages 90% of Benin’s international trade and 49% of transit traffic to neighbouring countries, including Niger, Burkina Faso, Mali, and Nigeria. It handled 12.5 million tonnes of goods in 2022. This figure is projected to nearly double to 23 million tonnes by 2038, underlining the timeliness of the Bank-backed expansion.
Joseph Ribeiro, Deputy Director General for West Africa at the African Development Bank, emphasised the port’s importance as a major revenue source for Benin.
“By expanding and renovating its infrastructure, the port’s capacity and operational efficiency should improve significantly,” he stated.
Concessional window proves instrumental
Since the commencement of cooperation between the African Development Bank and Benin in 1972, the Bank has committed a cumulative total of UA 1,486.83m (approx. $1.97bn) to the country across 97 projects.
The Bank’s concessional window has been crucial in providing affordable financing, with the African Development Fund (ADF) contributing UA 926.89m ($1.22bn), or 62% of the total funding, compared to the Bank’s UA 366.87m ($486.46m), which accounts for 32%.
The Unit of Account (UA), used by the Bank for its operations, represents a basket of currencies that include the US dollar, euro, Japanese yen, and British pound. It helps stabilise transaction values against currency fluctuations and currently exchanges at 1.326 USD per UA.
Economists highlight the need for increased concessional funding for Benin due to regional instability, climate change, and limited fiscal space. Concessional funding helps alleviate budgetary pressures emanating from these shocks, enabling the government to maintain essential public services and investments.
