• Saturday, May 25, 2024
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The Republic of Benin: A goldmine that doesn’t know it yet

Patrice Guillaume Athanase Talon

Patrice Guillaume Athanase Talon is quite possibly the luckiest president on the entire African continent. It is a real pity that he does not seem to know it yet. Having ascended to power in the Republic of Benin in 2016, Talon’s most significant policy impression has been to make noises about taking Benin out of the CFA monetary union which is perceived – rightly or wrongly – as a neocolonial tether to France. Benin meanwhile, is perfectly positioned to be a West African Switzerland if it plays its cards correctly, but like his predecessors, Talon’s ambitions remain small and localised.

It is well known that Benin is one of the biggest beneficiaries of Nigerian foreign trade, both above and under the table. Whenever the Nigerian authorities decide to wield the trusty old import ban hammer on a particular in-demand item in the finest tradition of Ibrahim Babangida and Muhammadu Buhari, that item finds its way to Benin and from there into Nigeria via the nominally demarcated border. Indeed while trade volumes between both countries have suffered since Buhari’s border closure policy brain fart, it is typically only the open and declared trade that this has affected. Both countries after all, share too much in common for a French and British-drawn line in the sand to be material. The real problem with the relationship between Nigeria and its smallest immediate neighbour is that Benin is thinking too small.

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Dear President Talon: Think big!

Presently, Benin serves as a transit port for items heading into the West African subregion, and it also has a significant commodity export output, with cotton making up as much as 40 percent of its total exports. It has close trading links with Nigeria, but the problem with this relationship is that it is the relationship between a crocodile and a bird that eats insects off the crocodile’s hide. Sometimes the crocodile forgets that it is meant to be a symbiotic relationship and attacks the bird, as Nigeria has done over the past year with the border closure economic voodoo policy.

Benin is far too exposed to Nigeria’s policy and economic shocks, and it also maintains a stubbornly welfarist internal approach to labour management. As much as 75 percent of Beninois residents are estimated to belong to a formal trade union. What this means is that its typical annual GDP growth of 5 percent is too slow to keep up with its population growth, and a single policy out of Abuja can kill or revive its economy. It could do so much better than this if it saw itself not as Nigeria’s 37th state by default, but as a mini-Switzerland.

Benin has three extremely important things going for it – its location right on the border with Nigeria’s most economically productive area; its close historical and cultural ties with southern Nigeria; and its supremely, almost unbelievably stable CFA currency. Its location gives it the competitive advantage of being physically close enough for people in Lagos and Ogun state to physically transact business without much travel. Its close cultural, ethnic and historical ties with the aforementioned states makes it easy for people from there to interact with it for business and tourism purposes.

To fully prepare Benin to become the recipient of billions of dollars worth of Nigerian money and relatively wealthy Nigerians seeking safe haven, Benin has really just three jobs to do. The first thing it needs to do is to overhaul its banking laws and tax regulations to make it easier for ECOWAS passport holders to open accounts and become domiciled in Benin

Most importantly, the CFA and its ability to store value on a level almost approaching that of the Euro potentially makes Benin a hot destination for Nigerian money seeking stability but easy proximity. In making noises about ejecting Benin from the CFA – however unrealistic such pronouncements may be – President Talon is once again like all his predecessors, failing to see the bigger picture and appreciate just what Benin could be if it plays its cards right.

Welcome investment. Build roads. Adopt English.

To fully prepare Benin to become the recipient of billions of dollars worth of Nigerian money and relatively wealthy Nigerians seeking safe haven, Benin has really just three jobs to do. The first thing it needs to do is to overhaul its banking laws and tax regulations to make it easier for ECOWAS passport holders to open accounts and become domiciled in Benin. The Emirate of Dubai provides an example of how successful this strategy is. Dubai’s residents do not pay income tax, and businesses only pay a single-digit flat rate. The result of this policy is that oil now accounts for less than 1 percent of Dubai’s GDP, and its government has no problem funding itself.

Benin already has an idea of what it means to benefit from Nigeria’s inefficiency, but it is only doing so on a small scale. That country now needs to become intentional about actively attracting monied Nigerians across the border with the promise that the CFA will stop their cash holdings from losing value, they will have a low and simple tax regime, and they will have full property rights. The logical next step after doing this is to make English the country’s official second language and aggressively push for Beninois children in schools to learn English.

It is a simple calculation – if the future prosperity of Benin lies in plugging into Nigerian wealth, it logically follows that both Nigerians and Beninese must speak a common language. In addition to opening Benin up to Nigerian investment, English is also the world’s de-facto trade language, which opens the possibility of cultivating new trade relationships beyond West Africa. When this is done, the final step on the road to converting Benin into a West African Luxembourg will be to aggressively invest in infrastructure to bring wealthy Nigerians across the border.

This means roads. This means rail lines. This means a bilateral air agreement to bring down the cost of flying to Cotonou. This means adopting a more visible and ambitious diplomatic engagement policy toward Nigeria. This means a media and publicity charm offensive on a scale only perfected by Paul Kagame’s Rwanda. All of this can realistically be achieved within 10 years.

They just have to hope that Mr Talon or his successor can finally learn to think big.