The free market economy of Benin remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade. Cotton is a key export commodity; high prices supported export earnings. Growth in real output has averaged 6.5% since 2014. Inflation has subsided and remained 1% over the past several years.
An insufficient electrical supply continues to hamper Benin’s economic growth though the government recently has taken steps to increase domestic power production. Private foreign direct investment is small, and foreign aid accounts for the majority of investment in infrastructure projects.
Benin’s 2001 privatization policy continues in telecommunications, water, electricity, and agriculture. Benin has appealed for international assistance to mitigate piracy against commercial shipping in its territory. Though security remains a problem, the Port of Cotonou has made progress towards implementing the International Ship and Port Facility Security (ISPS) Code in an effort to remain competitive. Projects included in Benin’s $307 million Millennium Challenge Corporation (MCC) compact (2006-2011) were designed to increase investment and private sector activity by improving key institutional and physical infrastructure. The four projects focused on access to land, access to financial services, access to justice, and access to markets (including modernization of the port). The Port of Cotonou is the largest component of Benin’s economy with revenues projected to account for more than 40% of Benin’s national budget. Realizing its economic potential requires further efforts to infrastructure upgrades, stemming corruption, and expanding access to foreign markets in Nigeria and neighboring landlocked countries. In September 2015, Benin signed a MCC second Compact for $375 million that is designed to strengthen the national utility service provider, attract private sector investment, fund infrastructure investments in electricity generation and distribution, and develop off-grid electrification for poor and unserved households. In order to raise growth, Benin plans to attract more foreign investment, place more emphasis on tourism, facilitate the development of new food processing systems and agricultural products, encourage new information and communication technology, and establish Independent Power Producers (IPP).
Benin was designated as AGOA Eligible Country on October 2nd 2000. Benin has been declared eligible for Apparel Provision on January 28th 2004 and benefits the Lesser Developed Country Special Rule for Apparel (3rd country fabric) and Lesser Developed Country Rule for Certain Textile Articles (Category 0) as well as Category 9 Textile Products (Handloomed / Handmade, folklore annex, ethnic printed fabrics).