The AfCFTA and the entrepôt economy: a clash of free trade and political realities

ABSTRACT

This article uses the case of Benin to explore the tension between the political realities of African countries and the objectives of the AfCFTA. For most of the country’s independence, Benin’s political economy has been based primarily on informal and/or illegal entrepôt trade with Nigeria. Benin’s entrepôt system creates a loophole around trade barriers for products that are stringently regulated in Nigeria by enabling their importation to Benin, and then in turn, re-exporting or smuggling them into Nigeria. This article argues that informal and/or illegal entrepôt trade with Nigeria is so ingrained in Benin’s political economy that regional and continental free trade (which is incompatible with entrepôt trade) is all but impossible from Benin’s perspective. The entrepôt system is one of the main sources of government revenue, which ruling elites are not willing to surrender.

KEYWORDS:

• Entrepôt; AfCFTA
• Benin
• Nigeria
• re-exportation

JEL CLASSIFICATION:

• F10
• F13

Introduction

The African Continental Free Trade Area (AfCFTA) is a free trade agreement among African Union (AU) member states. It was established in 2018 at the 10th Extraordinary Session of the AU Assembly of Heads of States and Government of Africa. Fifty-four of the fifty-five states comprising the African continent have since signed the agreement, with the sole exception of Eritrea The AfCFTA aims to bring together all 55 member states, covering a market of more than 1.2 billion people, including a growing middle class, and a combined gross domestic product (GDP) of more than US$3.4 trillion. In terms of the number of participating countries, the AfCFTA is the world’s largest free trade area since the formation of the World Trade Organization. The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and to pave the way for accelerating the establishment of a Customs Union. This objective will be accomplished gradually through the elimination of trade barriers (tariff and non-tariff), the liberalization of trade in services, the promotion of cooperation on investment, intellectual property rights, competition, and customs issues, and the implementation of trade facilitation measures (AfCFTA Secretariat, 2023). The agreement also entails the construction of an institutional structure, including a secretariat that is presently fully operational and situated in Accra and led by an elected secretary-general.

Using the Republic of Benin as a case study, I argue that the political realities of some African countries are incompatible with the objectives and implementation of the AfCFTA, as with regional integration more generally. The proponents of the AfCFTA Agreement assumed that eliminating tariff and non-tariff barriers would increase trade and promote structural change across the continent. This position has been backed by research at the aggregate level. For example, World Bank research showed that the AfCFTA could reduce the number of people living in extreme poverty by 30 million, boost the incomes of nearly 68 million others who live on less than $5.50 a day, increase income in Africa by $450 billion by 2035, increase Africa’s exports by $560 billion, increase wage gains for women (10.5%) more than for men (9.9%), boost wages for both skilled and unskilled workers by 9.8% and 10.3%, respectively, and much more (Maliszewska et al., 2020). However, this study, and many others like it (African Union Commission, 2022; UNCTAD, 2019), are devoid of politics. Some African countries depend politically on the types of barriers that the AfCFTA is designed to eliminate, and therefore, it is crucial to bring political economy realities into the AfCFTA. This could be done theoretically through frameworks like political settlement (Khan, 2010; North et al., 2009). A political settlement is understood here as a tacit agreement between powerful groups within a state setting the rules for political and economic engagement; such a tacit agreement keeps the peace by providing opportunities for those groups to secure a distribution of benefits that they find acceptable (Kelsall & Hickey, 2020). Accordingly, proper insights into a given political settlement and the institutions it engenders are crucial for trade and development policies because they demonstrate political elites’ commitment and state capacity.

This article situates the political realities of the West African country of Benin within the discourse of the AfCFTA. Benin shares borders with Togo to the west, Nigeria to the east, Burkina Faso to the northwest, and Niger to the northeast. Benin is of particular interest in examining the tension between the political realities of an African country and the objectives of the AfCFTA due to its reliance on smuggling and illegal trade with neighboring countries. These activities are not compatible with a continental free trade. For most of the country’s independence, Benin’s political economy has been primarily based on informal and/or illegal entrepôt trade with Nigeria. Benin reduces trade barriers for products that are strictly regulated in Nigeria by enabling their importation. These products are then re-exported to or smuggled into Nigeria. As argued in this article, smuggling activities are not technical issues that can be eradicated overnight. Instead, they are deeply connected to the survival of ruling elites and the political order in Benin. The entrepôt system was deliberately created in 1973 by the military leader Mathieu Kérékou after years of political crisis to establish a new economic basis for political rule. Since then, as this article will demonstrate, crises in the entrepôt system (such as when Nigeria closes its border) have translated into crises in the political system. The entrepôt trade system also forms the basis of clientelist politics in Benin at different levels (Igue & Soule, 2005; Prag, 2010, 2013). Traders and importers actively compete for political positions and fund political candidates to safeguard their own business interests. Consequently, some members of parliament, presidential candidates, and politicians at various levels of government are among the largest importers of re-exported products in Benin (Houssa & Reding, 2019, p. 12; Prag, 2013, p. 111).

In studying the ruling coalition of stakeholders in Benin, this article uncovers two networks: (1) traders involved in importation and re-exportation, particularly into Nigeria, and (2) public or private firms responsible for the formal and informal taxation of these activities. Political power in Benin has historically been based on ruling elites forming a coalition between various groups to secure both campaign funding and to meet the economic requirements of governance. However, since 2016, members of both networks have entered politics with different programs motivated by fear of losing their positions. As a result, the current president of Benin owns the company that controls the main Cotonou port, which is used for smuggling goods into Nigeria, a status he acquired while he was the main funder of the previous president. Therefore, the government of Benin is initiating a major restructuring exercise (which amounts to the formalization of the entrepôt system) to create a more stable basis for the taxation of other West African countries that use Benin as a gateway to Nigeria. For example, as discussed further below, Benin is instituting a ‘transit tax’ on cargoes carrying goods from Nigeria through the border to other West African nations or goods coming into Nigeria from other West African countries. Although an integral part of Benin’s political reality, this informal reality cannot be included in formal negotiations on regional or continental matters, such as regional integration and the AfCFTA. Along with many other African countries that have signed the AfCFTA Agreement, Benin has a unique set of political circumstances that are not reflected in the terms of the agreement and are thus incompatible with the local implementation of the AfCFTA.

The empirical material underlying this article was collected through the following research methods. First, to gain insight into Benin’s actual political and economic situation relative to the discourse of the AfCFTA, I conducted a series of interviews in Benin between October 2021 and January 2022. I interviewed a senior employee of Benin’s Ministry of Industry and Trade (Ministère de l’Industrie et du Commerce), who had experience discussing trade and industry development within the ministry. This employee is not a political appointee but a civil servant who is relevant for understanding the internal conversations and negotiations on the AfCFTA. I also interviewed a member of Benin Customs to learn about smuggling, re-exportation, and the country’s administrative preparation for the AfCFTA. Furthermore, I interviewed two Benin-based journalists with experience writing about local politics and regional integration. At the time, one of the journalists wrote for a government-owned outlet and the other worked for a private enterprise. For one of the journalists, I revisited the interview in February 2023 for clarification. All of the interview data has been anonymized, and all but one were conducted with a translator. Second, I used published reports on Benin from groups like the World Bank and the International Monetary Fund. And third, I used secondary literature, as well as grey literature and news reports. This article makes some unique contributions by studying the entrenchment of entrepôt in the politics of Benin and calling attention to the possible tension between politics and the AfCFTA.

The first section of this article provides a brief history of the entrepôt system in Benin. The second section establishes a link between politics and the entrepôt system, particularly the part that involves smuggling into Nigeria. The last section reproduces the discourse of the AfCFTA and the goal of eliminating the entrepôt system under the AfCFTA. Here, I also show the political and administrative tensions that exist between Benin and the AfCFTA.

Entrepôt trade in Benin

Benin has been described as an ‘entrepôt state’ by several researchers, including Igue and Soule (2005), Golub and Mbaye (2019), and Golub et al. (2019). Igue and Soule (2005) defined an entrepôt state as a state that subsists on income from trade based on re-exportation, serving as a transit point for the re-importation or re-exportation of goods. Benin’s history as an entrepôt region can be traced back to the Atlantic slave trade period when the region, now known as Benin, hosted the largest slave port and transit point in West Africa (in Ouidah). During the colonial period, France continued to use ports in Benin to export and import goods into some of its colonies in the region, some of which are landlocked. Even before there was a development policy to promote entrepôt, Benin became a natural entrepôt in the region after independence. For instance, the country became a regional exporter of cocoa in the late 1960s, despite producing no cocoa of its own, because cocoa farmers from Nigeria diverted their output to Benin before exporting it to Europe (Golub & Mbaye, 2019; Mustapha, 1999). The National Marketing and Export Society of Benin assisted in exporting over 70,000 tonnes of smuggled Nigerian cocoa between 1968 and 1974 (Igue, 1977). Some of the smuggled cocoa came from farmers in southwestern Nigeria who sought to evade the monopoly of Nigeria’s Marketing Board and protect themselves against various forms of collective action that amounted to a reduction in producer prices. Benin evolved into a full entrepôt state during the oil price shock of 1973, which saw oil prices surge by almost 300%. This shift led to a substantial transfer of wealth to Nigeria, a country that had just commenced exporting oil in significant volumes. Consequently, this wealth influx funded an increase in the importation of goods (World Bank, 1981).

Benin’s 1973 strategy aimed to transform the country into a hub for trade to and from landlocked countries in the region, such as Niger and Burkina Faso, and to serve as a gateway for regional trade linking Nigeria with other countries in West Africa and beyond. The focus on the latter objective was due to incentives created by Nigeria’s import restrictions (Igue & Soule, 2005). The strategy involved implementing a low-tariff policy, improving port efficiency, expanding access to credit for importers, and deregulating the importation of key products monopolized by state-owned firms (Golub & Mbaye, 2019). Politically, the new policy was a desperate attempt by Benin’s new military leader, Mathieu Kérékou, who seized power in 1972, to institute an economic strategy that would balance the economy and guarantee his political survival. Between November 1965 and October 1972, the country had gone through 12 leadership changeovers, largely due to economic problems. Therefore, Kérékou urgently needed an economic basis to legitimize his rule. As Nigeria imposed trade restrictions to promote local production, Benin targeted the same sectors protected by waiving customs duties on products such as rice, cloth, radio, and tobacco, which were the main re-exported products in the 1970s and early 1980s (Akinwumi & Adegeye, 1977; Golub & Mbaye, 2019). Apart from Nigeria, Benin had a formal agreement to serve some of the landlocked countries in the region, notably Niger. In 1977, the World Bank argued that ‘a large share of the imports of consumer goods (beverages, tobacco, radios, etc.) and exports of agricultural products registered as Benin trade is, in fact, unofficial border trade to and from Nigeria’ (World Bank, 1977, p. 2).

The World Bank noted that the congestion of the port of Lagos in the 1970s also led to an increase in the transit function of the Cotonou port and estimated that in 1977, more than ‘half of the port’s total traffic (960,000 tons) originated in or was destined for neighboring countries (Niger and Nigeria)’ (ibid). Customs revenue as a percentage of total government revenue increased to 62% in 1979 (World Bank, 2023). While re-exportation from Benin to Niger was formal and registered, the trade to Nigeria was informal and involved smuggling. Indeed, smuggling into Nigeria is the enduring legacy of the Kérékou policy. However, smuggling also went the other way, especially through large subsidies on Nigerian petrol products bought by Benin’s political elites (Allen, 1992, p. 56). The success of the policy is not reflected in official trade statistics, which do not account for the huge informal trade going on between Benin and Nigeria. Subsequent political leaders in Benin have generally pursued the same policies. More recently, the entrepôt system is reflected in the modern structure of Benin’s customs regime, which is broadly divided to cover: (1) imports for domestic use; (2) imports for transit; and, (3) imports for re-exportation (Golub & Mbaye, 2019). Goods that are declared for domestic use are taxed differently from transit goods, most of which are officially destined for landlocked Niger, and re-exported goods (see map of area in Figure 1). The entrepôt system, as it relates to Nigeria, has worsened since the early 2000s, since subsequent Nigeria administrations have increased tariff protection on numerous goods for the sake of building domestic production capability. There have been several studies on the smuggling of goods such as used cars, frozen poultry products, textiles, sugar, and rice, among others (Benjamin et al., 2015, p. 392; Ezeoha et al., 2019; Golub, 2012a, 2012b, p. 203). Recently, the World Bank (2021) estimated that informal re-exportation and transit trade with Nigeria contributes about 20% of Benin’s GDP.

Figure 1. Map of Benin, Nigeria and Niger (source: Bensassi et al., 2019).

To illustrate the extent of smuggling in the entrepôt trade the top two imported products in Benin over the past decade will be examined: rice and used cars. Table 1 presents the value of Benin’s rice imports and official re-exportation to the rest of West Africa from 2010 to 2020; smuggling into Nigeria represent the difference. Although rice imports are officially intended for re-exportation to Niger and other countries, the table reveals that less than 2% of the imported rice is actually sent to the rest of West Africa. The value of Benin’s rice imports surged from $22.5 million in 2002 to $255 million in 2006 following an agricultural policy introduced by the Nigerian government under Olusegun Obasanjo in 2004, which increased tariffs on rice (Odukoya, 2020). In 2013, the Nigeria administration implemented an import differential duty and levy system. Under this policy, import licenses for rice were restricted to millers who could provide evidence of production with an allocated quota (Odum, 2015). As a result, Benin’s rice imports reached one billion dollars in the same year. The policy was relaxed in the second half of 2014 due to elections, but it was reinstated after 2015 by the new administration of Muhammad Buhari, which favored agriculture. These policy changes impacted Benin’s rice imports. Although Benin mainly consumes white rice, it imports more parboiled rice, which is the variety consumed in Nigeria (Golub & Mbaye, 2019). During this period, Benin became the top rice importer in Africa and one of the top importers in the world. Up to 30,000 truckloads of Benin’s rice imports, which accounts for a significant portion of the country’s rice imports, are routed through transit shipments via Niger to northwest Nigeria (ECOWAS Rice Factbook, 2019, p. 16).

Table 1. Rice import value into Benin.

Year.	Value.	Total Official re-exportation to West Africa
2010.	$379M.	$91.3M
2011.	$226M.	$9.4M
2012	$527M.	$4.08M
2013.	$1.26B.	$10.1M
2014.	$924M.	$11.1M
2015	$586M.	$276k
2016.	$1.01B.	$157k
2017.	$1.53B.	$199k
2018.	$1.02B.	$480k
2019.	$767M	$423k
2020.	$663M. $161k

Source: OEC data, 2023.

The story is much the same for used vehicles (Ezeoha et al., 2019), as shown in Table 2. Nigeria’s policy on used cars began in 2002 when the Olusegun Obasanjo administration banned the importation of cars older than five years from the date of manufacture. At the same time, Nigeria increased its tariff on used cars. Both policies – the age limit and import duties – have fluctuated over the past two decades, which in turn has affected the value of cars imported into Benin. The cost of importing cars to Benin increased from $40.1 M in 1999 to $601 M in 2008. The cost of imported vehicles increased further in 2013–2014 when Nigeria introduced the Nigerian National Automotive Policy, which imposed a high tariff structure on second-hand vehicles – a 70% levy (see Table 2). In 2015–16, the Nigerian government increased the age limit of accepted used cars from 10 years to 15 years, reducing Benin’s imports. Researchers have focused on other items with similar stories, such as beer, clothes and apparel, sugar, used clothes, vegetable oil, cigarettes, and more (Golub, 2012b; Ogunleye et al., 2016; Ola, 2012). However, what I am interested in here is how the entrepôt system has become ingrained in the political settlement of Benin, as well as the nature of patronage politics.

Table 2. Cars import value into Benin.

Year.	Value.	Total official re-exportation to West Africa
2010.	$464M	$1.39M
2011.	$633M.	$2.94M
2012	$653M	$1.77M
2013.	$686M	$2.99M
2014.	$923M.	$4M
2015	$724M.	$2.68M
2016.	$213M	$7.44M
2017.	$257M.	$3.35M
2018.	$284M.	$3.12M
2019.	$331M.	$1.89M
2020.	$252M.	$2.46M

Source: OEC data, 2023.

Before delving into further analysis, it is pertinent to note that Benin is also involved in another type of formal transit trade with other West African countries, serving as a gateway for exporters from Nigeria and importers from several other countries into Nigeria. As Nigeria is the largest country in the West African region as well as its the main market, it intends to develop industrialization and has already increased its exports to regional countries through land borders. Similarly, other regional countries are building their export profiles with Nigeria. Over 90% of the trade that flows from West African countries to Nigeria passes through Benin, and likewise, over 95% of land border trade from Nigeria to West African countries also goes through Benin (excluding oil trade). For instance, during the past 24 years, Nigeria’s exports to Ghana have increased at an annual rate of 3.16%, from $181 million in 1996 to $382 million in 2020. During the same period, Ghana’s exports to Nigeria have increased at an annualized rate of 5.51%, from $15.8 million in 1996 to $57.2 million in 2020. Ghana’s main exports to Nigeria in 2020 included industrial products such as chocolate, garden tools, plastic products, plants, rubber footwear, liquor, palm oil, fruit juice, hair products, and beauty products. Ivory Coast also exports similar products to Nigeria, while Senegal imports soaps and seasoning products. Furthermore, Nigerian industrial giants like Dangote and BUA have developed an exportation network through the corridors of Benin, with trucks carrying products such as cement and fertilizers to other neighboring countries. In the past, Benin has not been able to benefit much from this trade as it only serves as a transit point. However, the patronage and linkages created by the entrepôt system are currently linked to this trade.

Entrepôt and the political settlement of Benin

How is the entrepôt system, especially smuggling into Nigeria, linked with politics and the patronage system in Benin? When Mathieu Kérékou created the entrepôt development strategy in 1973, it was an attempt to create economic stability and prevent incessant economic and political crises. He formed a coalition with powerful trading networks, southern commercial elites, and port officials to extract rent. Kérékou’s longevity as Benin’s longest-serving head of state has been credited to the success of this coalition. As Ebbe Prag observed:

Colonel Kérékou survived for 17 years as dictator by balancing power inside the army hierarchy and through close relationships with the powerful Yoruba trading networks and Southern commercial elite. The state–entrepôt system adopted by Kérékou, based on state-regulated importation and informal re-exportation/smuggling of industrial goods to neighbouring countries, mainly Nigeria, was important for sustaining his power, as it provided key economic resources (Prag, 2010, p. 19).

There are two groups in Kérékou’s coalition. The first group comprises the main trading and importing networks that are directly involved in importation and re-exportation. The second group comprises government and private organizations that work at the port to extract both formal and informal taxes from goods arriving at the port to be re-exported to other countries. This military-trading coalition suffered whenever there was a restriction on smuggling by neighboring Nigeria. For example, the Nigerian government decided to address the issue of smuggling in April 1984 – a decision initially prompted by the change in currency but then reinforced by the need to curb smuggling (Aluede, 2017, p. 17). However, this led to a crisis in Benin. As Prag argued, the entrepôt system experienced ‘a major crisis from the middle of the 1980s when Nigeria imposed strict controls on its borders, leading to the collapse of a state bank in 1998, which signaled the end of the Kerekou regime’ (Prag, 2010, p. 19). This happened when Benin was already in debt, and the border closure led to a reduction in economic activities, causing Kerekou to suffer a legitimacy crisis. Kérékou’s government attempted to solve this by convening a national conference that stirred the country towards multiparty democracy. However, this attempt to democratize in 1991 led to electoral loss, and Nicéphore Soglo was elected as the new leader.

As a former World Bank economist, Soglo instituted several adjustment programs with firm support from the International Monetary Fund and the World Bank (IMF Summary Proceedings Annual Meeting, 1995, p. 14). The economic reform led to retrenchment of the public sector and liberalization of trade as well as investment in the cotton sector and other agricultural products. The liberalization of trade aided the entrepôt system, however, Soglo did not have a clear coalition like his predecessor. Soglo moved closer to France, the United States, and International Financial Institutions and was heavily dependent on foreign aid. Recognizing their power and role in aiding Benin’s economic model, Nigeria’s leaders occasionally used border closures in response to Soglo’s policies. For example, Soglo generally supported international institutions in their condemnation of Nigeria’s dictatorship at the time, and Soglo refused to hand over political prisoners like Wole Soyinka, and others, who had sought asylum in Benin during the administration of Sani Abacha. In 1996, the Nigerian military government led by General Sani Abacha closed Nigeria’s borders with Benin not for economic reasons but in response to Benin’s military cooperation with the United States over the killing of an activist by Abacha (Ogunnubi & Awosusi, 2022). Even though Soglo did not form a Kérékou-like coalition, the resulting economic crisis in Benin (particularly due to increased fuel costs and job losses) is generally believed to have contributed to Soglo’s failure to win re-election in the same year (Golub & Mbaye, 2019, p. 6).

Kérékou won the 1996 election with the support of local traders and importers who felt betrayed by Soglo’s administration. Kérékou’s coalition continued to be traders and private companies involved in the port business who gained from the entrepôt system. Although he maintained a good relationship with international financial institutions throughout his next two terms, he also continued with the entrepôt economy. In 2003, when Nigeria accused Benin of harboring suspected criminal, Amani Tidjani, in Cotonou, the border was closed in response. Kérékou quickly turned Tidjani over to the Nigerian authorities in exchange for reopening the border (News24, 2003). Since Kérékou’s time, the main funders of political elites in Benin have been businesses within the entrepôt system, with clear promises of benefits. Thomas Boni Yayi ruled from 2006 to 2016, with his main funder being Patrice Talon, who has interests in textile import, cotton trade, and port logistics (the revenue part of the entrepôt system). Talon used his closeness to Yayi to acquire government-owned companies involved in cotton production and the tax collection end of the entrepôt trade. For example, he purchased la Société pour le Développement du Coton (SODECO), the biggest cotton grinder. Furthermore, immediately after Yayi’s successful re-election in 2011, Talon was given control of the management of the country’s main port, Cotonou port, via his private company Benin Control as well as the trade tax program known as the PVI (Le Programme de Vérification des Importations). Under PVI, Benin Control scanned imports and billed all containers exiting the Port of Cotonou for re-exportation. A few months after Yayi’s re-election, however, Talon’s license was terminated when their relationship soured and Talon was accused of embezzling more than 18 million euros in collected taxes.¹

This political persecution led Talon to enter politics. Prior to Talon, the importing and port logistics part of the coalition provided election funding for politicians without getting directly involved in politics. Talon’s decision to enter the political arena in 2016 has been interpreted as an attempt to secure his business interests, which had been threatened by his rift with Yayi.² Other businessmen involved in the entrepôt trade also decided to enter the political arena in 2016 to protect their business interests. The foremost example is Sébastien Ajavon, who was then one of the richest men in Benin, known as the ‘king of chicken’ (l’empereur du poulet) for controlling chicken imports in Benin, more than 95% of which are smuggled into Nigeria (Koter, 2017). Ajavon’s firm COMON SA was the main player in the unofficial cross-border trade of many food products into Nigeria (Houssa & Reding, 2019, p. 12). Ajavon had funded the previous two presidents. The first round of the 2016 election was dominated by three candidates: Lionel Zinsou, Talon, and Ajavon, who won 28%, 24%, and 23% of the votes, respectively. The second round involved Zinsou and Talon, with Ajavon supporting Talon as a fellow businessman in the entrepôt trade. During the second round of the 2016 election, Ajavon supported Talon on the condition that he would receive more market advantage and that seven of his allies would be nominated for government positions. After winning the election, however, Talon appointed only three ministers (of agriculture, secondary education, and communication) who were allies of Ajavon (Stroh, 2018 p. 49; Vidjingninou, 2017).

Talon and Ajavon represent two ends of the entrepôt coalition of Kérékou and Yayi. Talon’s company controls the administrative end of the entrepôt by managing the biggest port and collecting taxes on land borders, while Ajavon represents the trade end as one of the biggest importers of food products that are re-exported to Nigeria. However, Talon also has an interest in cotton production and controls the country’s biggest grinding company, (i.e. SODECO), which is now primarily a family business headed by Lionel Talon, the president’s son. Therefore, Talon occupies both the management part of the entrepôt coalition and has broadened his ruling coalition to include cotton interests. Soon after the 2016 election, Ajavon began to pose a major threat to Talon due to his close links with importers and traders’ unions. A few months after the election, cocaine was found in a container belonging to Ajavon’s company, COMON-CAJAF. Ajavon denied any connection with drug trafficking and accused the government’s security forces of planting the cocaine, which he described as a political assassination attempt (Boko, 2016). Ajavon was initially acquitted by a court of first instance in Cotonou, but a regional court later sentenced him to 20 years (in absentia) amid criticism of the original acquittal (AFP, 2018). Many in Benin believe that Ajavon’s legal troubles are politically motivated. An adviser close to the Beninese president stated that ‘Ajavon himself sought out the stories that pursue him […] we cannot say that we are in the presidential movement and at the same time maintain trade union movements against the regime’ (quoted in Jeune Afrique, 2017). Over the next few years, Ajavon’s group, which held over 50% of the market share for re-exporting chicken to Nigeria, experienced a drop in revenue of more than 70% (Vidjingninou, 2017). However, Ajavon continued to fund opposition politicians, even launching a political movement in 2018, while the Talon administration continued to attack him and his supporting traders. Apart from Ajavon, other top importers of products involved in re-exportation have turned to politics as candidates (mostly as Members of Parliament) or backers.³

The division between Talon and Ajavon has become a significant factor in understanding the trajectory of the entrepôt state since Talon took office. Talon has been more concerned with the revenue aspect of the entrepôt state, expanding the tax bases and looking for ways to tax new activities rather than the trade aspect. As a result, Talon relaunched the PVI (Le Programme de Vérification des Importations) controlled by his company. When the Nigerian government decided to institute a complete land border closure with neighbouring Benin due to continuous rice smuggling which jeopardised its rice policy (John, 2019), the border closure negatively impacted Benin’s economy, reducing government revenue, boosting unemployment, and more (IMF, 2020, pp. 53; IMF, 2021). For Talon, the border closure affected tax collection activities as opposed to trade in the broader sense. As a result, the government gradually imposed a new informal trade tax on formal transit trade through its territory, which started after the border closure ended. This new transit tax allows the administrative part of the entrepôt economy to continue (see Ayitey, 2021; Nigeria Tribune, 2021; The Sun, 2021). Legally, no fee should be imposed for transporting transit goods through an ECOWAS (Economic Community of West African States) country. However, the Benin government imposed a duty when its import tax intake dropped after the border was reopened, to be collected by the same administrative officials. This imposed an import duty of CFA9 million (over US$15,000) per truck on Nigeria-bound cargo transiting through the country (Adekoya, 2021). This transit tax led to a blockage on both sides of the Benin border (with Nigeria and with Togo for products coming from Ghana or the Ivory Coast into Nigeria) involving more than 3,700 Nigerian-bound cargo-laden trucks from Ivory Coast, Ghana, Togo, and other countries at the Ilakoji border, the border between Togo and the Benin Republic (Nigeria Tribune, 2021).

Even before this tax was imposed, the Talon government had already started imposing informal road taxes collected by officials as a form of cost for Nigeria traders transporting their goods to the rest of West Africa through Benin and vice versa. These earlier ‘taxes’ were collected in the form of ‘bribes’. However, for corporate trucks, these ‘bribes’ were paid yearly. For instance, the Group Executive Director of Dangote Industries, Devakumar Edwin, complained that the movement of products by road (through Benin) to other West African countries was becoming more expensive under Talon’s presidency. Benin’s government justified this, he said, by environmental pollution caused and the toll trucks took on local roads, and used both as a pretext to impose and negotiate an informal tax with Dangote Industries (Africa Business Community, 2021). According to Edwin, even when Dangote Industries spoke directly with the government (presumably Dangote himself speaking with Talon), the response was, ‘okay, we will allow you [to drive your trucks through Benin], but this is the fee you have to pay’ (quoted in Adeshokan, 2020). The situation is similar for other corporate exporters traveling from Nigeria to other West African countries through Benin.

This informal tax expands Talon’s end of the entrepôt coalition, tax collection. Furthermore, in response to the crackdown on smuggling, Talon has diversified more into cotton and textile production by constructing a textile park in Glo-Djigbe, which will house up to 30 apparel factories. The Glo-Djigbé Industrial Zone is a public-private partnership between the Republic of Benin and ARISE Integrated Industrial Platforms, which is being developed across 1640 hectares and is to be implemented in 2023. This diversification pattern, which involves introducing new taxes and building a textile park, clearly represents the Talon end of the entrepôt state model. Meanwhile, ‘importers like Ajavon have argued that Talon is betraying traders’.⁴

What are the implications of the entrepôt state of Benin for the AfCFTA?

The political realities of Benin, as explained above, have implications for the AfCFTA from Benin’s perspective. The AfCFTA agreement and its implementation provide measures for eliminating the smuggling that occurs between Benin and Nigeria (Signé & van der Ven, 2019), as well as the unilateral transit taxes on cross-border trade recently imposed by Talon. Some of these measures include ‘customs cooperation and mutual administrative arrangements’, which prohibits illegal cross-border trade and exchanging lists of prohibited goods for importation (AfCFTA Agreement, 2018, Annex 3). Additionally, the annex on trade facilitation includes freedom of transit, which requires each state party to ‘ensure the freedom of transit through its territories in accordance with Article V of GATT (1994) and Article 11 of the WTO Trade Facilitation Agreement’ (AfCFTA Agreement, 2018, Annex 4).⁵ Both networks of the entrepôt in Benin are incompatible with the AfCFTA because the trade agreement imposes responsibility on member countries for preventing smuggling or illegal cross-border trade, as well as an obligation not to impose a transit tax on trade passing through its territory. This contradicts the political reality of the Talon government, which seeks to formalize a system for exploiting its position as a gateway to Nigeria by extracting rent from transit trucks carrying Nigeria-bound cargoes. Some studies indicate that Benin may be one of the African countries that will experience the most significant losses in tariff revenue as a percentage of government expenditure due to the AfCFTA Agreement (Africa Economic Outlook, 2019). Furthermore, Benin has one of the highest non-tariff informal taxes in Africa, particularly in agricultural products (Simola et al., 2021).

There is, therefore, a clear tension between the entrepôt state and the AfCFTA. This tension partly explains why the Benin government has shown little enthusiasm for the AfCFTA. In 2018, Benin was one of the few countries that refused to sign the AfCFTA Agreement, along with Nigeria. A bureaucrat at the Benin Ministry of Industry and Trade explained that ‘it was the president’s decision not to sign in in 2018…we analyzed it at the office [ministry] and concluded that we may have to radically change our economic model for the free trade to be beneficial to us’.⁶ Although Benin eventually decided to sign the agreement on 7 July 2019, along with Nigeria, leaving Eritrea as the only holdout (Africa Times, 2019), Benin has yet to ratify the AfCFTA. While Nigeria’s initial refusal to sign the AfCFTA Agreement led to national debate and government-commissioned studies to understand the agreement’s effects (Nigerian Office for Trade Negotiations, 2021), there were no discussions or negotiations or sensitization with social groups in Benin, ‘except with players in the cotton sector’ (which is controlled by the current president).⁷ Cotton and textile production may be seen as one area outside of the entrepôt state where the AfCFTA might be relevant to Benin due to the diversification undertaken by Talon.

The production and export of cotton play a crucial role in Benin’s formal trade strategies. In 2019, Benin exported US$463 million worth of raw cotton, making it the sixth-largest exporter of raw cotton globally. Raw cotton was also the leading product that Benin formally exported that year (OEC, 2023). However, the main destination market for Benin’s cotton is Asia and there are limited prospects for trading cotton within the African continent in the near future (OEC World, 2023). The plan for strengthening Benin’s cotton-to-textile value chain through the construction of the Glo-Djigbé Industrial Zone is also outward-facing. At the time of writing, the Glo-Djigbé Industrial Zone is under construction and the government’s partner company, Arise Integrated Industrial Platforms, is owned by the Singapore-based company Olam International (see Apparel Resources News-Desk, 2021). This industrial zone is expected to add value for the European market and offer 100% relief on income tax, 100% VAT exemption, no capital gains tax, full reparation of profits, no property tax, and no customs duties on the importation of raw materials and building instruments within the zone (ibid.). The AfCFTA does not hold any clear value for the industrial park, as it is currently configured. Bilateral collaborations for cotton-to-textile production have been attempted by the Talon government, but these have failed. For instance, regarding the processing of cotton, an employee at the Ministry stated that ‘Nigeria and Ghana are the two biggest markets for textiles in West Africa, and they both have a permanently closed market’.⁸ Benin tried to collaborate with Nigeria in 2016 for a cotton-textile value chain but Nigeria refused. All of this points to the fact that the political position of Benin on the AfCFTA is likely to be determined by the entrepôt economy and not cotton trade.

In addition to the political tensions described earlier, implementing the AfCFTA in Benin would therefore require significant resources and changes due to the long-established norms operating in the country. To illustrate, during an interview with a customs officer to assess Benin’s readiness for AfCFTA implementation, I learned that Benin Customs department and Talon’s company, Benin Control, had held a series of internal workshops to determine the necessary steps. These included consultations with neighboring countries’ customs agencies, particularly Nigeria’s (B&FT, 2022), trade facilitation training (TFWA, 2022), and internal workshops to build capacity. The officer stated that Benin currently has ‘administrative structures that are not suitable for the implementation of the continental free trade [area] or even ECOWAS CET to the fullest’. He also reported that ‘we have discussed the free trade [system], and we saw that to properly implement it, we [will] have to undergo a great deal of administrative changes through training and increase our capacity building […] particularly in the area of goods origin (rules of origin) and customs cooperation’.⁹ The customs officer also noted that their main challenge was collaboration and partnerships with other customs administrations and government agencies due to a lack of symmetry in their focus. For example, aside from the political rationale, one administrative reason for the continued prevalence of smuggling is the high cost of tackling it. ‘Our counterpart in Nigeria keeps telling us to monitor smuggling into their country, that is all they talk about […but…]. Nigeria expects us to spend our time and resources monitoring it for them []. To fight this smuggling, we employ and train more officers, we buy patrol vehicles, they ask us to buy surveillance equipment… this is all Nigeria customs talk about’.

Conclusion

The political and administrative reality of Benin’s entrepôt state cannot be reflected at the negotiation table of the AfCFTA because it consists of activities that are deemed incompatible with the type of free trade promoted by the AfCFTA. Therefore, the negotiation outcome of the trade agreement will likely face political and administrative challenges at the local level. There is a precedence for this; for example, Benin has deliberately ignored regional trade rules under the ECOWAS in order to maintain its entrepôt state. Thus, it is very likely that the outcome of the AfCFTA will lack adherence to the rules due to the tension with political reality. This is the expected outcome because it may be unrealistic to expect political elites to wilfully implement measures that will jeopardize the entrepôt state simply to obey the provisions of the AfCFTA. Dismantling the entrepôt state for implementing the AfCFTA could lead to poverty in terms of a reduction in government revenue as well as the loss of informal employment that is directly tied to the entrepôt system. It could also lead to a political crisis with the collapse of the ruling coalition and even a military takeover. This prospect is not far-fetched given the country’s history with coups and the rise of military takeovers in the region since 2019, such as neighboring countries like Burkina Faso, Guinea, Mali and Niger, all of which were directly related to economic crises (Baltoi, 2023; Laniran, 2022).

Like Benin, the political economy of most African countries contains such peculiarities that are part of a broader local political settlement and cannot therefore be reflected at an official negotiation level. As such, the political problem of the AfCFTA is one of compatibility between the political realities of different African countries and how changes in those political realities alter the very dynamics of this compatibility.

Acknowledgments

I would like to thank the anonymous reviewers for their helpful comments on this paper. I also extend special thanks to Teniola Tayo for her significant contributions, as well as to my research colleagues: Professor Oludiran Akinleye, Professor Risikat O.S. Dauda, and Dr. Gbenga Shadare. With a heavy heart, I also acknowledge our late colleague, Dr. Olabanji ‘Banji’ Akinola, who passed away in 2022.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by TETFund research funds (2020) granted to the Centre for Social Protection and Policy Studies research team at the University of Lagos, Nigeria.

Notes

1 Interview with journalist in Cotonou, January 21, 2021.

2 Interview with journalist in Cotonou, January 21, 2021.

3 Interview with journalist in Cotonou, December 15, 2021.

4 Interview with journalist in Cotonou, December 15, 2021.

5 Article 4 of GATT ‘There shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties’. Article 11 of the WTO Trade Facilitation Agreement reads ‘Traffic in transit shall not be conditioned upon collection of any fees or charges imposed in respect of transit, except the charges for transportation or those commensurate with administrative expenses entailed by transit or with the cost of services rendered’ (WTO Agreement On Trade Facilitation, 2017).

6 Interview with Employee of Ministry of Industry and Trade, November 26, 2021.

7 Ibid.

8 Interview with Employee of Ministry of Industry and Trade, November 26, 2021.

9 Interview with Officer of Benin Republic Customs, December 13, 2021.