Impact of Informal Re-exports between Benin and Nigeria: A CGE analysis

Ever since the end of the Biafra war, re-exportation has become an important economic activity for Benin’s economy. One of the reasons for the existence of this type of commerce resides in the disparity in economic policies between Benin and Nigeria. We model this sector and its interrelations with the remainder of the economy as well as on public finances. A CGE model was developed with data from Benin’s social accounting matrix for 1999. In the model, we distinguished between formal and informal households (households that work in the informal sector) and a distinction was incorporated into the model in regards of the re-exportation industry by dividing the latter into its 8 most important re-export sectors. We simulated a 10% depreciation of the CFA F and a 20% decrease in import tariffs. Our findings demonstrate a great sensitivity of government’s revenues to the activity of this informal sector. For one simulation, public savings dropped by almost 25%, but in both cases, the government’s income was strongly affected.