Power Shortages, Informal Jobs and the Limits of Benin’s Economic Boom

Despite recording 8.1% economic growth in 2025, Benin continues to struggle with widespread informal employment and limited access to wage-paying jobs, particularly among young people. The World Bank warns that unreliable electricity, aging infrastructure and operational inefficiencies are constraining business development, placing energy reform and industrial expansion at the centre of the country's efforts to turn rapid growth into better employment opportunities.

Benin's economy is expanding at one of the fastest rates in the region, yet the benefits of that expansion remain unevenly reflected in employment. With growth reaching 8.1% in 2025, the country faces an increasingly important economic challenge: converting strong national output into productive, formal and better-paid work. The World Bank has identified electricity-sector weaknesses as a major obstacle to achieving that transition.

In its fourth annual Benin Economic Update, titled Accelerating Benin's Structural Transformation for More and Better Jobs: The Role of the Electricity Sector, the World Bank places employment quality alongside economic performance. The assessment reveals an economy capable of sustaining rapid growth but still struggling to generate wage-paying opportunities for most workers, particularly young people.

Stronger economic indicators have created favourable conditions for development, but the persistence of informal employment suggests that output growth and labour-market transformation are advancing at different speeds.

A Fast-Growing Economy With Too Few Wage-Paying Jobs

Benin's macroeconomic record reflects considerable momentum. Annual growth averaged 7.1% between 2021 and 2025, while the fiscal deficit narrowed to 2.7% of GDP in 2025, below the West African Economic and Monetary Union's 3% ceiling. Inflation remained at 1.1%, giving the economy a combination of rapid expansion, fiscal consolidation and relatively stable prices.

Yet these achievements conceal a fundamental weakness in the employment structure. In 2022, informal employment accounted for 96.3% of workers, while eight out of ten jobs created involved self-employment. Such figures indicate that economic expansion has not substantially altered the dominance of work outside formal employment arrangements.

The imbalance becomes sharper when wage employment is examined. Only 19.8% of workers held wage-paying jobs in 2024, while the proportion among young people was just 9%. For a rapidly growing economy, these figures expose the limited reach of formal employment and the difficulties younger workers face in accessing it.

Employment patterns also reveal a movement toward low-productivity services, where opportunities for sustained income growth remain restricted. This raises a deeper development question about whether expanding economic activity is creating sufficiently productive occupations or primarily increasing the number of people working in activities with limited earning potential.

Industrial employment provides a contrasting picture. The Glo-Djigbé Industrial Zone employed 22,798 people in 2025, an increase of 28.8% from the previous year. Its expansion demonstrates that formal industrial employment can grow significantly, although progress within one industrial zone cannot establish that similar opportunities are expanding throughout the wider economy.

Benin thus faces a structural challenge extending beyond the overall number of jobs. The composition, productivity and remuneration of employment will determine whether continued economic expansion produces lasting improvements in workers' economic prospects.

The Electricity Problem Behind Benin's Industrial Ambitions

Electricity has emerged as a central constraint on business development. Nearly half of Beninese firms identify access to electricity as a major obstacle, while 86.1% experience power outages. These conditions reveal how difficulties with a basic production input can complicate the relationship between industrial expansion and employment creation.

The distinction between electricity access and dependable supply is particularly important. Businesses may operate within connected areas while still confronting interruptions. Improving access without addressing reliability would therefore leave a substantial part of the operating difficulties identified by firms unresolved.

Infrastructure weaknesses compound the problem. Grid losses reached 24.7% in 2024, while approximately half of transmission lines and substations are more than 25 years old. These figures point to a system confronting both operational inefficiencies and aging physical assets, complicating efforts to support expanding economic activity.

Fuel availability creates another vulnerability. Gas shortages have forced reliance on costly heavy fuel oil, adding financial pressure to electricity provision. With international energy prices among the risks identified in the World Bank's outlook, these existing supply challenges introduce an additional dimension of uncertainty.

The electricity sector consequently represents more than an infrastructure concern. Its performance is closely connected to the conditions under which businesses operate, expand production and potentially generate employment. Nevertheless, improved electricity provision cannot automatically be equated with formal job creation, whose scale would depend on broader economic developments.

The World Bank identifies electricity reforms and successful implementation of the Mission 300 Compact as potential catalysts for employment growth. Their effectiveness will ultimately depend on whether infrastructure improvements and governance reforms deliver measurable improvements in reliability, efficiency and business operating conditions.

The Next Growth Test: Industrial Jobs, Regional Trade and Economic Resilience

Benin's development prospects extend beyond domestic electricity reform. Closer economic integration with Nigeria could generate up to $1.3 billion annually and create 26,000 direct jobs, according to the World Bank. Grain processing, textiles, energy, higher education and tourism feature among the sectors identified as potential beneficiaries.

These projections suggest that regional trade could broaden the economic activities supporting employment. However, estimated opportunities must be distinguished from realised gains. The figures describe potential benefits, not employment already created or additional income already secured.

The interaction between regional integration, industrial development and electricity performance deserves particular attention. Stronger commercial opportunities may expand the scope for productive activity, but unreliable electricity remains a documented obstacle facing businesses.

Benin's economic outlook remains favourable, with growth projected at 7.6% in 2027–2028. Nevertheless, the conflict in the Middle East, higher energy prices, climate change effects and security challenges could weaken momentum. These risks underline the uncertainty surrounding even a relatively strong growth trajectory.

The decisive indicators will increasingly lie beyond headline GDP performance. Changes in wage employment, youth participation in formal jobs, industrial hiring, electricity outages and grid efficiency will provide a clearer picture of whether economic gains are reaching productive employment.

Benin has demonstrated an ability to sustain rapid expansion while improving its fiscal position. Its more demanding challenge is to translate that momentum into an economy where formal employment grows beyond individual industrial successes and where reliable electricity supports broader productive activity. The distance between impressive growth figures and workers' employment prospects remains the clearest measure of the transformation still required.