First MCC regional compact aims to improve Benin-Niger trade corridor

The U.S.-Africa Leaders Summit was a unique moment in the spotlight for the Millenium Challenge Corporation, a lesser known United States development agency. MCC was featured in one of President Joe Biden’s speeches and took to the mainstage for ceremonial signing of its first regional compact.

“We were very delighted, surprised, and slightly shell shocked by how much attention we got,” MCC CEO Alice Albright told Devex.

Albright joined ministers from Benin and Niger to sign a $504 million Regional Transport Compact, a five-year grant agreement to improve the trade corridor between Benin’s port of Cotonou and Niger’s capital Niamey by rehabilitating roads and upgrading freight and customs operations. The deal, MCC’s first compact involving a region instead of individual countries, signifies a new phase in how the agency operates. It is also one of the more concrete big-dollar investments launched at the summit. In addition to the $504 million from MCC, Benin and Niger are also each contributing $15 million to the project.

This deal was a long time coming. MCC’s board selected the two countries as eligible to work together back in 2018, not long after Congress gave the agency the authority to do these kinds of regional compacts. Prior to that, MCC would work with countries individually.

MCC sought the authority to do regional transactions because it recognized “how important regional integration was for economic activity and trade,” Albright said. But putting these kinds of deals together is complicated — both countries have to be eligible and meet various criteria. And MCC needs to negotiate individual agreements with each country and iron out details about how the project will be implemented in an integrated manner. That’s part of what has taken so much time to structure this first one, she said.

“This is not just about a road. It’s really about their trading and economic future,” she said.

At the signing ceremony for the new compact last week, Benin’s President Patrice Talon noted that by working together, neighboring countries can make fairly small markets more attractive to business.

“These kinds of compacts can promote investment in our country,” he said in French, adding that he hopes it will prompt critical U.S. private sector engagement.

The compact will include both infrastructure improvements and institutional reforms to increase the flow of trade and strengthen the relationship between Benin and Niger, Mohamed Bazoum, Niger’s president, said at the summit. He said this is an example of how the U.S. government is meeting their desires.

“This is another reason we consider we are facing a partner that pays attention to our expectations and helps us realize our own interests,” he said in French.

There are two other regional compacts in the pipeline. MCC is working to structure a regional compact with Côte d’Ivoire aimed at improving regional energy infrastructure and distributing energy in West Africa in a more cost-effective way. Earlier this month, the MCC board approved Senegal for a new regional compact, and MCC will now work with the country to identify what regional priorities or projects it will tackle.

“What you're going to see over time is that we are going to rely on this regional authority more and more and begin to focus on the opportunities for regional and trade integration,” Albright said.

One of the greatest potentials for economic growth in Africa is regional trade, and that is driving interest in regional compacts, she added.  

MCC selects countries for its regional compacts much the same way it does for its other large grant agreements. A country must be low-income or lower middle-income, and it must pass the “MCC scorecard,” which includes criteria related to a country being on a path to strong democratic governance and fighting corruption. Given those hardline requirements, events such as civil unrest or a coup can put a stop to MCC’s work in a country — as has happened in Burkina Faso and Ethiopia.

While the first three regional compacts selected are in West Africa, Albright said she wouldn’t be surprised if MCC would look at opportunities in East Africa down the line, especially given the role the region can play in addressing food insecurity.

At the summit, Biden also announced that the MCC board of directors had selected four new African countries to develop grant agreements with MCC. In addition to the Senegal regional compact, Gambia and Togo were also selected for individual compacts. Mauritania has been chosen for a so-called “threshold program,” which offers smaller grants to support policy and institutional reforms in areas constraining economic growth to countries that don’t quite meet MCC’s full eligibility criteria.

While MCC has asked Congress to consider expanding the number of countries it can work in, Albright said that if granted, African countries will continue to be a focus and the agency’s more frequent partners.

One of the key purposes of the summit was to reset the relationship between U.S. and African nations to one of partnership, rather than that of donor and recipient.

“We’re very gratified by those who really recognize that’s how MCC works and the things that we work on really do match the challenge at the moment,” Albright said. MCC will “continue to push for more scope and resources so that we can continue to work in the way that really suits our government partners,” she added.