Benin–Nigeria relations are characterised by two-way informal cross-border trade (ICBT) facilitated through their long, porous border. First, Benin imports consumer goods that are subject to high import protection in Nigeria and then transships them to Nigeria through elaborate channels. Second, Benin illegally imports petroleum products from Nigeria, where consumer prices are highly subsidised. Also, consumer, intermediate, and capital goods are smuggled from Nigeria into Benin. This ICBT accounts for a significant share of Benin’s income, employment, and tax revenues on imported goods that are transferred to Nigeria. These benefits of ICBT to Benin, however, are very fragile as they are on the vagaries of economic policy in Nigeria. Moreover, ICBT has nurtured informality, corruption and political capture. It also crowds out private and public resources that could have been put to better use in agricultural and the manufacturing sectors. The way forward for Benin is to progressively move away from smuggling towards formal trade. Benin could aim to become a competitive, efficient regional centre for legal trade and services to its hinterland countries, as well as to Nigeria.