By the end of the 1980s, Benin's economy was near collapse. As its oil boom ended, Nigeria expelled 100,000 Beninese migrant workers and closed the border with Benin. Kérékou's socialist collectivization of Benin's agriculture and the ballooning bureaucracy further damaged the economy. By 1988, international financial institutions feared Benin would default on its loans and pressured Kérékou to make financial reforms.
Kérékou subsequently embarked on a major privatization campaign, cut the government payroll, and reduced social services, prompting student and labor union unrest. Fearing a revolution, Kérékou agreed to a new constitution and free elections. In 1991, Nicéphore Soglo, an economist and former director of the International Bank for Reconstruction and Development, was elected president. Although he enjoyed widespread support at first, Soglo gradually became unpopular as austerity measures reduced living standards and a 50% currency devaluation in 1994 caused inflation. Kérékou defeated Soglo in the 1996 elections and was easily reelected in March 2001. Term limits prevented him from running again. In April 2006, Yayi Boni assumed the presidency. The World Bank and IMF agreed to cancel much of Benin's foreign debt after the country demonstrated significant economic reforms.
In 2010, floods destroyed 55,000 homes, killed tens of thousands of livestock, and displaced 680,000 people. There were 46 fatalities.
After two postponements, presidential elections were held on March 13, 2011. According to Benin's constitutional court, incumbent Yayi Boni won 53% of the vote. His main challenger, Adrien Houngbedji, disputed the results, alleging fraud and claiming victory for himself. Parliamentary elections followed in April, 2011, and established a new government, including Pascal Koupaki as prime minister, Nassirou Bako Arifari as foreign minister, Benoît Assouan Degla as interior minister, and Adidjatou Mathys as finance minister; Issifou Kogui N'Douro remained as defense minister.