Residents of Senegal greeted the dawn of a new era on Monday following the post-election departure of long-serving leader Abdoulaye Wade, who drew widespread praise for cementing the country's reputation as West Africa's most stable democracy.

Excited residents gathered at tea shops as boys hawked newspapers splashing headlines like 'Wade Knocked Out', after a night marked by fireworks, honking horns and singing in parts of the capital Dakar that followed his former protégé Macky Sall's election win.

This is a victory for all Senegalese people, not just the politicians, said Bassirou Sylla, 32, a trader in Dakar's upscale neighbourhood of Point E.

The election was the latest test for democracy in a region plagued by bloodshed and flawed votes, including on in Ivory Coast that triggered a civil war last year. A military coup in Senegal's neighbour Mali last week demonstrated how quickly a democracy can unravel.

Wade's 12-year rule saw big infrastructure spending but little progress in tackling poverty,

He admitted defeat just hours after polls closed on Sunday as early results showed challenger Sall with a landslide win, maintaining Senegal's record as the only nation on mainland West Africa not to have seen a coup or civil war since independence.

While hopes for a better future were running high in Dakar, where Wade faced the greatest opposition, it remains to be seen whether Sall, a former Wade ally who served for years as his prime minister, would bring real change.

THUMBS-UP FOR DEMOCRACY

The United Nations, the European Union and the African Union congratulated Senegal on its smooth election, and French President Nicolas Sarkozy praised Wade for accepting his loss. By accepting the choice of your countrymen, you have once again shown your dedication to democratic principles, Sarkozy told him in a letter.

Investors also welcomed the smooth transition of power with a rally in the price of Senegal's $500 million Eurobond, which had depreciated before the first round vote due to what analysts viewed as a deteriorating political and security climate.

The bond rallied intraday to a price of 109, from 105.25 on Friday. This suggests the market reacted positively to the smooth run-off election and power shift, said Samir Gadio at Standard Bank.

Wade, 85, began his career as president with an impeccable democratic reputation but drew criticism for seeking to extend his rule to a third term this year, setting off street protests in which six people were killed.

Sall campaigned for Sunday's election on lowering the cost of living, including cutting taxes on rice. He criticised Wade for pursuing vanity projects - including an African Renaissance Monument standing slightly taller than New York's Statue of Liberty - instead of helping poor Senegalese.

Serigne Bakhoum, a taxi driver who said he voted for Sall, said the country where average daily income is $3 was pinning its hopes on Sall for change.

We are demanding that President Macky Sall follow through on his campaign promise to bring down the price of fuel, which is too high in Senegal, he said. I'm waiting impatiently to see what he will do.

PROTESTS

Opposition activists had said Wade's quest for a third term was unconstitutional and some voters viewed him as yet another example of a long-serving African leader seeking to hang on to power.

The Constitutional Council, however, upheld his argument that his first term did not count because it began before a two-term limit was adopted. The ruling set off weeks of protests in which at least six people died.

In a first round vote on February 26, Wade fell short of the outright majority needed to avoid a run-off but he then drew united support from defeated candidates for the second round.

Sunday's early results from Dakar had showed Sall ahead, even in Wade's own precinct in the Point E neighbourhood with 417 votes to Wade's 120.

Full results are expected later on Monday or Tuesday.

The European Union said the election conditions were mostly positive, but noted that the voter list contained errors, including the names of about 130,000 dead people.

(Additional reporting by Mark John, Simon Akam, Emmanuel Braun, Richard Valdmanis, and Bate Felix; Writing by Richard Valdmanis and Mark John; Editing by Mark Heinrich, John Stonestreet)