Analysis of the Potential Impact of the African Continental Free Trade Agreement (AfCFTA) on the Nigeria Economy.

Abstract

This paper assesses the potential impact of the Africa Continental Free Trade Agreement (AfCFTA) on the Nigeria economy. Autoregressive Distributed Lag (ARDL) Model were employed on quarterly data variables, including export and import trade for the period, March 2010 – June 2020. The result validates the trade-led growth hypothesis in the case of AfCFTA and Nigeria economic growth. Showing export trade as positively related with gross domestic product in the long run, agreeing with economic theory, that export impact positively on gross domestic product. Import indicates negative effect on gross domestic product in the long run. The error correction term (ECT) coefficient indicates that at 29.14% the disequilibrium due to the shock in the previous quarters is adjusted back to the long run equilibrium in the current quarter. The study suggests that for Nigeria to truly benefit from the AfCFTA, an outward-oriented strategy should be adopted, through trade composition by switching from exports of raw materials and semi-manufactured goods to high valued-added goods. Also, the government should scale up issues of productivity in the real sector of the economy and shift from being a net importer to a net exporter of non-oil products. Our results contradict earlier observers of Nigeria, who have argued that the implementation of the AfCFTA could reduce the tariff, revenue accruals, frustrate industrialization, and promote the dumping of products on the Nigerian economy.