Are there Potential Economic Benefits from China-Nigeria Trade Agreements

Abstract

This study examined the potential economic gains and losses from trade agreements between China and Nigeria. A gravity model was implemented using panel data analysis to discern the drivers of trade and simulate the effects of trade agreements between the two countries. Empirical results showed that economic size of both countries played a major role in promoting trade between them. Also, the levels of tariffs in China and Nigeria were important. Simulation experiments revealed that under a non-reciprocal tariff reduction in China by 25 per cent,50 per cent,75 per cent and 100 per cent in all traded products, Nigeria will record positive growth of export. Similarly, a reciprocal tariff reduction agreement by China and Nigeria, by the same magnitude will lead to a rise in Nigeria’s export of all products particularly chemicals, mineral fuels and some manufactured products by over 100.0 per cent while China’s exports to Nigeria will rise by between 32.0 per cent per cent and 43.0 per cent (for miscellaneous manufactures and crude materials). Keywords: Trade agreements, Potential gains and losses, China, Nigeria, Gravity model, Panel data models, Simulations. JEL Classification: F14: F15: F59, C15, C23, C33