Structural Model for the Analysis of ‘The Impacts of Import Tariff Changes on Domestic Industrial Production’ in Nigeria

Abstract

This study has investigated the ability of import tariff changes to match the relationship between import tariff changes and domestic industrial production in Nigeria. The study used a Static Computable General Equilibrium model of an archetype country to run simulations that indicate the nature of the static effects of import tariff changes on Nigeria. This study identifies four different scenarios to investigate the impacts of the changes in the import tariff rates on domestic industrial production in Nigeria. Scenarios try to get macroeconomic and welfare variables changes after the tariff rate changes compared to the base case scenario 2019 in which the benchmark equilibrium parameters are calibrated. The results shows that the growth of domestic industrial production have direct relationships with import tariff changes. That is, import tariff increase will provide increases in domestic industrial production. On the basis of our findings, this study recommends that, economic policies aiming to establish a level of import substitution seems to be more favourable in Nigeria, therefore, they should be encouraged. Also, a coordinated interplay of monetary and fiscal policies will be required to minimise contemporaneous distortions that arise from trade restrictions.