FREE TRADE AREA AGREEMENT AND THE ECONOMY: Theory, Evidence and Lessons for Nigeria
- E. Olawale Ogunkola
- Solomon A. Olakojo
- ( paper pages. 341 - 380 )
Abstract
The effects of the recently-signed African Continental Free Trade
Area (AfCFTA) Agreement on the Nigerian economy when
implementation starts have raised some concern. This study
therefore investigates the potential impacts of the AfCFTA on the
economy. A partial equilibrium model based on the SMART
simulation tool included in the World Integrated Trade Solutions
(WITS) was used. The results show that the tariff revenue loss from
the AfCFTA implementation outweighs the positive welfare gains
and total trade increase gains. Variations exist across Nigeria’s
major trading partners within the continent. The net total trade
creation with Swaziland, Kenya, Cameroon, Namibia and South
Africa is positive, while it is negative for Cȏte d’Ivoire, Senegal,
Ghana and Morocco. Hence, there is a need to minimize the loss in
tariff revenue that could result from the imports surge from other
African countries by enlarging the domestic tax base. Adequate
incentives and compensation for local producers of commodities
that will face severe competition from other African countries will
not only increase domestic production of these commodities but will
equally minimize revenue loss through indirect taxes on these
commodities.
Citation
E. Olawale Ogunkola, Solomon A. Olakojo.
2021.
"FREE TRADE AREA AGREEMENT AND THE ECONOMY: Theory, Evidence and Lessons for Nigeria"
The Nigerian Journal of Economic and Social Studies,
63 (3): 341 - 380.
JEL Classification
F13, F14, F15
