Posted Fri, Dec 20, 2019 7:15 AM

Impact Assessment Study and Economy-Wide Implications of the African Continental Free Trade Area (AfCFTA) on the Nigerian Economy

The African Continental Free Trade Area (AfCFTA) represents one of the most ambitious attempts of the African Union Heads of States and Governments to economically unite African peoples and economies. It also represents a bold attempt by the African Union Heads of States and Governments to provide or at the least, experiment with an “African solution” to “an African” problem. The AfCFTA is the first step in the implementation of African Union (AU) Agenda 2063: the “Vision” for an integrated, prosperous and peaceful Africa. The proponents of the Continental Free Trade Area project, who interestingly are in the majority, are deeply convinced of the potential of the AfCFTA to broaden and strengthen the scope for intra-African trade as well as improve the well-being of African people. The antagonists of the drive towards the establishment of a continental free trade area in Africa, unfortunately, do not agree with the proponents. The antagonists believe the AfCFTA will be damaging to participating countries’ economies. This group specifically argues that the AfCFTA will severely decrease government revenue, thereby worsen the fiscal stance of many African countries. They also argue that it will exacerbate firm losses and that the exposure of domestic firms to foreign competition will reduce demand and profitability, which in turn will have an adverse effect on productivity. Given the huge market potential in Africa, there is a tremendous possibility that AfCFTA will become an African success story. However, the amount of success that is achievable in this “African Project” will depend to a large extent on the quality of preparation that is infused to the negotiation and implementation of the AfCFTA agreement by African countries. Although Nigeria signed the AfCFTA framework agreement in July 2019, the initial reluctance of the Nigerian Government to sign the agreement was borne out of the concern of different segments of the Nigerian economy regarding the possible harmful consequences of joining the AfCFTA. There is the underlying fear among policymakers in Nigeria that AfCFTA could easily be transformed from a free trade area into a free transfer of resources arrangement from one economy to the other. It is against this background that the Nigerian Economic Summit Group (NESG) commissioned the Centre for Petroleum Energy Economics and Law (CPEEL) at the University of Ibadan, Ibadan in conjunction with Equilibria Consult, to conduct an evidence-based study that has the overarching objective of assessing the potential impact of AfCFTA on the Nigerian economy.