Posted Fri, Dec 20, 2019 6:58 AM

Macroeconomic Effects of the African Continental Free Trade Area Agreement (AfCFTA) on the Nigerian Economy

The framework agreement for the establishment of the AfCFTA was endorsed by 44 African countries in Kigali, Rwanda on 21 March, 2018. On July 8, 2019, Nigeria signed up to the AfCFTA framework Agreement. One main objective of the AfCFTA is to create a single continental market for goods and services across Africa. While stakeholders in Nigeria have expressed concerns that the agreement will have negative consequences on the economy, others have echoed optimism and highlighted potential benefits for Nigeria, if the agreement is well implemented. This policy brief examines the implications of the AfCFTA agreement on key macroeconomic indicators such as Gross Domestic Product (GDP), Government Revenue, Private Investment and Inflation in Nigeria. This brief also examined how the Nigerian government can maximise the benefits of the agreement and minimise associated costs. In this brief, four scenarios were created and the results for each scenario were compared with a baseline which showed the direction of a specific variable if Nigeria had not signed the AfCFTA. When the results of each scenario were compared with the baseline (if Nigeria had not signed the AfCFTA), the outcomes were mixed and the magnitudes of the differences were mostly negligible across the four scenarios established. In essence, removal of tariffs under the AfCFTA arrangement has no major consequence on key macroeconomic indicators in Nigeria. This policy brief provided critical recommendations such as the need for Nigeria to develop a comprehensive and up-to-date trade policy; the need for the Nigerian government to address specific constraints that limit competitiveness of Nigerian exports; the need for involvement of key stakeholders including the private sector during the AfCFTA negotiation process; as well as the creation of strict and enforceable mechanism of the rules of origin within the trade agreement. Lastly, the brief recommended that the Nigerian government must improve border scrutiny and security to prevent dumping and abuse of the rules of origin by traders.