The impacts of the African Continental Free Trade Area on the Nigerian economy

The African Continental Free Trade Area (AfCFTA) is aimed at boosting intra-African trade and promoting regional development. However, the distribution of its benefits and costs are uneven, and it presents opportunities and threats to different sectors of the economy. This report assesses the impact of the AfCFTA on the Nigerian economy, with particular reference to the agri-food sectors. Using the MAGNET and DEMETRA models calibrated on the GTAP 10 database and Nigeria’s 2019 Social Accounting Matrix (SAM) respectively, the analysis shows that the AfCFTA has a negligible impact on GDP, and the impact is much larger under the tariff and NTM scenarios than under the tariff only scenario. Contrary to expectations, government revenue increase significantly as revenue from other sources offset the fall in customs revenue, and this effect is larger under the intermediate input liberalisation schedule. The outputs of industry, utilities, construction, services and agriculture sectors increase while outputs of public services, extractive and processed food sectors reduce. The reduction in the output of the processed food sector leads to an increase in imports of processed food commodities. The increase in output is bigger under the agricultural trade liberalisation schedule. The employment effects also mirror the output effect, with sectors that experience output contraction also experiencing fall in employment and vice versa. Low-skilled labour will be mostly affected. The welfare impact is higher for rural households compared to urban households. For urban households, some outlier households face some welfare losses in 2025 and 2030. But the negative welfare effects turn positive in the transition to 2035 as the AfCFTA benefits expand. In terms of the trade flows, the results show that trade between Nigeria and other AfCFTA member states will increases significantly by 2035. Based on the findings of the study, it is recommended that complementary policies be implemented to stimulate growth. Policies to protect key sectors that are negatively affected, including processed food sector, be implemented.