The impacts of the Africa 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 across member states and household groups is 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. Analysis performed using the MAGNET and DEMETRA economy-wide models calibrated on the GTAP 10 database and Nigeria s 2019 Social Accounting Matrix, respectively, shows that the AfCFTA has a negligible impact on Nigerian gross domestic product, notably in the case of a liberalisation scenario that eliminates tariffs but does not include non-tariff measures (NTMs) cost reduction. Contrary to expectations, government revenue increases, as revenue from other sources offsets the fall in customs revenue, and this effect is larger under the intermediate input liberalisation schedule. The outputs of the industry, utilities, construction, services and agriculture sectors increase, while the outputs of the public services, extractive industry and processed food sectors decrease. 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 larger under the agricultural trade liberalisation schedule. The employment effects also mirror the output effects, with the sectors experiencing output contraction also experiencing a fall in employment, and vice versa. Low-skilled labour will be affected due to adverse effects on output of sectors where they are employed. The welfare impact is larger for rural households than for urban households. For urban households, some outlier households face welfare losses in 2025 and 2030. But these negative welfare effects turn positive in the transition to 2035 as the AfCFTA benefits expand.