Implications of the African Continental Free Trade Area for Nigeria’s Economic Growth

Authors

O. S. Aigheyisi, University of Benin
M. A. Iyoha, University of Benin

Publisher

Central Bank of Nigeria

Keywords

Intra-Regional Trade, Economic Integration, Intra-African Trade, African Continental Free Trade Area, Economic Growth, Nigeria

Abstract

The objective of this paper is to examine the effect of intra-African Trade on Nigeria’s economic growth from 1981 to 2019. To achieve this, the ARDL modeling technique is employed to investigate the short-run and long-run effects of intra-African trade on Nigeria’s economic growth. The study finds that though the short-run effect is positive but not significant; the long-run effect is significantly positive, and robust to alternative estimation techniques. This suggests that expansion of trade among African countries, which is expected to result from the full implementation of the African Continental Free Trade Agreement (AfCFTA), would have positive growth effect on Nigeria in the long-run. Furthermore, positive and significant long-run real output effects of capital formation, exchange rate and population, as well as negative and significant long-run real output effect of inflation are observed. Evidence from out-of-sample simulation based on a three-equation system of simultaneous equations model shows that expansion of intra-African trade will (potentially) contribute to the growth of the Nigerian economy. Based on these findings, we recommend strong commitment to the implementation of the Free Trade Agreement, improvement of the investment climate, moderation of inflation and establishment of a stable exchange rate system, as well as development of a knowledge-base of the population to improve the performance of the Nigerian economy in the years ahead.

Author Bio

Aigheyisi, O. S., and Iyoha, M. A. are staff of the Department of Economics, University of Benin, Benin City, Nigeria

Publication Title

CBN Economic and Financial Review

Issue

1

Volume

60

First Page

25

Last Page

51

Classification-JEL

F13, F15, F43, F63

Recommended Citation

Aigheyisi, O. S. & Iyoha, M. A. (2022). Implications of the African Continental Free Trade Area for Nigeria’s Economic Growth. CBN Economic and Financial Review, 60(1). 25 - 51.