Effect of institutional quality on intra-African agricultural trade

The African Continental Free Trade Area agreement presents a significant milestone in the effort to boost intra-African agricultural trade and food security in Africa. Despite its potential, the agreement faces notable institutional and structural constraints, which are often overlooked in existing studies. This study addresses the research gap by examining the impact of institutional quality on intra-African agricultural trade using the gravity model and the Poisson Pseudo Maximum Likelihood estimation. The analysis draws on data from 54 African countries spanning the period 1996–2021. The findings indicate that institutional quality significantly affects intra-African agricultural trade; however, its impact varies in magnitude and direction depending on the country's trade function (importing or exporting). By enhancing governance and reducing transaction costs, the institutional quality of exporting African countries and its dimensions positively influence intra-African agricultural trade. Conversely, stringent institutional frameworks for importing African countries increase compliance costs and restrict the importation of agricultural products. The study emphasizes the critical importance of institutions in addressing the persistent challenges within intra-African agricultural trade. To improve agricultural trade, African governments should streamline their institutional frameworks to reduce compliance costs and facilitate agricultural imports for importing countries. Additionally, policymakers should harmonize trade laws among African countries to reduce trade obstacles and promote a more integrated agricultural market. Finally, we argue that the nuanced differences in the dimensions of institutional quality across African countries highlight the diverse and multifaceted nature of the institutional quality-agricultural trade dynamics. Understanding these differences offers valuable insight for policymakers seeking to enhance intra-African agricultural trade through improved institutions.