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Impact of Free Trade Area on Trade, Revenue and Welfare in Nigeria

Author

Listed:
  • Ndubuisi O. Chukwu
  • Ambrose Nnaemeka Omeje
  • Kasie Emmanuel Ofoezie
  • Michael Okike Ugwu
  • Augustine Jideofor Mba

Abstract

This study offers an analytical evaluation of the effects of Free Trade Area (FTA) agreements on trade, revenue, and welfare in Nigeria. The study applied World-Integrated Trade Solution/Software for Market Analysis and Restrictions on Trade (WITS-SMART), anchored on a partial equilibrium model (PEM) for its simulations. The study simulated 100% tariff elimination on selected products under Harmonized System (HS)-2 classification code sourced from Trade Analysis Information Systems (TRAINS) and Common Format for Transient Data Exchange (COMTRADE). The study’s findings show that the African Continental Free Trade Area (AfCFTA) agreement will benefit Nigeria’s economy from trade creation estimated at US$8,860.419 million, including a favorable welfare gain to the value of US$740.571 million. Nevertheless, Nigeria will sustain losses in trade revenue, valued at US$6,142.061 million. The study recommends proficient revenue management and well-diversified revenue collection sources, such as improvement in Value Added Tax and Ad-Valorem duty, to cushion the effects of the revenue loss resulting from tariff elimination in the FTA. JEL Classification F1, F2, F4, F5, F6, I3

Suggested Citation

  • Ndubuisi O. Chukwu & Ambrose Nnaemeka Omeje & Kasie Emmanuel Ofoezie & Michael Okike Ugwu & Augustine Jideofor Mba, 2024. "Impact of Free Trade Area on Trade, Revenue and Welfare in Nigeria," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 16(1), pages 81-97, January.
    • Handle: RePEc:sae:emeeco:v:16:y:2024:i:1:p:81-97
    DOI: 10.1177/09749101221128683
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Free trade area; welfare; tariff; AfCFTA; economic integration; WITS-SMART;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • F6 - International Economics - - Economic Impacts of Globalization
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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