The Effect of Trade Liberalisation on Poverty in Nigeria: A Micro–Macro Framework

Despite the deployment of several policy prescriptions towards ameliorating poverty in Nigeria, the incidence has remained pervasive. Therefore, this paper seeks to examine the impact of trade liberalisation on poverty in Nigeria. A major contribution is the use of an integrated computable general equilibrium microsimulation model, derived from Winters’ trade liberalisation framework that focused on product and factor market channels. The model was calibrated with data inputs drawn from a 2006 social accounting matrix that was reconciled with heterogeneous households’ income and expenditure data obtained from the 2004 Nigerian living standard survey. Policy simulations that reflected actual trade reductions were carried out while rural and urban poverty effects associated with trade liberalisation were computed using the Foster–Greer–Thoerbecke index. Findings reveal the moderate poverty-reducing effect of agriculture and manufacturing sector trade liberalisation with the effect being relatively more pronounced in urban centres. The weak sectoral linkages (particularly between agriculture and manufacturing) combined with the low income and price effects partly explained these poverty-reducing outcomes. The study concludes that trade liberalisation cannot be solely relied upon by the government to address the rising incidence of poverty in Nigeria and therefore, should be used as a complimentary policy to alleviate poverty.