The Impact of AfCFTA on Welfare and Trade: Nigeria and South Africa in Light of Core Export Competences

Abstract

The African Continental Free Trade Area (AfCFTA) entered into force in May 2019 after surpassing the required 22 ratifications. This article combines the decision support model (DSM) and the Global Trade Analysis Project (GTAP) computable general equilibrium (CGE) model to make quantitative assessments of the expected welfare and trade effects of the AfCFTA on Nigerian and South African sectors possessing sustained export potential within the AfCFTA member states. By specifying two scenarios of AfCFTA membership, the simulation results reveal positive welfare gains for Nigeria (USD 146.12 million) and South Africa (USD 1.46 billion), originating from the GTAP sectors identified with sustainable export opportunities in the AfCFTA member states. The trade deal is also expected to be net-trade-creating, with a net trade of USD 2.15 billion at the global level. The assessments in this article are valuable in informing trade policy in light of core export competencies and the size, growth and consistency of the import demand in AfCFTA countries. It is also the first time elements of a product-level export market analytical tool are harmonised with a CGE model in the welfare and trade assessments of regional and/or bilateral trade arrangements. Policymakers and export promotion associations in both Nigeria and South Africa are recommended to utilise the results found in this article as a point of departure in leveraging the welfare-improving sustained export opportunities identified within the AfCFTA.

Growth, fiscal and welfare implications of trade liberalization in Africa: A macro‐micro modeling assessment of the Senegalese economy

“…The key findings of this study are comparable to those that have emerged in the literature evaluating the welfare impacts of tariff elimination in various African nations. For instance, studies such as Mhonyera and Meyer (2023) estimate substantial welfare enhancements for Nigeria and South Africa as a result of the AfCFTA's sustainable export potential. Additionally, Simola et al (2022) find that trade liberalization reduces the risk of hunger for one million Source: Authors' computations, results from simulations.…”

“…They propose win-win trade liberalization policies as effective measures for reducing poverty and mitigating inequality in Africa. Mhonyera and Meyer (2023) employ the Global Trade Analysis Project (GTAP) model to analyze the welfare and trade impacts of the AfCFTA agreement on key export sectors in Nigeria and South Africa. The simulation projects substantial welfare gains, with Nigeria benefitting by US$146.12 million and South Africa gaining US$1.46 billion.…”

“…It holds the promise of eliminating tariffs on a substantial portion of traded goods, liberalizing trade in services, and addressing non‐tariff barriers to promote intra‐African trade and enhance economic integration. Its establishment has the potential to bring about several significant impacts (Echandi et al, 2022; Mhonyera & Meyer, 2023). This paper seeks to evaluate the multifaceted consequences of trade liberalization within the framework of the AfCFTA, with a specific focus on the Senegalese economy.…”

Leveraging the Potential of the African Continental Free Trade Area: Logistics Challenges and Development Paths for Future Value Chains in Africa

“…This accord is anticipated to bolster deeper economic integration, promote competitiveness within domestic industries, streamline resource allocation, and enhance the region's attractiveness for foreign direct investment [17]. Additionally, it represents a strategic step forward in industrialization and overall economic advancement across Africa [18]. The AfCFTA is poised to simplify, align, and enhance coordination among trade frameworks, mitigating challenges stemming from overlapping trade agreements across the continent [17].…”

“…Furthermore, the AfCFTA, as a regional bloc, presents a distinct and fertile ground for impactful international business research, with its inception sparking a surge in scholarly studies examining its execution, results, advantages, and hurdles [16]. Encompassing a market of approximately 1.2 billion individuals and a Gross Domestic Product (GDP) of USD 3.4 trillion, the AfCFTA holds substantial potential to foster robust cooperation and trade ties among African nations [18]. The AfCFTA seeks to facilitate trade creation and diversification, potentially enhancing collaboration and commerce across the continent [17].…”