African Continental Free Trade Agreement and Domestic Economy's Competitiveness: How Competitive is the Nigerian Economy?

Arising from the signing of the African Continental Free Trade Agreement by 54 African countries, that established the African Continental Free Trade Area (AfCFTA), the paper examined the competitiveness of the Nigerian economy vis-à-vis the newly signed free trade agreement. The main objective was to investigate whether the economy is competitive enough to benefit from the AfCFTA. The paper adopted the auto-regressive distributed lag (ARDL) model with real GDP as the dependent variable and real effective exchange rate (REXR), index of openness (OPEN), gross capital formation (GCF), labour force (LAB), a dummy variable (DUM), used as a proxy for the AfCFTA agreement, and an interaction term between the "dummy" and "openness" (DUM_OPEN), as the independent variables. Time series data spanning 2000-2021 were used in the analysis. The findings showed that no long-run relationship existed among the variables in the model. In the short-run, however, the proxy of free trade agreement impacted the economy negatively and significantly in line with the findings of Nieto, Soler, Moscoso and Valbuena (2014); the index of trade openness was statistically insignificant, in tandem with the findings of Hur and Park (2012); DUM_OPEN was not statistically significant; the economy, not competitive enough to benefit from the AfCFTA in the short-run, consistent with the findings of Olamade (2015). Consequently, the paper concluded with policy recommendations to boost the economy for Nigeria to benefit from the AfCFTA.