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AFRICAN CONTINENTAL FREE TRADE AREA AND NIGERIA’S MACROECONOMY: CONCERN FOR IMPORTED INFLATION
The African continental Free Trade Area (AfCFTA) is poised to creating a single continental market for the free movement of goods and services within the African Continent. This paper specifically investigates the effect of imports within the framework of AfCFTA on imported inflation in Nigeria. In general, it examines the African continental Free Trade Area and Nigeria macroeconomy with concern for imported inflation in the country. Annual time series data from World Bank’s development indicators, Central Bank of Nigeria Statistical Bulletin 2018 and United Nations conference on Trade and Agreements (UNCTAD) were used. To achieve the objectives of this study, various econometric tests were carried out on the variables such as the Augmented Dickey- Fuller (ADF) test, Philips-Peron test, Bound test, CUSUM test, as well as Error correction mechanism. The econometric techniques adopted for the study were multiple regression method based on Auto regressive and Distributed Lag (ARDL). Results from the ARDL Model demonstrate that although, imports from Morocco have a positive nexus with inflation in Nigeria, supplies from Cameroon have shown to have negative and insignificant impact on inflation. This implies that imported inflation has risen significantly following the increased liberalisation of imports from Morocco and liable to be induced by the AfCFTA agreements. This result suggests that Nigeria’s policy makers should take advantage of the AfCFTA framework to create stronger ties with Cameroon for the supply of her chemical products and cut down on demand for these products from other AfCFTA member states. This will help curtail rise in import prices for the benefit Nigeria’s macro economy in the long run.
Free Trade Area, Imported Inflation, Imports, AfCFTA, Nigeria, Africa, ARDL Model