Andriamananjara, Soamiely; Brenton, Paul; von Uexkull, Jan Erik; Walkenhorst, Peter
Description:
This study discusses potential economic
implications for Nigeria of an Economic Partnership
Agreement with the European Union. It uses the World Bank s
Tariff Reform Impact Simulation Tool to assess the effects
of preferential tariff liberalization with respect to the
European Union. The results suggest that the impact of an
Economic Partnership Agreement on total imports into Nigeria
will be slight. This is in part because the Agreement will
likely allow the most protected sectors to be excluded from
liberalization, and also because where substantial tariffs
are involved much of the increase in imports from the
European Union will occur at the expense of other suppliers
of imports. It is this trade diversion, arising from the
discriminatory nature of the EPA, which generates a negative
welfare impact of the tariff reforms. One way for Nigeria to
limit these losses is to pursue non-preferential trade
liberalization before implementing an EPA. The paper looks
at the large number of import bans in Nigeria and argues
that the positive impact on welfare of removing these import
bans is likely to be substantial. Their removal would
undermine a major reason for cross border smuggling and pave
the way for a return to normal regional trade flows. The
paper shows how an Economic Partnership Agreement presents
an opportunity for accelerating the reforms that are needed
to support a strategy to increase regional and global trade
integration. Such an agreement is more likely to have
positive and significant impacts when integrated into a
comprehensive strategy toward competitiveness and
alleviation of the supply constraints that have stifled the
impact of previous trade agreements. Key issues that should
be addressed include liberalization and regulatory
strengthening of services sectors to ensure that all firms
in Nigeria have access to efficiently produced backbone
services and initiatives to address the country s poor trade
logistics performance.