n AfricaGrowth Agenda - Household welfare effects of economic community of West African states' custom external tariffs in Nigeria

Volume 2015, Issue 1
  • ISSN : 1811-5187


The importance of Nigeria's economic integration with the rest of the world cannot be overemphasized. Trade, a veritable channel of this integration, and in particular its policies, often have a different impact on economic agents due to the transmission mechanism through which they operate. This paper uses micro- and macro-economic data to investigate the household welfare effects in Nigeria of the Common External Tariff (CET) of the Economic Community of West African States (ECOWAS). The welfare effects are examined from the perspective of households as producer, consumers, and factor owners. The empirical strategies proceeded in three steps: first by determining the extent of tariff pass-through to domestic prices; second, investigating the linkages between prices and wages, and finally examine the impact of both prices and wages on household welfare. The paper finds that the trade policy has had a net positive effect on households in Nigeria, largely due to the gains from expenditure on agricultural goods. The expenditure gains from the policy through lower prices outweigh household losses incurred in their purchasing power through lower income. The paper recommends social safety net measures, particularly for vulnerable subsistence agricultural households in rural areas.

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