Implications of Free Trade Area For Poverty, Household Welfare And Economic Development In Nigeria

Abstract

Purpose of the study: The study aims to investigate the implications of free trade areas for poverty, household welfare and economic development in Nigeria. Methodology: This study employed a fully modified least squares (FMOLS) regression technique. The income per capita and unemployment out of many macroeconomics indexes were employed in this study to measure welfare and poverty implications of free trade area respectively. To enable the study, determine the policy and decision-making implications of the free trade area on Nigeria economy, historical data were drawn from the central bank statistical bulletin for 27 years. Main findings: The estimated results revealed that the income per capita (welfare) model demonstrated a fair view of free trade scenarios as indicated by the explanatory variables; export contributions to gross domestic product and foreign direct investment contributed positively to the welfare of the individual. Besides, the study also found foreign direct investment and export contributions to gross domestic product to have a negative relationship with unemployment, which implies a reduction in the unemployment rate in Nigeria. Research implications: This study documented that households’ welfare will be increased by free trade area, while unemployment will also be reduced by participating in free trade area. Based on study findings, policies makers, academia, researchers, the and government will find the study relevant in making policies that promote foreign direct investment, export contributions to the growth of the economy and gross domestic product such as reduction in tariff, simplifying trade regulations, increasing the availability of credit to exporters, creations of duty drawback, improving cooperation among economic actors and overall structural changes which will have positive implications on the households welfare, poverty and economic development. The novelty of the study: The relevance for free trade area as one among economic policies to promote the welfare and reduce poverty among nations is gaining momentum globally especially African continent. Given the paucity of studies on this area, the study is undertaken as a framework to determine what the implications of free trade areas will be among the African continent.