MPIA-10205 The Impacts of Trade Liberalization on Poverty in Nigeria: Microsimulations in a CGE Model

Abstract

The study proposes to examine the effects reduction of import tariffs will have on poverty and income distribution in Nigeria. As a prelude to tariff reduction, the government is currently assessing the implications of significantly reducing tariffs due, in part, to its 2001 agreement with Ghana to quickly implement the ECOWAS Trade Liberalisation Scheme. Moreover, with strong evidence showing that openness is beneficial to growth, Nigeria and other Less Developed Countries are being encouraged to reduce tariffs and be more open. It is unknown if these tariff reductions will lead to higher poverty levels. It is also unknown what the relative effects of the increases will be in the different socioeconomic groups  location, sector etc. Previous efforts to asses the economic impacts of import tariff reduction have been limited by the employment of representative households. This gives ambiguous results in analysis of poverty effects. The study aims at using a Computable General Equilibrium Micro Simulation Model (CGEMM) to run simulations that will indicate if there will be increases in the overall incidence of poverty and substantially uneven impacts on household income distribution and poverty incidence in different socioeconomic groups. Using a CGEMM overcomes the limitation and ambiguity associated with representative households. Compared to previous studies the study employs a closer characterisation of the labour market to assess the impacts of tariff reduction: wages of urban, rural, skilled and unskilled labour are distinct in order to ascertain possible differences in policy impact. Information from the study will provide guidance in tariff setting aimed at poverty reduction. Since 1988 the government has used 2 harmonized tax books to state import tariffs: the 1988-1994 and 1995-2001 tax books. The next tax book is being prepared .It is intended that the study will shed some light on the poverty implications of the different possible tax rates and influence the sequencing of tariff reductions vis-à-vis other complementary reforms.


Members

Project leader: Adeola Adenikinju

Project researchers: Kanayo Ogujiuba


Journal publication

No journal publications.


Working Papers

Title Modified Size Comments Recommendations
The Impacts of Trade Liberalization on Poverty in Nigeria: Dynamic Simulations in a CGE Model November 2005(PDF VERSION) 2007-04-01 220 KB 0 0

Policy Briefs

Title Modified Size Comments Recommendations
The Impacts of ECOWAS Trade Liberalization Scheme on Poverty in Nigeria 2007-09-15 23.25KB 0 0

Final report

Title Modified Size Comments Recommendations
2006-02-06 220 KB 0 0

Proposal

Title Modified Size Comments Recommendations
2004-09-03 374 KB 0 0

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