Gravity vs. Policy: Analyzing Nigeria’s Trade Margins Under the AfCFTA Framework

Abstract

The study investigated the impact of Gravity vs. Policy: Analyzing Nigeria’s Trade Margins Under the AfCFTA Framework, with the aim of examining how geographical distance, economic size, non-tariff barriers, and trade liberalization influence Nigeria’s bilateral trade flows, particularly through the intensive and extensive margins between 2000 and 2025. The scope of the study covered Nigeria’s trade relationships with its major global and regional partners, focusing on the transition from pre-AfCFTA to post-AfCFTA periods. The study adopted an ex post facto research design, utilizing secondary data obtained from UN COMTRADE, IMF Direction of Trade Statistics, and the AfCFTA Secretariat. The Poisson Pseudo Maximum Likelihood (PPML) gravity model was employed as the main analytical technique to estimate trade determinants, while diagnostic tests and fixed effects estimation were used to ensure robustness. The theoretical framework of the study was anchored on the Gravity Model of Trade, New Trade Theory, and Trade Policy Liberalization Theory, which collectively explain how structural forces and policy reforms interact to shape trade outcomes. The findings of the study revealed that economic size positively influences trade flows, while geographical distance and non-tariff barriers significantly reduce trade performance. It was also found that AfCFTA implementation has contributed to increased trade volume and export diversification, although persistent structural constraints limit full benefits. The study concluded that Nigeria’s trade performance is driven by a dynamic interaction between gravity forces and policy reforms under AfCFTA. Therefore, the study recommended stronger digital trade facilitation, infrastructure development, export diversification, and institutional strengthening to enhance Nigeria’s trade competitiveness.