Minimizing Illicit Financial Flows to Mitigate Barriers to AFCFTA Implementation in Nigeria

By: Timilehin Adebayo ADERIBIGBE & Sesan Sunday ABERE

Pages: 117–137, Volume: 3, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 8/1/2026, 2026

ISSN (Electronic): 2536-6742

DOI:

Minimizing Illicit Financial Flows to Mitigate Barriers to AFCFTA Implementation in Nigeria

Abstract:

To benefit fully from the implementation of the African Continental Free Trade Area (AfCFTA), Nigeria must address barriers such as illicit financial flows (IFFs). Trade facilitation has been identified as an effective strategy for reducing IFFs. This study examined the effects of trade facilitation on IFFs between Nigeria and its African trading partners from 1981 to 2022. Data on trade facilitation indicators—internet usage, regulatory quality, border efficiency, and port infrastructure quality—were obtained from the World Development Indicators (WDI, 2025), while IFFs, comprising illicit financial outflows (IFOs) and illicit financial inflows (IFIs), were estimated using discrepancies in bilateral trade data from the International Monetary Fund (IMF, 2025). Descriptive statistics, panel Poisson regression, and time-series Poisson regression were employed to assess the effects of trade facilitation on IFOs and IFIs between Nigeria and its trading partners across four major African trade blocs: EAC, ECOWAS, AMU, and SADC. Panel regression results showed that internet usage and regulatory quality significantly reduced both IFOs and IFIs, while improved port infrastructure reduced IFIs. Time-series results revealed that internet usage reduced IFIs across all trade blocs and IFOs with EAC and SADC. Port infrastructure reduced both IFOs and IFIs in AMU and SADC, border efficiency lowered IFOs and IFIs with EAC and ECOWAS, and regulatory quality reduced IFOs across all blocs and IFIs from ECOWAS, AMU, and SADC. The study recommends establishing a cross-border team of information technology professionals, customs officials, and trade policy analysts to strengthen internet-enabled trade systems, reduce smuggling, simplify border procedures, and harmonize regulations for monitoring cross-border transactions.

Keywords: Trade facilitation, Illicit Financial Flows, Trade Blocs, Quality Port Infrastructure, Internet