Effect of Trade Liberalization on Inflation in West African Countries

The study explores the impact of trade liberalization on inflation in West African countries—Nigeria, Ghana, and Côte d’Ivoire—using panel data analysis with fixed effects for the period 1985 to 2023. The findings reveal that GDP growth and interest rates significantly reduce inflation, while foreign direct investment (FDI), trade openness (TO), and exchange rate depreciation exert upward pressure on prices. These results underscore the need for targeted policy measures. Policymakers should focus on fostering GDP growth through economic diversification and investment in productive sectors, such as manufacturing and agriculture, to curb inflation. Managing FDI strategically to enhance domestic capacity while mitigating inflationary pressures is vital. Furthermore, reducing reliance on imports via local production, stabilizing exchange rates, and implementing robust monetary policies are essential for maintaining price stability in the face of trade liberalization. While trade liberalization offers growth opportunities, it also introduces inflationary challenges. A balanced policy approach is crucial to harness the benefits of openness while safeguarding economic stability.