Abstract

This study examines the potential impact of the African Continental Free Trade Area (AfCFTA) on domestic revenue mobilization in ECOWAS countries. Trade potential is first estimated using a gravity model with high-dimensional fixed effects and Poisson pseudo-maximum likelihood over the period 2000-2022. Robustness checks rely on alternative estimators, including negative binomial, zero-inflated Poisson, and zero-inflated negative binomial models. Trade potential is further estimated using the approach proposed by Fontagné et al. (2002). The generalized method of moments (GMM) is then applied to assess the impact of trade potential under AfCFTA on domestic revenues. Results show that: (i) AfCFTA has a positive and statistically significant impact at the 1% level; (ii) ECOWAS countries exhibit untapped trade potential of about 11% within AfCFTA markets; and (iii) AfCFTA trade potential significantly enhances domestic tax mobilization. These findings support the effective implementation of AfCFTA alongside strengthened domestic tax reforms, including VAT modernization and harmonization, as well as stronger enforcement of rules of origin.