Price transmission and market integration: a test of the central market hypothesis of geographical markets for cassava products in Nigeria

Abstract

In the wake of the immediate past administration, the Federal Government had demonstrated its concern in making cassava a major industrial raw material and foreign exchange earner. This leads directly to not only measures of expanding cassava production but to improvements in marketing efficiency of the traditional food market of cassava products in the country as well, since inefficiency in the marketing system can lead to unprofitable arbitrage, with attendant welfare losses. With this in mind, this paper investigates price transmission and market integration of cassava products namely chips, chunks, white gari and yellow gari between a central market in Kano and peripheral/rural markets in Taraba, Benue, Nasarawa and Edo States, using standard econometric methods. Precisely, the co-integration methodology was followed. Results show that the markets for all the products were integrated except for chips in Benue, white gari in Nasarawa, yellow gari in Benue, and yellow gari in Edo. Further
results indicate that price transmission elasticities range from o.434 to 1.00, indicating full transmission in some cases and not in others, while the speeds of price transmission range from 11.46% to 47.15%, implying that the speed with which cassava product prices are spatially transmitted between the locations is generally low. Improvements in road network and other communication infrastructure will reduce inefficiencies in the traditional cassava product marketing system with attendant gains for producers, middlemen and consumers.