Price Transmission and Integration of Rural and Urban Rice Markets in Nigeria

Abstract: This study was designed to analyze the degree and determinants of market integration in rural and urban rice markets in Nigeria using evidence from Enugu State. Issues considered include: level of rice market integration via price movements, structural factors that affect the integration of rice markets and, the problems affecting rice traders in the state. Forty wholesalers and forty retailers were selected for the study. Primary and secondary data were collected and analyzed using co-integration analysis, market integration function and descriptive statistics. Unit Root Test showed that rural and urban prices were stationary at first differencing and were integrated of the order zero, 1(0).  Rice markets in the study area were integrated but the level of integration was low. The Vector Error Correction Model had a coefficient of -0.0061872 which was significant at 1% level and was negative. The Market Integration Function had Coefficient of Determination (R²) of 0.78 showing that the independent variables explained about 78% of the variations in the prices of rice in the rural and urban rice markets. Transportation cost, toll fee, processing cost and storage cost significantly affected the level of market integration. The greatest problems encountered by the rice traders were inadequate finance, high transportation costs/bad roads and poor quality of local rice compared to foreign rice. To improve the level of market integration; transportation, processing, storage, communication and credits facilities should be provided.