Spatial integration of rice markets: The case of Kwara and Niger States, Nigeria

Abstract

data of retail prices of rice were collected for a period of 60 months (2006-2010) and error correction technique was employed in the determination of the degree of market integration between the two States using a four test procedures viz: Augumented Dickey Fuller test to detect for the presence of unit root in the series; Johansen co-integration test for the long run equilibrium relationship among the variables; vector error correction model test (VECM) to capture short-run and long-run changes in the price movements; and Granger casualty test to reflect the direction of influence between prices. The overall analysis of the vector error correction estimates shows that most of the markets in the two states were not well integrated in the short run. In other words, price adjustment across markets did not happen instantaneously. It took some times for the spatial price adjustments to take place. However, the co-integration results revealed that most of the markets in the two states were well integrated in the long run in the study area. The causality test results indicated that though the two States rice markets drifted apart in the short run, there was smooth transmission of price signals and marketing information from Kwara State to Niger State rice markets.