Grain Price Movements in Nigeria

As crop prices move throughout the year, they influence households’ consumption decisions, farmers’ production decisions, and traders’ marketing decisions. As such, it is important to understand price seasonality in local contexts in order to design appropriate policy interventions. A new working paper and policy note from IFPRI’s Nigeria Strategy Support Program look at such price movements in grain prices in Kebbi state, Nigeria.

How and to what extent prices move throughout the year depends on how markets are able to meet demand through either trade or storage of grains. While both trade and storage can help to stabilize prices under certain conditions, this depends on the availability of stocks to sell and the ability of both traders and farmers to facilitate trade. When transaction costs and marketing risks are high, farmers and traders will have lower market participation. As a result, prices will move (either increase or decrease) more than they would if there were less risk and lower transaction costs. Thus, variations in price seasonality can be linked to market infrastructure.

The NSSP study looked specifically at grain price movements in six markets in Kebbi state; cereals are widely grown in this state The study used monthly price observations from the National Bureau of Statistics for maize, millet, local rice, imported rice, and sorghum in these markets from January 2000 to December 2016. The six markets chosen varied in terms of their geographic separation and socioeconomic characteristics, all of which impact their access to business services such as banking.

The study finds that local and imported rice saw the highest price levels during the study period, while sorghum had the lowest price levels. All markets saw an increase in imported rice prices in early 2015 as a result of the depreciation in the Nigerian Naira. Seasonal fluctuations throughout the study period were most distinct for local rice, millet, and sorghum. The range between the maximum and minimum price in a year was lowest for maize and millet and highest for imported rice and local price. The average intra-annual price range was lowest in the Birnin Kebbi market, which is the economic and administrative hub of Kebbi state and thus has the most access to business services. This market also saw the lowest total number of directional changes, in which a price rose in one period and the declined in the next; this suggests that prices in this market are more predictable than in the other five markets studied.

While certain factors, such as the depreciation of the Nigerian currency, impacted all markets, the extent of those impacts varied from market to market. The study’s authors conclude by suggesting that state-based price analyses, such as the one conducted in Kebbi state, can help policymakers better understand which markets in their state most need interventions to help stabilize prices. Such interventions could include investments in storage infrastructure and enhancements to business services in order to reduce marketing risk and increase market participation.

By: Sara Gustafson, IFPRI

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