Analysis of rural and urban rice markets integration in Niger State, Nigeria: error correction model approach

Abstract

This study examined the integration of rural and urban markets in Niger State using the Error correction Modeling. Secondary data of the retail prices of rice were collected for a period of 60 months (2006)(2007)(2008)(2009)(2010) and error correction technique was employed in the determination of the degree of market integration between the markets 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; andGranger casualty test to reflect the direction of influence between prices. The results revealed that unit root in the price series was eliminated after the first differencing and that there was a stable long-run equilibrium relationship among the markets. The vector error correction estimates shows that most of the markets were not well integrated in the short -run, and finally, the causality test revealed that no single market dominated the price formation either in the rural or urban markets in the study area. Therefore, to improve the rate of spatial price adjustment in the study area, policy makers should intensify their efforts on improving the functioning of rice markets through increasing marketers' access to accurate and timely marketing information as well as reduction of the prices of mobile phones to make it more affordable to the marketers so as to improve the degree of integration of the markets in the study area.