Market Structure, Price Formation and Price Transmission for Wood Charcoal in Southeastern Nigeria

Abstract

Due to the Federal Government of Nigeria's privatization and commercialization of the downstream sector of the oil industry, the prices of kerosene and gas, which are competitors to wood charcoal, have risen astronomically in recent years. This has also continued to shift demand away from them and back to wood charcoal. Wood charcoal business is, therefore, fast becoming a lucrative business in Nigeria. However, for agro-climatic reasons, production of wood charcoal is mostly concentrated around the forest regions of the country thereby underscoring its marketing as a very important component of the business environment with potential for mass employment creation and poverty alleviation. But no systematic assessment of this potential has been carried out to date. This paper examines the marketing of wood charcoal in Abia State Nigeria, especially as it concerns the margins, structure, price causality, and price transmission. The margins were however on the average, lower than the producer's share of the consumer spending. The result of the analysis also suggests a competitive market structure for wood charcoal in the study area. Prices were determined at the producer level of the marketing chain, but producers were asymmetric in their price transmissions to the wholesale level. These observations suggest that policy intervention in the form of improving the socio-economic environment under which marketing agents operate and facilitation of market information flow (which could reduce the asymmetric behavior of producers) could improve marketing of wood charcoal in the study area, with important practical implications for poverty alleviation and food security.

Structure and performance of cassava markets: challenges of food security and connecting small farmers to markets in Cameroon

“…The Littoral and Center regions host the economic and political capitals of the nation and have larger household sizes which might imply increased pressure on household food security (Table 2). These factors drive marketers to grab new market opportunities to improve household welfare (Agbugba and Obi, 2013;Olagunju et al, 2020). Furthermore, larger households provide available labor necessary for the efficient coordination of marketing operations.…”

Assessing the Relationship between Fuel and Charcoal Prices in Uganda

“…The role of charcoal as an energy source and as a contributing factor to deforestation has been widely researched (Branch et al 2022;Chidumayo and Gumbo 2013;Masera et al 2015). Although there are studies investigating the supply and value chains of charcoal (Agbugba and Obi 2013;Agyei et al 2018;Khundi et al 2011;Schure et al 2013;Shively et al 2010;Worku et al 2021), these articles, except for one, do not explicitly address any of the factors that influence charcoal prices. Agbugba and Obi (2013) used daily prices for a single month to assess price transmission among supply, wholesale, and retail levels in Nigeria.…”

“…Although there are studies investigating the supply and value chains of charcoal (Agbugba and Obi 2013;Agyei et al 2018;Khundi et al 2011;Schure et al 2013;Shively et al 2010;Worku et al 2021), these articles, except for one, do not explicitly address any of the factors that influence charcoal prices. Agbugba and Obi (2013) used daily prices for a single month to assess price transmission among supply, wholesale, and retail levels in Nigeria. Their analysis was short-term and did not include any external cost factors such as fuel prices.…”

Conceptual Analysis: The Charcoal-Agriculture Nexus to Understand the Socio-Ecological Contexts Underlying Varied Sustainability Outcomes in African Landscapes

“…Simpler, competitive markets can give relatively higher margins, as high as over 50% of the final retail price, to producers than to other actors, especially with asymmetric information in favor of producers (Agbugba and Obi, 2013). In contrast, and more commonly, complex markets involving many stakeholders and sectors tend to result in inequitable distribution (Sepp, 2008).…”

“…The price of charcoal can also give rise to a distributional problem across the value chain (Agbugba and Obi, 2013).…”