Price Transmission and Market Integration in Oyo State, Nigeria

The paper tests the market integration of the main staple agricultural commodities in Oyo State. Monthly prices in covering a period of 8 years (1994-2001) were obtained from Oyo State Agricultural Development Programme (OYSADP) and analysed using the Ravallion Model. The study also calculated the Indices of Market Concentration (IMC) to measure the degree of spatial market integration. The IMCs for cassava, yam, white maize and yellow maize were 0.3074, 0.0814, 0.02712 and 0.1648 respectively. The IMCs imply high short-run market integration between the reference and rural markets. The market integration indices confirm that price changes in the urban markets (Bodija and Ilora) translated to changes in the price of cassava, yam, maize, yellow maize in rural markets (Akanran, Towobowo, Anko, Irepodun, Oje, Kajola, Akala and Aberu). It is concluded that agricultural commodity arbitrage is working. The degree of market integration can be enhanced by the provision of not only transport infrastructure but by provision of adequate formal marketing information and standardization of weights and measures in the system.