ABSTRACT
The study analyzed price spread in the marketing of rice in Abia State, Nigeria. Multi-stage sampling procedure was employed to select the 90 marketers from both urban and rural area respectively, making a total of 180 sample size needed for the study. The research has been carried out using descriptive analytical tools; such as mean, frequencies, percentage and inferential statistics (such as correlation and multiple regression analysis). The result on the socioeconomic characteristics indicates there was no gender disparity in rice marketing among the rural marketers as both male and female accounted for 50% each. The mean ages were 44 and 43 years for rural and urban marketers respectively. Average net return realized in a month were N62,905.67 and N 516,350.82 for rural and urban marketers The analysis revealed that the markets had positive price spread of one ton of rice is N 8930.53 and N 3065.31 for rural and urban market respectively. The Pearson’s Product Moment Correlation (PPMC) used to ascertain the level of market integration between urban and rural markets showed that there is strong and significant relationship between price of rice in rural and urban market (0.7433**). Ordinary least square OLS estimate shows that the coefficient of education, experience, capital cost (depreciations) and purchase cost were the significant variables affecting marketing price of the rice in rural area while the coefficient of education, experience, assembling cost, capital cost (depreciations) and purchase cost were the significant variables affecting marketing price of the rice in the urban area. Furthermore, high cost of transportation (4.77), lack of government subsidy (4.76) and seasonal price variation (4.71) were the critical problem for rice marketing in urban markets. While lack of government subsidy was ranked first (4.71), followed by Seasonal price variation (4.61) and high cost of transportation (4.57) were the critical problem for rice marketing in rural markets. This wide price spread across different markets could be attributed to inadequate information dissemination among marketers about the price of rice in different markets. This wide price spread across different markets could be attributed to inadequate information dissemination among marketers about the price of rice in different markets. The study also recommends that; national price policy should be mounted rather than regional price policy; in case of growing integration of the markets.
TABLE OF CONTENTS
Title
Page i
Declaration ii
Certification
iii
Dedication
iv
Acknowledgements v
Table
of contents vi
List
of Tables ix
List
of Figures x
Abstract xi
CHAPTER 1: INTRODUCTION 1
1.1
Background Information 1
1.2
Problem Statement 4
1.3 Objectives of the Study 7
1.4 Research Hypotheses 7
1.5 Justification for the Study 8
1.6 Scope of the Study 9
CHAPTER 2: REVIEW
OF RELATED LITERATURE 10
2.1 Conceptual Framework 10
2.1.1 Economics of Rice 10
2.1.2 The West African Rice Subsector 12
2.1.3 An Overview of the Production and Marketing
of Rice in Nigeria 13
2.1.4 Government intervention in rice production 18
2.1.5 Trends in Nigeria’s rice economy 20
2.1.6 Demand for rice 22
2.1.7 Marketing System 23
2.1.7.1
Marketing and markets 23
2.1.7.2
Rice marketing 25
2.1.7.3
Market structure 26
2.1.7.4
Rice’s marketing channels 26
2.1.7.5
Marketing efficiency 30
2.1.7.6
Market chain, supply chain, and value chain analysis 33
2.1.7.7
Cost of marketing 34
2.1.7.8
Marketing approach 38
2.1.8 Concept of price spread 38
2.1.9 The Concept of Price Trends 39
2.1.10 Market Integration 40 2.1.11 Price Volatility 41
2.1.11.1
Food grain price spatial variation 41
2.1.11.2
Temporal variation in food grain prices 43
2.1.12 Obstacles to the Marketing of Rice 45
2.2 Theoretical Framework 46 2.2.1 Theory of profit
maximization 46
2.2.2 Theory of Marketing 47
2.3 Empirical Literature 48
2.4 Analytical Review 52
2.4.1 Spatial Price Model 52
2.4.2. Regression analysis. 53
2.4.3
Correlation Coefficient 55
2.4.4 Costs and Returns 55
CHAPTER 3: METHODOLOGY 57
3.1 The Study Area 57
3.2 Sampling Technique 57
3.3 Data Collection 58
3.4 Data Analysis 58
3.4.1
Descriptive statistics 58
3.4.2
Cost and returns 58
3.4.3
Spatial price model 59
3.4.4
Correlation coefficient 60
3.4.5
Regression model 60
CHAPTER 4: RESULT AND
DISCUSSIONS 62
4.1 Socio-economic Characteristics of the
Respondents. 62
4.1.1
Gender 63
4.1.2
Age 64
4.1.3
Marital status 64
4.1.4
Educational attainment 64
4.1.5
House size 65
4.1.6
Experience 65
4.1.7
Marketing union 66
4.2 Marketing Channels of Rice in the Study
Areas 66
4.3 Cost and Return of Rice Marketers. 68
4.4 Price Spread and Pricing Efficiency of
Marketers in the Area 69
4.5 Market Integration of Rice Markets in the
State 72
4.6 Factors Affecting Rice Prices in the
Study Area 73
4.7 Constraint Encountered in the Marketing
of Rice 77
CHAPTER 5:
SUMMARY, CONCLUSION AND RECOMMENDATION 79
5.1
Summary of findings 79
5.2 Conclusion 80
5.3 Recommendations 81
REFERENCE 83
APPENDIX 103
LIST OF TABLES
4.1:
Socio-economic characteristics of respondents 63
4.2:
Cost and Return Analysis from the Rice Marketers per Month 68
4.3:
Price spread and pricing efficiency of marketers in the area 69
4.4:
Estimate of Level of Market Integration between urban and rural markets 72
4.5
Multiple regression result on factors affecting price of rice in rural market. 73
4.6:
Multiple regression result on factors affecting price of rice in urban markets. 75
4.7:
Constraint encountered in the marketing of rice. 77
LIST OF FIGURES
4.1:
Rice marketing channels in Abia State 67
4.2
Price spread of rice in Urban Area (January 2021 – August 2021) 71
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Nigeria's economic development relies heavily
on agricultural production. The majority of Nigerians work in small-scale
agricultural production and between 60 and 70 percent of them live in rural
areas (Jifin, 2017; Yusuf et al., 2020). Agriculture is
a key factor in the creation of wealth and the alleviation of poverty in
Nigeria, in addition to making up the largest share of GDP (Adamu et al., 2013).
One of the most important food crops is rice
(Oryza sativa L.), Of all the staple crops, rice has
raised to a position of prominence with high and ever increasing rate of
consumption in Nigeria and other countries countries and the consumption is of interest to the Nigerian economy
because of the huge amount of foreign exchange being spent on its importation
and the consequent depletion of scarce resources on which the level of economic
activities and productivity (Atera et al., 2018). Despite
the fact that rice is the most widely consumed nutrient on the planet, it is
rarely traded on global markets. Global trade only accounts for 7% of rice
production (PS&D 2020). This is largely because rice is still a highly
protected commodity and is primarily consumed in the region where it is produced.
According to FAO (2019), rice is the most important food crop in West Africa
because of its impact on households' and nations' economies and contribution to
food security.
Rice marketing encompasses all of the
processes involved in transporting rice from its place of production to its
final destination. The size of the marketing margin is reflected in a series of
transaction costs. These margins fluctuate over time, among brands, types,
locations, and locations (Akpan et al.,
2014). It cannot be overstated how important marketing is in raising rural
income and in the overall growth of any economy. In point of fact, shifting
goods of trade from surplus to deficit regions is one of agricultural marketing's
primary responsibilities. In the agricultural sector of Nigeria, rice is one of
those products that are traded. It is the process of changing, storing, and
transporting agricultural products from the point of initial production to the
consumers in the right form, at the right time, and in the right place to meet
the needs of those consumers. Put it
another way, marketing creates utilities for time, form, location, and
possession (Dayyabu et al, 2021).The importance of a well-structured
and effective rice marketing system cannot be overstated. It speeds up economic
growth by providing marketing agents with income and employment opportunities,
creating foreign exchange earnings, developing an exchange economy, and
encouraging specialization (BigBen, 2016). Products travel through various
marketing agents or intermediaries known as market channels while they are
being sold. Wholesalers and retailers are the market intermediaries that both
play a significant role in the marketing system (Girei et al., 2013).
According to Akpan et al., (2014), the price of rice varies greatly from season to
season, and consumers pay different prices for the same product in different
markets that are separated by a few kilometers. Pricing and marketing after
harvest suggested that, like any other private enterprise, agriculture is
driven by entrepreneurs motivated by investment and entrepreneurial profits.
Therefore, farmers must consider the most advantageous location, time, and form
in which their products could be marketed in order to maximize returns (Dayyabu et
al, 2021). As a result, agricultural products'
prices fluctuate throughout the month and even throughout the day.
Additionally, prices differ across alternative markets and among product
grades. The price spread is the difference between what the consumer pays and
what the farmer gets for the same amount of farm produce. Marketing expenses
and margins make up the majority of it. Rice's price range from producer to
consumer is also unique because it is the result of demand and supply from
transactions between various intermediaries at various levels of the marketing
system. According to Frederic (2015), in a free market economy, the price
system and competition provide the coordinating mechanism for determining the
flow of resources into production and the flow of goods and services into use.
In addition, the marketing arrangements at various stages also play an
important role in price levels at various stages from the farm gate to the
ultimate user. Prices, resource allocation, income distribution, and capital
formation are all determined within the marketing system. As a result, the rate
of economic development of any nation, but especially Nigeria, is sped up by an
effective marketing system.
Rice marketing takes place in both formal and
informal settings. The designated areas that are managed by public
organizations are known as formal market places. Since informal markets aren't
officially recognized, most government regulations don't apply to them. A group
of women who meet weekly in the center of a village or who buy from farmers
along roadsides could be considered an informal market. According to (Dayyabu et
al, 2021) farmers typically accept lower prices
because they are unaware of market prices or because they do not have the time,
resources, or means to transport rice grains to the market through a variety of
market channels, rice travels from farmers to consumers. Rural assemblers buy
surplus crops from farmers, who then sell them to urban wholesalers either
directly or through commission agents. When prices are sufficiently high to
cover the costs of procurement, storage, handling, and a profit margin, large
wholesalers hold substantial stocks that they offer to retailers for sale.
Small wholesalers handle smaller quantities, utilize local markets, and acquire
grains from wholesalers and commission agents for smaller quantities of sale to
consumers (Gomez, 2014).
In Nigeria, specifically in Abia State,
traders of rice form commodity-based associations to advocate for improved
marketing conditions and discuss general price guidelines. Traders discuss rice
pricing at association meetings, but individual traders set prices.
1.2 PROBLEM STATEMENT
An efficient price system is essential to
agricultural activities' long-term viability. The market for agricultural
products in Nigeria has exhibited a pattern over time of short-term price
stability and long-term price decline (Akpan et al., 2014). Various factors, including variations in consumers'
bargaining power, cyclical income fluctuations between sellers and consumers,
seasonality of production, natural shocks like floods, pests, and diseases, and
farmers' inappropriate responses to price signals, have been blamed for the
erratic price of agricultural commodities in Nigeria (Omojola ,2014).
The rice subsector is still expanding, but it
faces numerous obstacles, including biotic, abiotic, and socioeconomic
constraints, with socioeconomic constraints exerting greater pressure
(Abdul-Gafar et al., 2016). By and
by, Nigerian rice sub-area is overwhelmed by frail and wasteful maker market
linkages because of unfortunate framework including absence of further
developed handling offices, low rice efficiency, unfortunate post-reap dealing
with and capacity, costly and unfortunate admittance to inputs (Excellent seed,
compost and harvest security items), deficient market data, absence of
straightforwardness, low ability to satisfy quality guidelines, and restricted
proficiency conveyance organizations. As a result, rice farmers in Nigeria now
earn little and produce less rice.
The majority of rice farmers in Nigeria are
smallholders who cultivate mixtures on farms with an average size of less than
two hectares. Only 1.7 million of the 4.6 million hectares available for rice
production are utilized for rice cultivation (FAO, 2019).
Despite the fact that its production requires
a lot of labor, which accounts for the majority of production costs, Ogbonnaya et al., (2018). The marketing system and
the economy as a whole may suffer if commodity prices fluctuate across markets.
Depending on the source of variability, it could result in resource allocation
among sellers and consumers that is inefficient. It could also raise the level
of poverty among society's low-income earners Robert et al., (2020).
The rice markets are constrained by a number
of issues and obstacles: inadequate facilities for storage and transportation,
lack of a uniform system of common grade standards to facilitate trading at a
distance, lack of management skills, and inappropriate legal codes to enforce
contracts are just a few of the issues that plague the rice buying and selling
market (Astewel, 2017). Therefore, Nwibo et al., (2013) suggest that an important issue is examining the
rice market's operation and distribution channels. By encouraging
specialization and leading to increased output, an efficient marketing system
encourages economic growth.
Due to its high use, rice is becoming more
expensive in many Nigerian markets; resulting in a wider supply-demand gap.
Marketing issues like inadequate market information, inadequate market structure,
high transportation costs, lack of capital, inadequate storage facilities,
limited markets, and a large number of intermediaries can also contribute to
the widening demand-supply gap (Tiku et
al., 2015).
According to Nguyen
et al, (2016), an analysis of the
farm-retail price spread is useful in developing countries with an inefficient
marketing system for determining influential factors on marketing margin,
estimating the economic profit of dominant merchants, and evaluating unfair
pricing practices on marketing services.
Producers and consumers alike value
information on the price and trend of agricultural commodities in developed and
developing nations like Nigeria. Between production seasons, there are
short-term fluctuations in the prices of agricultural commodities (Iheke et al.,
2017). Farm product prices tend to be low during harvesting seasons due to
surpluses; however, prices rise during the off-season due to decreased
production and seasonal shifts (Akpan et al., 2014).. As a result, the quantity of agricultural
products supplied by farmers and demanded by consumers is largely influenced by
their price. In Nigerian markets, agricultural commodity price instability is a
regular occurrence (Iheke et al, 2017). The marketing system and the economy as
a whole may suffer if commodity prices fluctuate across markets. Depending on
the source of variability, it could result in resource allocation among sellers
and consumers that is inefficient.
In contrast, in a developing nation like
Nigeria, a standardized product price is not a sensible policy. This is due to
the nature of the majority of agricultural products, rising external costs, and
deteriorating marketing infrastructures, which frequently resulted in
significant differences in the total variable costs incurred by sellers and consumers
in these markets.
Additionally, producers, consumers, and
policymakers need to know how prices tend to fluctuate throughout the year in
order to plan effectively Iheke et al., (2017). It has been claimed that agricultural commodity
markets are inefficient due to a lack of market knowledge and other structural
flaws; however, the dynamic process of information transmission between markets
in price discovery and its implications for marketing efficiency are critically
important (Adekoya et al., 2013)
In light of the foregoing, the following
questions regarding rice marketing are addressed in the study:
i.What are the socioeconomic characteristics of
rice marketers in Abia state?
ii. Are there marketing channels of rice in Abia
State?
iii.What the cost and return of rice marketers in
rural and urban markets?
iv.What is the nature of price spread and
pricing efficiency of marketers in rural and urban markets;
v.Are rice markets in the rural and urban areas
of Abia State integrated?
vi. Are there factors affecting rice prices in
the study area?
vii.What are the constraints encountered by
marketers in marketing rice in Abia State?
1.3 OBJECTIVES
OF THE STUDY
The broad objective of this study is to
analyze price spread in the marketing of rice in Abia State, Nigeria and the
specific objectives are to:
i.
describe the socio-economic characteristic of rice marketers in the
study area;
ii.
identify the marketing channels of rice in the study area;
iii.
estimate the cost and return of rice
marketers in the area;
iv.
determine the price spread and pricing efficiency of marketers in the
rural and urban markets;
v.
analyze market integration of rice between rural and urban markets;
vi.
describe the factors affecting rice prices in the study area;
vii.
describe the constraint encountered in the marketing of rice in the
study area.
1.4 RESEARCH HYPOTHESES
1.
HO: Price
movements in the market across the study area are not perfectly integrated
2.
HO: Education, experience and market charges are
positively related to price of rice while capital cost,
assembling cost and purchase price
are negatively related
to price of rice in rural area.
1.5 JUSTIFICATION
FOR THE STUDY
Market liberalization and structural
adjustment policies in developing nations have frequently been evaluated based
on the degree of market integration Tijjani et al., (2022). One of the prerequisites is an effective marketing
policy based on sound empirical facts, which is one of several ways to increase
agricultural production and the state's economic growth. As a result,
policymakers will require knowledge of the state's rice price transmission
direction and magnitude in order to develop viable agricultural sector
policies.
Because rice's seasonal price behavior is due
to its production sequence, this research will greatly enhance rice marketing
in relation to inter-market and seasonality of price trends. A study of this
kind was prompted by the rice production's two periods of glut and shortage.
According to Ayinde and Idris (2014), when
seasonal price patterns are examined alongside supply, demand, information, and
other marketing concepts, they can serve as a guide for the creation of a
marketing strategy.
By answering the research questions of why
and how various factors influence rice marketing, the findings will contribute
to a deeper comprehension of the theory of planned behavior. Additionally, the
findings will provide policymakers with a roadmap for enhancing rice marketing
in the region. The findings will also be useful as a source of information for
future researchers.
1.6 SCOPE OF THE STUDY
Although
rice marketing chain in Abia State may involve a number of marketers, this
research focused on marketers only. The study covered eight months marketing
period. The activities of rice marketers within this period were investigated
to determine their socio-economic characteristics, marketing channels, price spread and pricing efficiency,
market integration, factors affecting rice prices, and the constraints
encountered in the marketing of rice.
The
major limitation of this study was the inability of marketers to keep
up-to-date accurate records. However, this was overcome by the use of memory
recall. Also the respondents were not willing to reveal some sensitive
information like age, financial records among others. Collection of the
traders’ data was the most difficult task during the survey. Most of the time
traders are reluctant to give appropriate information as they link it with tax
fees. Besides, they are busy and time specific during interview. Some traders
also appointed some more days to fill the questionnaire .The researcher
overcame this by assuring the respondents of the confidentiality of any
information obtained and also by keeping the questionnaires anonymous.
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