ABSTRACT
While there are many aspects to agricultural market modernization that are linked and mutually affect and
reinforce each other, we argue in this paper that investment in Nigeria in physical market infrastructure,
such as storage units, remains relatively neglected, especially in rural areas. That this is the case
undermines successful agricultural development in the country. We examine the transactions cost, spatial
market equilibrium, and industrial policy literatures to provide a conceptual context for understanding how
and why investments in physical market infrastructure can lower transactions costs for traders and for
farmers, and, thus, increase market participation.
We also implemented a marketplace characteristics survey in Kebbi state, an agriculture-based
state in northwestern Nigeria, to determine whether further investments in marketplace infrastructure are
needed. We found that some markets, especially those in rural areas, lacked storage units and
communications technologies. Hence, traders and farmers in those markets operate in a challenging
environment. We argue that investments such as these are likely to be more successful in the long-run and
have more immediate effects on local agricultural development than would national initiatives. Local
governments have better knowledge of local conditions and can better design initial investments to
strengthen markets and then implement follow-on initiatives required to meet needs that arise as market
conditions evolve.
Keywords: grain markets, market participation, infrastructure, local government, Kebbi state, Nigeria
TABLE OF CONTENTS
Abstract .............................................................................................................................................................iii
1. Introduction....................................................................................................................................................1
2. Review of Literature: Market System Design, Transactions Costs, and Government Industrial Policy .........2
2.1. Marketplaces, markets, and market structure................................................................................... 2
2.2. Transactions costs and market participation...................................................................................... 3
2.3. Government industrial policy ............................................................................................................. 4
3. Theoretical Framework: Role of Public Investment to Facilitate Market Participation.................................5
4. Grain Markets and the Survey........................................................................................................................6
5. Survey Results.................................................................................................................................................7
5.1. Differences in physical infrastructure across markets........................................................................ 8
5.2. Differences over time for individual markets..................................................................................... 9
5.3. Mechanisms to improve grain storage quality and the market environment ................................. 10
6. Discussion and Policy Implications...............................................................................................................12
References........................................................................................................................................................14
Appendix: Descriptions of Visited Markets......................................................................................................15
LIST OF TABLES
Table 5.1. General socioeconomic characteristics of the interviewed Kebbi state grain traders......................8
Table 5.2. Storage and physical infrastructure related marketplace characteristics.........................................9
Table 5.3. Changes in market conditions between the dry and wet season 2018...........................................10
Table 5.4. Needs identified by traders to improve quality of grain storage ....................................................10
Table 5.5. Needs identified by traders to improve the general marketing environment................................11
LIST OF FIGURES
Figure 4.1. Map of markets visited for marketplace characteristics surveys.....................................................7
Figure 5.1. Artistic rendering of elements of an “Ideal rural marketplace”.....................................................11