SPATIAL INTEGRATION AND PRICE FORMATION OF COWPEA MARKETS IN SOUTHWEST NIGERIA
Keywords:spatially co-integrated analysis, price formation, cowpea markets
This study examined the Cointegrated Analysis of spatial price formation of cowpea markets in Southwestern Nigeria. Specifically, the study examined the statistical properties of the price series and determined the direction of causality rural and urban markets prices and examined the degree and speed of price transmission between rural and urban cowpea markets. Time series data of retail rural and urban market price of cowpea from 2004 to 2013 were obtained from Agricultural Development Programmes of Lagos, Ogun and Oyo States of Nigeria. The degree of price transmission was analyzed within the framework of Vector Error Correction Model. Stationarity of the series were tested by Augmented Dickey Fuller unit root test method while co-integration among the price series were tested by Johansen test method. In addition, Granger causality test was employed to establish the direction of causality among the price series. The ADF tests revealed that the price series were stationary at first difference. Johansen co-integration results showed that even though one co-integrating equation exists between linear combinations of cowpea price series, some stable long run equilibrium relationships exist among the price series which could be given some error correction representations. Results based on pairwise granger causality revealed that Rural Price of Maize in Oyo State have strong exogeneity over other rural and urban markets. The speed of adjustment of 51%, 87% and 60% from the short run to the long run equilibrium is relatively high as compared to a perfect adjustment of 100% threshold. This showed that there is a strong integration among the cowpea markets in Southwest Nigeria.