THE ROLE OF SUPPLY SHOCKS AND INFORMATION DISSEMINATION ON PRICE DISPERSION IN NIGERIA

Author

Olajide Idris Sanusi, Southern Illinois University CarbondaleFollow

Date of Award

8-1-2018

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Morshed, AKM Mahbub

Abstract

In the first chapter, we examine the impact of rainfall shocks and armed conflicts on regional price dispersion of commodities within Nigeria. We used monthly data from 2001 to 2006 comprising prices of 139 items in 36 states. Our findings suggest that rainfall reduces regional price dispersion for a majority of commodities especially agricultural goods, over time. The effect of armed conflict, on the other hand, depends on the type of commodity or group of commodities considered. While armed conflict increases dispersion for basic food items, it reduces dispersion for other categories of commodities such as clothing and footwear. On average, a 1% increase in rainfall decreases price dispersion for staple food items by 7% while armed conflict increases the dispersion of staple food and fats \& oil by about 3.9% and 2.4% respectively. Overall, armed conflict increases price dispersion for a majority of commodities, and our findings are robust to changes in the measures of dispersion and rainfall shock. For the second chapter, we contribute to the literature on how information tends to play a vital role in price dispersion of goods and services across locations. Using a unique radio broadcasting data set of market prices collected from Nigeria, we provide estimates of the impact of grain price information dissemination on price dispersion across markets in Nigeria. Using difference-in-difference estimation, we find that the price announcements between 2009 and 2015 explains a 22 to 42 percent reduction in grain price dispersion. This effect increases over time across all market pairs. Our result are robust to various measures of dispersion. Lastly, in the third chapter, we analyze price convergence dynamics of various services and commodities in different states and regions across Nigeria in situations of supply shocks that emanate from insurgency (Insurgency here is specific but not limited to the activities of terrorists and militants in the northern and southern parts of Nigeria). We overwhelmingly reject the unit root null hypothesis in favor of a mean reverting process. The average speed at which market prices of goods and services moves towards parity is mostly below six months across all goods and services, and across regions.