The World Bank has stated that the cost of trade in Nigeria and Ethiopia is four to five times higher than what is obtained in the United States due to insecurity, higher transportation costs, topography, and poor road infrastructure.
The Global lender pointed out in the Africa Pulse published on Monday that price differences between imported food and non-food products are caused by market perversion throughout Africa, which suggests a lack of integration across regional markets.
It stated, “Similarly, access to product markets is constrained, which prevents firms and farms from scaling up their production. In particular, the lack of connectivity and market integration means that markets are segmented, allowing firms or farms with market power to capture benefits, contributing to income inequality.
“Studies from the Africa region consistently find spatial differences in prices of imported goods (food and non-food) as well as nontraded agricultural staples, indicating that markets are not well-integrated, and the retail prices of products are affected by distance. For instance, trade costs are four to five times higher in Ethiopia and Nigeria than in the United States, due to poor road infrastructure, low competition in the transportation sector, and topography.”
The report found that there was a preference for the sale of local products in Africa by producers over exports due to these distortions.
In addition, the report noted that high transport costs, increased cost of screening workers, and lack of information on job opportunities contribute to friction in Africa’s labour markets.
The World Bank also captured the influence of state involvement creating barriers to trade competition and investment through regulation in markets across Africa.
It noted that consumers, small competitors, and workers were disadvantaged by the tendency of large players in such environments to set prices above market rates.
It stated, “Global analysis of World Bank and Organisation for Economic Co-operation and Development indicators of product market regulations suggest that barriers to competition in product markets tend to be higher in African countries, due to a high degree of state involvement in markets, legal and administrative barriers to entrepreneurship, as well as barriers to trade and investment.”
