The World Bank’s recent Africa Pulse report highlights significant challenges affecting trade and market integration in Nigeria and across the continent.
These challenges include insecurity, high transportation costs, poor topography, and inadequate road infrastructure, all of which contribute to trade costs in Nigeria being four to five times higher than in the United States.
The report underscores how market distortions in Africa lead to substantial price disparities in imported goods and agricultural products. Limited market connectivity and integration hinder firms and farms from expanding production, exacerbating income inequality.
Moreover, spatial differences in prices further indicate market segmentation and the impact of distance on retail prices.
Food inflation remains a pressing issue, driven by factors such as currency depreciation and the high cost of transportation.
In February 2024, several Sub-Saharan African countries experienced double-digit year-on-year food inflation, with notable increases in Ethiopia, Malawi, Nigeria, Sierra Leone, and Zimbabwe.
The report emphasizes that these distortions discourage African producers from exporting and contribute to frictions in labor markets due to high transport costs and barriers to labor market information.
State intervention in markets also creates barriers to trade competition and investment, with large players often setting prices above market rates to the detriment of consumers, small competitors, and workers. Regulatory barriers, legal constraints, and administrative hurdles further impede entrepreneurship and innovation.
The report warns that such an anti-competitive market environment stifles innovation and hampers economic growth prospects across the continent.
