Market Structure, Price Formation and Price Transmission for Wood Charcoal in Southeastern Nigeria

Due to the Federal Government of Nigeria’s privatization and commercialization of the downstream sector of the oil industry, the prices of kerosene and gas, which are competitors to wood charcoal, have risen astronomically in recent years. This has also continued to shift demand away from them and back to wood charcoal. Wood charcoal business is, therefore, fast becoming a lucrative business in Nigeria. However, for agro-climatic reasons, production of wood charcoal is mostly concentrated around the forest regions of the country thereby underscoring its marketing as a very important component of the business environment with potential for mass employment creation and poverty alleviation. But no systematic assessment of this potential has been carried out to date. This paper examines the marketing of wood charcoal in Abia State Nigeria, especially as it concerns the margins, structure, price causality, and price transmission. The margins were however on the average, lower than the producer’s share of the consumer spending. The result of the analysis also suggests a competitive market structure for wood charcoal in the study area. Prices were determined at the producer level of the marketing chain, but producers were asymmetric in their price transmissions to the wholesale level. These observations suggest that policy intervention in the form of improving the socio-economic environment under which marketing agents operate and facilitation of market information flow (which could reduce the asymmetric behavior of producers) could improve marketing of wood charcoal in the study area, with important practical implications for poverty alleviation and food security.