Bringing People and Markets Together: The Impact of ICT on Grain Markets in Niger

The majority of the population in Niger are rural subsistence farmers. Grains (primarily millet) are dietary staples, accounting for over 75 per cent of rural households’ caloric consumption. These are transported from farmers to consumers through an extensive system of markets that run the length of the country, which is roughly three times the size of California.

As grain markets occur only once per week, traders and farmers have historically travelled long distances to markets to obtain market information. This not only requires the cost of travel, but also the opportunity costs of traders’ time. Between 2001 and 2006, however, cell phone service was phased in throughout the country, providing an alternative and cheaper search technology to grain traders, farmers and consumers.

Aker (2008) shows that the introduction of cell phone towers in Niger reduced differences in grain prices across markets by 20 per cent and the intra-annual variation of grain prices by 12 per cent. Cell phones had a greater impact on price dispersion for markets that are farther away, and for those that are linked by poor-quality roads. This effect also intensified over time: the reduction in inter-market price dispersion increased as a higher percentage of markets have cell phone coverage, suggesting that ICT is more useful as a greater percentage of people have coverage.

The reduction in price differences seems to be linked to a reduction in search costs: Since cell phones reduced traders’ search costs by 50 per cent, they were able to change their marketing behaviour. Grain traders operating in cell phone markets searched over a greater number of markets, had more market contacts and sold in more markets as compared to their non-cell phone counterparts. This suggests that traders in cell phone markets were better able to respond to surpluses and shortages, thereby allocating grains more efficiently across markets and dampening the price differences.

Cell phones have not only helped traders in Niger. Between 2001-2006, cell phones were associated with a 3.5 per cent reduction in average consumer grain prices, as well as an increase in traders’ profits. Holding all else equal, this would have enabled rural households to purchase an additional 5-10 days’ worth of grain per year. In 2005, the year that Niger experienced a severe food crisis, cell phone markets in food crisis regions had relatively lower consumer grain prices. This suggests that the presence of cell phone towers could have averted a worse food crisis. Since a majority of rural households in Niger are net consumers, lower consumer prices suggest that people were better off. In sum, the experience in Niger provides powerful evidence of the potential impacts of information – and in particular ICT – on agricultural markets and producers’, traders’ and consumers’ welfare.

Source: Jenny C. Aker, Visiting Fellow (Centre for Global Development) and Tufts University.