Cointegration and Market Integration: An Application to Hides and ‘Pomo’ Markets in Nigeria

Abstract

Aim: To investigate long run and short run relationship between the prices of hides and ‘pomo’ in Kano and Lagos markets in Nigeria, using cointegration techniques. Study design: The study made use of purely secondary data the prices of hides for the past twenty one years (1988 – 2009) in Kano State and the prices of ‘pomo’ for the same number of years in Lagos State to see whether the two markets are cointegrated or fragmented. Place and Duration of Study: From the Federal Ministry of Agriculture and Natural Resources, Livestock and Veterinary Unit, Gwale, Kano and Federal Ministry of Commerce and Industry, Lagos, in July, 2011. Methodology: Data on prices of hides and ‘pomo’ over a period of twenty one years (1988 – 2009) were used. Unit root test and Johansen cointegration test were carried to find out whether the markets in the two locations are cointegrated or fragmented. Results: The result showed that there was no cointegration between the two markets. The result of similar trend in the prices of hides and ‘pomo’ in the two markets may be attributed to other factors such as inflation and festivities. Conclusion: There is no long run relationship in the price of hides and ‘pomo’ in the two markets. Therefore, there should be government’s commitment to policies that can reduce inflation rate so that prevailing market prices of hides and skins can be stable in different market locations.