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Trade costs in Nig. 5 times higher than US

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By Mercy Kelani

Market distortions in Africa lead to varying price levels of imported items.

According to a recent study conducted by the World Bank, the expenses associated with international business transactions in Nigeria are approximately five times greater than those in the United States. Insecurity, increased transportation expenses, difficult terrain, and lack of road infrastructure were cited as the main factors contributing to the conditions in Ethiopia, which are similar to Nigeria’s, according to the Africa Pulse report. Market distortions in Africa lead to varying price levels of imported food and non-food items, highlighting the lack of market integration within the continent.

As stated in the report from The World Bank, limited access to product markets is highlighted as a barrier that hinders both businesses and farms from expanding their production capacity. The report suggested that income inequality is exacerbated by market segmentation, which is caused by limited connectivity and integration. This results in certain businesses or agricultural operations with market power being able to monopolize benefits. The report stated that research conducted in Africa has consistently revealed disparities in goods.

Regulations put in place by govt’s in Africa hinder trade competition.

These disparities are in prices of imported goods (both food and non-food items) and non-traded agricultural staples across different regions. This suggests that markets are not effectively interconnected, leading to variations in retail prices of products influenced by geographic distance. The report stated that trade costs in Ethiopia and Nigeria are significantly higher compared to the United States, approximately four to five times more expensive. This is primarily attributed to inadequate road infrastructure, limited competition within the transportation industry, and challenging topography in those countries.

The consequences of distortions in the market were brought to light, with a focus on how African producers prioritize selling locally over exporting. It was also noted that labour market friction in Africa is a direct result of expensive transportation costs, high expenses for screening workers, and a lack of information regarding job opportunities. According to the report from the World Bank, regulations put in place by governments in Africa are hindering trade competition and investment by creating barriers.

Lack of competition in the market hinders the development of new ideas.

Also, the report highlighted how large companies in these regulated markets are able to raise prices above what would normally be seen in a free market, leading to negative impacts on consumers, small businesses, and workers. According to the report, product market regulations in African countries are characterized by significant barriers to competition. This is attributed to extensive state involvement in markets, legal and administrative obstacles to entrepreneurship, as well as restrictions on trade and investment.

Furthermore, the analysis of indicators from the World Bank and Organization for Economic Co-operation and Development indicates that these barriers are more pronounced in Africa compared to other regions. Additionally, it was mentioned that this lack of competition in the market hinders the development of new ideas and slows down progress in these economies. The World Bank consists of two entities: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). These organizations provide financial assistance in the form of loans and grants to low and middle-income countries for the implementation of capital projects.

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Founded alongside the International Monetary Fund (IMF) during the Bretton Woods Conference in 1944, this organization initially provided its first loan to France in 1947 after a sluggish beginning. Throughout the 1970s, its primary focus shifted towards providing loans to developing countries, which changed during the 1980s. Over the past three decades, it has expanded its loan portfolio to include NGOs and environmental organizations. The loan strategy aligns with the Sustainable Development Goals set by the United Nations, along with strict environmental and social protection measures.

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