ISSUE 38 June 2007

Humanitarian Exchange Magazine

Cross-border trade and food markets in Niger: why market analysis is important for humanitarian action

by Geert Beekhuis, WFP, and Ibrahim Laouali, FEWS NET

In the early 1990s, Sahelian countries embarked on a process to develop markets, limit government market interventions and liberalise trade. The achievements of this process, which was encouraged at the regional level by the Economic Community of West African States (ECOWAS) and the Union économique et monétaire de l’Afrique de l’ouest (UEMOA), have to date been mixed: barriers to trade, both formal and informal, still limit the free play of the market. This mix of trade liberalisation and trade restrictions has an important influence on household food security. The high retail price of cereals in Niger during the summer of 2005 – and its devastating impacts on poor households – is often used to support the argument that ‘markets’ are to blame for creating food insecurity. Free trade proponents, however, emphasise that the majority of Sahelian households benefit from markets for their food and income.

Humanitarian actors recognise that markets can alleviate or aggravate food insecurity, and acknowledge the imperative need to understand how markets work, and the links between markets and livelihoods. This article explores the vital role of markets in food security in the Sahel, and the lessons learned from the Niger food security crisis. It concludes with an agenda to guide the future work of the World Food Programme (WFP), the Permanent Interstate Committee for Drought Control in the Sahel (CILSS), FEWS NET, National Market Information Systems and other partners, to reinforce their market analysis and monitoring capacities.


Why are markets so crucial for food security in the Sahel?

According to a popular Nigerian saying from 20 years ago, a Sahelian man who wished to marry should not depend on the market: he should be self-sufficient in food production. Today, however, high population growth has reduced the size of agricultural plots. This, in the context of market liberalisation, has obliged Sahelian households to rely increasingly on markets for their food security.

In April 2005, a typical household in Niger depended on market purchases for 90% of its food. The large majority of Sahelian households – be they pastoralists, subsistence farmers or urban families – are not self-sufficient in staple foods. This market dependence increases in years of poor agricultural production. Households also rely on markets to earn income from the sale of animals, staple foods, cash crops and labour, to cover non-food expenditures. During bad years, coping strategies include selling small livestock and taking out loans with traders. Debt forces subsistence farmers to sell staples at very low post-harvest prices to repay loans, creating spillover effects into the following year.

Food security analysis in the Sahel has for some time focused on the assessment of agricultural production; it is now time to devote more resources to analysing how markets contribute to the distribution and pricing of food; other supply sources, such as imports; demand factors; and policies, informal trade barriers and public interventions. CILSS, the key player with respect to food security analysis in the Sahel, as well as its national counterparts, have moved in this direction, and this process should continue, with the technical and financial assistance of its partners.


Why is market analysis important for food security assessments?

First, markets have the capacity to ameliorate the negative impacts of shocks. Without trade, a modest drop in domestic cereal production may lead to huge price increases and consumption shortfalls. With trade, prices increase until they reach parity with import prices, limiting the consumption shortfall. Understanding how markets function, and the interventions that can facilitate trade, can help in identifying measures to alleviate the negative impacts of shocks. It may also allow us to better estimate the appropriate amount of food aid to import, reducing potential market distortions.

Second, market analysis contributes to food security monitoring. If markets function well, surpluses readily move to deficit zones with adequate purchasing power. However, if purchasing power in deficit zones is very low, or trade is constrained by security problems, lack of infrastructure or the absence of competition, disastrous effects on local food supply and prices may result. Market monitoring should provide the logic of food price changes, it should explore future market developments, and it should assess the potential impact of prices on the food security of the various livelihood and wealth groups.

Third, market analysis informs the debate over cash versus food assistance. If markets are well-integrated, transport costs are reasonable and food is available, then cash assistance may be appropriate: traders will respond to the increased demand from households.


What happened to the food markets of Niger and Nigeria during 2004–2005?

The hike in food prices in Niger followed steep price rises in Nigeria, caused by lower agricultural production and buoyant demand stemming from high consumer purchasing power and demand from the poultry and food processing sectors. Higher prices in Nigeria caused a drastic drop in exports to Niger, while cereal flows reversed: Niger was supplying Nigeria. This trade-driven supply squeeze was compounded by lower domestic crop production because of locust attacks and some dry spells. As similar supply reductions may occur in the future, we have to ask why the response to the price hike in Niger took so long to materialise.

The national system for agricultural market information, SIMA, has been collecting food price data on more than 40 markets in Niger since the early 1990s. During 2004–2005, SIMA and FEWS NET reported relatively high price levels. However, this alert was not well-received by humanitarian actors and donors. The reasons advanced to explain the price increases were neither complete nor convincing, mainly because of a lack of shared knowledge of cereal markets and trade and the absence of reliable statistics on imports and agricultural production in Nigeria. In addition, humanitarian actors did not understand how dependent households in Niger were on food market purchases, how households were linked to markets and how these relations had evolved. Lastly, there was no agreed alert threshold for price increases amongst humanitarian actors. As a result, humanitarian actors did not agree on the significance of the price hike or its impacts until very late in the crisis.


Market analysis in Niger during 2005

The widespread publicity given to food prices and markets during the Niger crisis encouraged greater analysis of cross-border trade and markets. Public awareness of the importance of markets also increased. Journalists, NGOs and other institutions started reporting on food and livestock markets, and FEWS NET, SIMA and CILSS began conducting missions to markets in northern Nigeria. These missions, combined with WFP’s Niger market profile, provided an explanation of the 2005 price hike. They also laid the foundations for today’s collaboration in monitoring Niger’s markets by WFP, SIMA and FEWS NET.

Market analysis by institutions such as CILSS, FEWS NET, SIMA and WFP offers the following lessons: i) a sub-regional or regional approach, covering all the key trade-linked zones in West Africa, is preferable to a purely ‘national’ approach; ii) assessments should devote more attention to demand factors at the micro level, in addition to analysing the various sources of food supply, prices and market and trade structures; iii) market monitoring should be conducted on the basis of an agreed understanding of the market’s structure, conduct and performance, and the analysis should cover flow information, as well as prices; and iv) partnerships for market assessments should be broadened to capture the multidimensional character of markets, and to agree on conclusions and recommendations.


Joint market analysis in 2006

At the end of 2005, FEWS NET and WFP launched a study to identify knowledge gaps regarding links between markets and food security in West Africa. The study also formulated recommendations to reinforce market analysis of food security assessments, including: i) establishing a regional monitoring system for cross-border flows; ii) strengthening capacities to conduct market analysis; and iii) developing tools to analyse the links between households and markets. CILSS, which plays a central role in food security monitoring in the Sahel, made similar recommendations during its annual meeting in December 2005. Under the guidance of CILSS, a technical working group was established to conduct market assessments in key cross-border trade corridors such as the Maradi, Kano and Katsina zone, and to develop proposals for a cross-border monitoring system.

The crucial role of CILSS cannot be overstated: it is a permanent body representing its nine member states, and ECOWAS and UEMOA count on its technical assistance to support their regional market and trade integration activities. CILSS is therefore best placed to provide guidance to its member countries’ market information systems, ensure cross-fertilisation between countries and report on regional market trends. All key partners adhere to this approach, and provide technical and financial support to CILSS.


Challenges ahead

In the context of making CILSS the regional centre of excellence for market analysis in West Africa, two high-priority challenges have been identified. First, CILSS and its sister organisation, the ‘Réseau des Systèmes d’Information sur les Marchés en Afrique de l’Ouest (RESIMAO)’, must be supported to establish a strong regional market monitoring system and to become a technical assistance provider to national market information systems. The regional market monitoring system will encompass prices and flows for both agricultural and livestock products, and publish a regular bulletin. To do this, an agreed in-depth regional understanding of market behaviour is necessary, as well as support for database and cartography development. This should be complemented with financial resources to implement the pilot phase of a proposed project to collect cross-border flow data. WFP and FEWS NET are committed to supporting this priority objective, for example through a sub-regional market study being undertaken in Nigeria, Niger, Chad and Cameroon.

The second challenge concerns the interaction between households and markets. Characterising these relationships would assist in identifying when price changes could jeopardise food access. Pilot testing of qualitative and quantitative methods to analyse these interactions has been conducted in Mauritania, but further work is necessary. As the influence of markets on household food security varies for each livelihood group, a livelihood approach is essential. In addition, due to intra- and inter-annual variations, longitudinal data is necessary to enable a meaningful characterisation of households’ interaction with markets. FEWS NET and WFP are ready to support CILSS in tackling this priority challenge; an initial stock-taking of experiences in other regions of the world, which might be adapted to the West African context, has been initiated by FEWS NET, in collaboration with its partners.

 

Economist Geert Beekhuis is WFP’s market analyst for West and Central Africa. His email address is: Geert.Beekhuis@wfp.org. Ibrahim Laouali, an agricultural economist, is FEWS NET’s Regional Market and Trade Advisor for West Africa and Niger Country Representative. His email address is: librahim@fews.net.


References

Michigan State University, Market Profiles and ENAs: A Summary of Methodological Challenges, report for WFP, May 2006, available at www.wfp.org(what we do? > needs assessments > SENAC documents).

FEWS NET and WFP, ‘Bilan des connaissances sur le commerce et les marchés impliquées dans la sécurité alimentaire’, 2006, available at www.fews.net.

FEWS NET, Understanding the Crisis, July 2005, available at www.fews.net.

WFP reference materials on market analysis produced by the Strengthening Emergency Needs Assessment Capacity project (SENAC) are available at www.wfp.org (what we do? > needs assessments).

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