Project – Digital Agricultural Marketplaces, Price Information Asymmetry and Smallholder Market Participation: An Assessment of Selected Farmers in Benue State

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Agriculture remains an important sector of the economy because of its contributions to food security, employment generation, income creation, poverty reduction and rural development. In many developing countries, agricultural production is largely undertaken by smallholder farmers who cultivate relatively small plots of land and depend on family labour, limited financial resources and locally available production inputs. Despite their contribution to food production, smallholder farmers frequently encounter difficulties in accessing profitable markets for their produce. These difficulties arise from inadequate market infrastructure, high transportation costs, limited access to reliable price information, weak bargaining power and dependence on intermediaries. Market participation is therefore not determined by production capacity alone but also by farmers’ ability to obtain relevant information, identify buyers, negotiate favourable prices and complete transactions at reasonable costs. Barrett (2008) explains that smallholder market participation is influenced by several production, institutional and transaction-cost constraints, while Osebeyo and Aye (2014) identify market information, transportation costs and market distance as important factors influencing the marketing decisions of smallholder tomato farmers in Makurdi, Benue State.

The availability of accurate and timely agricultural market information is particularly important because agricultural prices often differ across markets, locations, seasons and commodity categories. Farmers who lack information about prevailing prices may sell their produce at lower prices than those obtainable in alternative markets. This situation creates price information asymmetry, which occurs when buyers, traders or intermediaries possess better or more current information about market prices than farmers. Such differences in information can weaken farmers’ bargaining positions, reduce the prices they receive and limit their ability to make informed marketing decisions. In rural agricultural markets, traders may have greater access to information through transport networks, market contacts and frequent interactions with buyers, while farmers may depend on information received from neighbours or local produce buyers. Courtois and Subervie (2015), in their study of farmer bargaining power and market information services in Ghana, demonstrated that access to mobile-based market information could improve the prices received by farmers, particularly for commodities where bargaining plays an important role. Their findings illustrate how unequal access to market information can influence the distribution of economic benefits between farmers and traders.

The growth of information and communication technologies has created new opportunities for addressing information gaps within agricultural value chains. Mobile phones, internet services, electronic databases, digital payment systems and online trading platforms can connect farmers with buyers, traders, processors, transport operators and agricultural service providers. Digital agricultural marketplaces are technology-enabled systems through which agricultural products can be advertised, matched with potential buyers, priced, negotiated and sometimes purchased or sold electronically. These platforms may also provide information about prevailing commodity prices, product demand, market locations and transaction requirements. By improving communication and reducing the time and cost required to search for buyers and market information, digital marketplaces have the potential to strengthen farmers’ participation in agricultural markets. Aker (2010) established that mobile phone expansion reduced price dispersion in grain markets in Niger, demonstrating the importance of communication technology in improving market information flows. Similarly, Van Campenhout (2022) explains that information and communication technologies can address information inefficiencies in food supply chains, although their effectiveness depends on the design, accessibility and practical usefulness of the services provided.

Digital agricultural marketplaces may improve the position of smallholder farmers by reducing their dependence on informal information channels and creating opportunities to compare prices across different markets. Through digital platforms, farmers may obtain information about the prices offered by different buyers, advertise available produce, communicate directly with customers and identify alternative sales channels. This can improve transparency and provide farmers with a stronger basis for negotiating prices. Digital marketplaces may also support collective marketing by allowing farmer groups and cooperatives to aggregate produce, coordinate sales and connect with larger buyers. However, access to digital information does not automatically guarantee better market outcomes. Farmers must also possess the capacity to understand the information, verify its accuracy and use it when making marketing decisions. Courtois and Subervie (2015) found that mobile-based market information improved prices received for selected crops in Ghana, while Baumüller (2018), in examining the M-Farm service in Kenya, observed that mobile-based price information and market linkages could assist farmers in planning production and marketing activities. These findings suggest that digital marketplaces can improve agricultural market participation when the information supplied is relevant and actionable.

Despite these potential benefits, smallholder farmers may face several barriers to adopting and effectively using digital agricultural marketplaces. Such barriers include limited smartphone ownership, poor internet connectivity, high data costs, inadequate digital literacy, language differences, low awareness of available platforms, unreliable electricity supply and concerns about online payment security. Other challenges may arise from inaccurate price information, limited buyer participation, weak platform management and the absence of effective arrangements for transporting agricultural produce after a transaction has been agreed upon. These constraints indicate that the effectiveness of digital marketplaces depends not only on the availability of technology but also on the economic, social and infrastructural conditions surrounding farmers. Okello, Kirui, Gitonga and Nzuma (2014), in their study of ICT-based market information services in Kenya, found that awareness and use were influenced by transaction costs, geographical characteristics and farmers’ human and financial resources. In a related study, Chikuni and Kilima (2019) found insufficient evidence that mobile phone-based market information services independently increased smallholder farmers’ participation in maize markets in Malawi, indicating that access to price information may be insufficient where other market constraints remain.

In Nigeria, the agricultural sector is characterised by a large population of smallholder farmers who supply food commodities to rural, urban and regional markets. However, many farmers continue to operate within marketing systems where information is obtained through local traders, produce buyers, agricultural associations and informal networks. Such arrangements may limit the ability of farmers to compare prices across distant markets and identify more profitable marketing opportunities. The development of digital agricultural platforms offers an opportunity to improve these arrangements by connecting farmers with investors, buyers and other participants in agricultural value chains. Akinwale, Wole-Alo and Oluwole (2022), in their study of digital platforms linking agricultural investors with smallholder farmers in Nigeria, examined platforms such as ThriveAgric, EZ Farming and Farmcrowdy and identified benefits including improved monitoring, advisory services and reduced post-harvest losses, while also highlighting challenges relating to the timely delivery of inputs and the cost of operating platforms. In addition, Oyinbo, Chamberlin and colleagues (2022) examined digital extension and price-risk information among smallholders in northern Nigeria, illustrating the relevance of digitally delivered information to farmers’ production and marketing decisions.

Benue State is an important agricultural area in Nigeria because of its production of food and cash crops, including yam, cassava, rice, maize, soybeans and other agricultural commodities. A considerable proportion of agricultural production in the state is undertaken by smallholder farmers who depend on local and regional markets to sell their produce and generate household income. Farmers in communities across the state may encounter marketing difficulties associated with inadequate storage facilities, transportation costs, market distance, price fluctuations and dependence on produce buyers and intermediaries. These challenges can be particularly significant for perishable commodities, where delays in identifying buyers or obtaining reliable price information may result in distress sales and reduced earnings. Osebeyo and Aye (2014), using evidence from smallholder tomato farmers in Makurdi Local Government Area of Benue State, established that market information access, transportation costs and market distance significantly influenced farmers’ marketing decisions. This provides a relevant local foundation for examining how digital agricultural marketplaces may address information constraints and influence farmers’ participation in agricultural markets.

The relationship between digital agricultural marketplaces, price information asymmetry and smallholder market participation therefore deserves specific investigation in Benue State. Although digital platforms are increasingly promoted as instruments for improving agricultural marketing, their actual usefulness may differ according to farmers’ awareness, access, digital skills, trust in information sources and ability to connect with buyers. Furthermore, the availability of digital price information may not necessarily lead to increased market participation where transportation costs, inadequate market infrastructure, limited production volumes and other transaction barriers remain unresolved. Research in Ghana and Malawi demonstrates that the effect of market information services on farmers’ marketing outcomes depends partly on crop characteristics, bargaining conditions and the wider market environment (Courtois & Subervie, 2015; Chikuni & Kilima, 2019). It is therefore necessary to assess the extent to which selected smallholder farmers in Benue State use digital agricultural marketplaces, determine whether these platforms reduce differences in access to price information and examine how their use relates to farmers’ participation in agricultural markets. This study is designed to provide evidence on these issues and contribute to the understanding of digital agricultural marketing among smallholder farmers in the state.

1.2 Statement of the Problem

Smallholder farmers play an important role in agricultural production and food supply in Nigeria, yet their ability to obtain profitable returns from farming is often affected by weaknesses in agricultural marketing systems. One major challenge is the unequal distribution of price information between farmers and other market participants, particularly produce buyers and intermediaries. Farmers who do not know the prevailing prices of their commodities in alternative markets may accept prices below the prevailing market value because they lack sufficient information to negotiate effectively. This problem can reduce farm income, discourage commercial production and weaken farmers’ ability to expand their agricultural activities. Evidence from Makurdi, Benue State, indicates that access to market information, transportation costs and market distance influence the marketing decisions of smallholder tomato farmers (Osebeyo & Aye, 2014). Despite the importance of these factors, many farmers still depend on informal channels for obtaining information about commodity prices and available buyers.

The emergence of digital agricultural marketplaces offers a possible means of reducing these information gaps by providing farmers with access to price information, buyer contacts and alternative marketing opportunities. However, the availability of digital platforms does not necessarily mean that smallholder farmers can access or benefit from them. Differences in smartphone ownership, internet connectivity, digital literacy, affordability and awareness may prevent some farmers from using available platforms effectively. In addition, farmers may question the reliability of online price information or encounter difficulties translating digital information into actual sales. Van Campenhout (2022) observes that information and communication technology initiatives designed to address food-supply-chain inefficiencies do not always achieve their intended results, partly because of weaknesses in implementation, adoption and the wider market environment. This raises questions about the extent to which digital agricultural marketplaces are accessible and useful to smallholder farmers in Benue State.

Another problem relates to the possible gap between access to digital price information and actual participation in agricultural markets. Although information about prevailing prices may improve farmers’ bargaining positions, market participation also depends on the availability of buyers, transportation facilities, storage, market distance, transaction costs and the quantity and quality of produce available for sale. A farmer may know that a higher price is available in another market but may be unable to transport the produce there because of high transportation costs or poor road conditions. Similarly, access to an online marketplace may not guarantee a successful transaction where buyers are unavailable or where farmers lack the resources to meet delivery requirements. Chikuni and Kilima (2019) found insufficient evidence that mobile-based market information services independently influenced smallholder maize-market participation in Malawi, while Courtois and Subervie (2015) demonstrated that the benefits of price information depended partly on the bargaining characteristics of the commodities being sold. These findings suggest that the relationship between digital information and market participation requires investigation within the specific conditions of Benue State.

Furthermore, there is a need for location-specific evidence on how digital agricultural marketplaces relate to price information asymmetry and smallholder market participation among farmers in Benue State. Although previous studies have examined agricultural market information, mobile technology and digital platforms in different African countries and parts of Nigeria, their findings cannot automatically be generalised to all farming communities in Benue State. Differences in agricultural commodities, market structures, digital infrastructure, farmers’ educational backgrounds and access to buyers may produce different outcomes. The absence of sufficient comparative evidence on farmers’ use of digital marketplaces, the extent to which these platforms improve access to price information and their relationship with actual market participation creates a gap that needs to be addressed. This study therefore seeks to assess digital agricultural marketplaces, price information asymmetry and smallholder market participation among selected farmers in Benue State.

1.3 Objectives of the Study

The main objective of this study is to assess the relationship between digital agricultural marketplaces, price information asymmetry and smallholder market participation among selected farmers in Benue State.

The specific objectives are to:

1. Examine the extent of awareness, accessibility and utilisation of digital agricultural marketplaces among selected smallholder farmers in Benue State.

2. Assess the extent to which digital agricultural marketplaces reduce price information asymmetry among selected smallholder farmers in Benue State.

3. Examine the relationship between access to digital agricultural market information and smallholder farmers’ participation in agricultural markets.

4. Identify the major factors limiting smallholder farmers’ adoption and effective utilisation of digital agricultural marketplaces in Benue State.

1.4 Research Questions

The following research questions will guide the study:

1. What is the extent of awareness, accessibility and utilisation of digital agricultural marketplaces among selected smallholder farmers in Benue State?

2. To what extent do digital agricultural marketplaces reduce price information asymmetry among selected smallholder farmers in Benue State?

3. What relationship exists between access to digital agricultural market information and smallholder farmers’ participation in agricultural markets?

4. What are the major factors limiting smallholder farmers’ adoption and effective utilisation of digital agricultural marketplaces in Benue State?

1.5 Research Hypothesis

The following null hypothesis will be tested at a 0.05 level of significance:

H₀: There is no statistically significant relationship between access to digital agricultural marketplaces and smallholder farmers’ market participation in Benue State.

1.6 Significance of the Study

This study will be significant to smallholder farmers in Benue State because it will provide information on the usefulness of digital agricultural marketplaces in improving access to agricultural market information. The findings may help farmers understand how digital platforms can be used to compare commodity prices, identify potential buyers, communicate with market participants and make more informed selling decisions. It may also encourage farmers to explore alternative marketing channels rather than depending exclusively on traditional produce buyers.

The study will benefit agricultural cooperatives and farmers’ associations by providing information on how digital marketplaces can support collective marketing, information sharing and improved bargaining positions. Cooperatives may use the findings to encourage members to access digital market information, aggregate agricultural produce and establish connections with buyers in different markets. This could strengthen collective participation and improve the ability of farmers to negotiate favourable trading conditions.

The study will be useful to agricultural extension officers and development organisations because it will identify the opportunities and challenges associated with the use of digital agricultural marketplaces. The findings may guide extension programmes on digital literacy, mobile-based agricultural information, online marketing and the practical application of price information. It may also help development organisations design interventions that combine digital information with other forms of support, such as market linkages, transportation and storage facilities.

The findings will be relevant to government agencies and agricultural policymakers in Benue State and Nigeria generally. Information on farmers’ access to digital marketplaces, price information asymmetry and market participation may assist policymakers in developing strategies for improving agricultural market information systems. The study may also provide useful evidence for policies aimed at expanding rural digital infrastructure, supporting agricultural innovation and strengthening the participation of smallholder farmers in commercial agriculture.

Digital marketplace operators, agricultural technology companies and private investors may also benefit from the study. The findings may provide insights into farmers’ needs, the barriers affecting platform adoption and the type of information and services that smallholder farmers consider useful. This may encourage the development of more affordable, accessible and farmer-oriented digital agricultural services.

Finally, the study will serve as a reference material for students, researchers and academics in agricultural economics, agricultural extension, development studies, information technology and related disciplines. It will contribute to literature on digital agricultural marketplaces and smallholder market participation, particularly by providing evidence from selected farming communities in Benue State.

1.7 Scope of the Study

The study will focus on digital agricultural marketplaces, price information asymmetry and smallholder market participation among selected farmers in Benue State, Nigeria.

The geographical scope will cover selected farming communities in Benue State. The specific communities and Local Government Areas will be determined based on agricultural activities, the presence of smallholder farmers, accessibility and the feasibility of collecting relevant data.

The content scope will cover four major areas. First, it will examine farmers’ awareness, accessibility and utilisation of digital agricultural marketplaces. Second, it will assess the extent to which these platforms improve access to timely and reliable agricultural price information. Third, it will examine the relationship between digital market information and farmers’ participation in agricultural markets, including their decisions to sell produce, choice of buyers and access to alternative markets. Fourth, it will identify the major technological, economic, social and institutional factors limiting farmers’ effective use of digital agricultural marketplaces.

The study will consider digital platforms and services used for agricultural marketing, including mobile-based market information services, online agricultural marketplaces, digital buyer-seller platforms and other electronic channels that provide agricultural price information or facilitate transactions. It will not focus exclusively on general social media usage unless such channels are used by farmers for agricultural marketing and price-information purposes.

1.8 Operational Definition of Terms

Digital Agricultural Marketplaces: Technology-enabled platforms or electronic systems that connect farmers with buyers and other agricultural market participants for the exchange of agricultural products, price information and marketing services.

Price Information Asymmetry: A situation in which some agricultural market participants, particularly buyers or intermediaries, possess more accurate or timely information about prevailing commodity prices than the farmers selling their produce.

Smallholder Farmers: Farmers who operate relatively small agricultural holdings and generally depend on family labour, limited capital and locally available resources for production.

Market Participation: The involvement of farmers in agricultural markets through selling their produce, identifying buyers, negotiating prices and completing agricultural transactions.

Market Information: Relevant information about agricultural commodity prices, market demand, available buyers, market locations, product quality requirements and other conditions influencing agricultural transactions.

Digital Market Information: Agricultural marketing information communicated or accessed through digital technologies such as mobile phones, internet platforms, SMS services and electronic information systems.

Market Transparency: The extent to which farmers and other market participants have access to accurate, timely and understandable information about agricultural commodity prices and trading conditions.

Bargaining Power: The ability of a farmer to negotiate favourable prices and trading conditions when selling agricultural produce to buyers or intermediaries.

Digital Literacy: The ability of farmers to access, understand, evaluate and effectively use digital devices, applications and online information for agricultural and marketing activities.

Market Access: The ability of farmers to reach buyers, obtain relevant market information and participate in agricultural transactions at reasonable costs.

Transaction Costs: The expenses and efforts associated with searching for buyers, obtaining market information, negotiating prices, transporting produce and completing agricultural sales.

Selected Farmers: Smallholder farmers drawn from the selected farming communities in Benue State who will participate in the study.

Project – Digital Agricultural Marketplaces, Price Information Asymmetry and Smallholder Market Participation: An Assessment of Selected Farmers in Benue State