Monopsony Power in Input Markets: Empirical Evidence from Labour and Supply Chains in Nigeria

Monopsony power in input markets refers to situations where buyers dominate sellers, often leading to unfair wages or prices. The article evaluates the empirical evidence of the Nigerian supply chains and labour market with respect to the research on exploitation and distortion of markets. The wage elasticities create influence in the labour markets as the employers are able to pay wages lower than the product which is experienced in the highly casualised informal sectors. The supply chains, like agriculture, open middlemen and processors, who predatory small farmers whose price is low at their farm-gate, and on whose actions are as reminiscent of modern slavery as it gets. The theoretical frameworks in the analysis are the oligopsony and search frictions frameworks to describe the dynamics as well as the settings in Nigeria which present the rural remoteness and the absence of a good infrastructure to enhance buyer power. The supply elasticity of labour and markdowns is estimated but the informal markets are problematic with data. This is an indication that monopsony lowers productivity and increases inequality with low-skilled workers and women being the worst hit. The available policy recommendations are; antitrust policies and infrastructure investments in order to level the playing field. The loopholes of this review are loopholes in the longitudinal data of chain of informal chains and recommends future researches to provide guidelines to more fair economic policy in Nigeria.