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Citation Information

Type Working Paper
Title The pro-poorness of fertilizer subsidy and its implications on food security in Nigeria
Author(s)
Publication (Day/Month/Year) 2014
URL http://www.karl-wohlmuth.de/files/dateien/35_e4_reuben_alabi_and_adams_o_ojor___wip.pdf
Abstract
We examined the pro-poorness of the newly introduced fertilizer scheme(GES) in Nigeria in
this study. The study made use of the Nigeria General Household Survey (GHS)-Panel Datasets of
2010/2011 and 2012/2013. The data were analysed using pro-poor price indices, average and marginal
benefit incidence analyses to estimate the share of the poor and non-poor in the fertilizer scheme and
to check the pattern of the change in their shares over time in Nigeria. The pro-poorness analysis
suggests that while Voucher Fertilizer Subsidy Scheme seems to be more pro-poor than E-wallet
Fertilizer Scheme on the basis of accessibility, none of them was pro-poor when the analysis was done
on the basis of quantity of fertilizer purchased. On that basis of the share of the poor in Government
expenditure on fertilizer subsidy, the study shows that the share of the rich (N6090 million) and the
richest (N8070million) income group were 3 and 4 times higher than the share of the poorest
quintile(N1979 million) respectively in 2010/2011 in Government expenditure on fertilizer subsidy .
The same trend was noticed in 2012/2013, as the share of the rich (N6813 million) and the richest
(N8735 million) income group were 3 and 4 times higher than the share of the poorest quintile(N2262
million) respectively. The implication of this is that the rich and richest farmers are the immediate
beneficiaries of fertilizer subsidy scheme that are designed to assist poor small-scale farmers in
Nigeria. Apart from income profile, the study shows that education was a distinguishing factor
associated with purchasing fertilizer during fertilizer subsidy scheme in Nigeria. It shows that those
that attended formal schools shared about 70% and 64% of fertilizer subsidy during Fertilizer
Voucher and E-wallet Fertilizer Schemes respectively. The marginal benefit analysis reveals that if
fertilizer subsidy expenditure increased by 100% ( double) the share of the poorest(core poor which is
the target of E-wallet fertilizer subsidy), will decline by about 8%(-0.0791), while the share of the
rich will increase by 8%(0.0803). The study also indicated that the marginal benefit in E-wallet
fertilizer scheme increases with initial accessibility to E-wallet Fertilizer subsidy. The finding
suggests that the poor’s initial rate of access to a fertilizer may determine the relative extent to which
the poor will be benefit from the expansion of the fertilizer subsidy scheme. The conclusion is that
any constraints that limit the accessibility of the poor farmers to fertilizer subsidy will also hinder
their share of the fertilizer subsidy even the government spend more on fertilizer subsidy scheme in
Nigeria. All these findings may cast doubt on the ability of E-wallet Fertilizer Scheme to significantly
increase fertilizer application among farmers in Nigeria. Based on these findings we recommend that
the Federal Government should phase out fertilizer subsidy gradually. After 2016, which is the final
year of E-wallet, fertilizer subsidy be replaced with virile fertilizer market that will sell fertilizer at
cheaper price. This can be made possible by encouraging local production of organic and inorganic
fertilizer by private fertilizer firms. All the fertilizer importing firms should be mandated to open their
fertilizer manufacturing firms between now and next year. Capital constraint is a limiting factor to
accessibility to fertilizer in Nigeria. About N25376 Million and N28270 Million spent on fertilizer
3
subsidy in 2010 and 2012 respectively by Nigerian government can be converted to farming input
soft loan scheme for the farmers as the farmers need fertilizer and other inputs to increase their
productivity.

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