Two forms of subsidy – the old direct state purchase/distribution through public sector channels and the new voucher system an indirect distribution method been introduced and implemented by the government. Though the voucher system, a new and revised method of distributing subsidised fertilizer by the government, may be attractive in content and outlook, its costs and effectiveness might not stand the test of time. Nigeria is a large country with a farm population of over 100 million. The cost of implementing a voucher scheme nationwide will be quite astromical.

It is noteworthy that the voucher system is just being introduced (in 2 States in 2009 and expanded to 2 additional states in 2010). This makes the system of implementation to be very slow as 89% of the states in Nigeria are yet to feel its impact. Some farmers (where it was tried in 2009) are already complaining about the inaccessibility of the voucher/fertilizer and the upward trend in the price of the government subsidised fertilizer. What the farmers pay per 50kg bag was higher than what they were paying in the old system. It is pertinent to note that Ghana that has tried the voucher for over 3 years has this year decided to drop it because of its high administrative costs.

It is a fact that the fertilizer industry is a very large and complicated one and it will be impossible for government to coordinate and control the market efficiently. About 70% of the population (about 105million people) are engaged in small, medium or large –scale farming or other agro related business.

The success of deregulation in other sectors of the economy will present good illustration and case examples here. Before the deregulation of the telecommunications industry, only 1 out of every 1,000 Nigerians had access to telephone. Though the government claimed to subsidize telecommunication services to cater for poor Nigerians before the deregulation, ordinary Nigerians that form the bulk of the population had no access to telephone services. This situation changed drastically when competition was allowed in the industry and this resulted in the provision of better technical, marketing and consumer services by the new operators. In fact, more than 80 million Nigerians have access to portable telephone services in this post deregulation era and telecommunication is now the most vibrant sector in Nigerian economy.

The same effect was observed in the deregulation of the cement, sugar, salt and rice industries following the scraping of the Essential Commodities Board and the government price control agency. The consumers of these products now have better access to them and the healthy rivalry among competing companies have stabilised prices and pushed up the available quantities and quality of the products and services.

In accordance with recognised economic principles and the aftermath of previous deregulation programs, the force of demand and supply will ultimately bring down the price of fertilizer if the fertilizer companies are allowed to function without government’s intervention in the market. This will make fertilizer to be affordable by peasant and low income farmers in the long run. It will compel the companies to produce/supply quality fertilizer to meet farmer’s needs. It will remove corruption and fraud involved in the administration/implementation of subsidy. Removal of subsidy and deregulation of the fertilizer industry will boost local food production. About 60% to 80% of consumer spending is spent on food in Nigeria most of which is imported.

This means that Nigeria is patronising farmers in other countries using our scarce foreign exchange at great detriment of our poor farmers. If the funds committed to fertilizer subsidy could be ploughed to other farmer support services such as strengthening research, extension and training, rural infrastructure (roads, water, electricity, etc.) and credit provision for farmers to buy inputs on time; then our agriculture will develop and thrive buoyantly in a very short period of time. This will spur overall economic growth which we have been yearning for along time.

The Fertilizer Suppliers Association of Nigeria (FEPSAN) is a strong proponent of deregulating the fertilizer market.  The Association believes that if fertilizers are available in the right quantities and time, Nigerian farmers can get over 30% increases in crops production. This means that substantial part of foreign exchange spent on food importation will be saved which could be utilized for the provision of rural infrastructure and other services.

The Association is in full support of providing subsidy to farmers but it is pertinent to stress that instead of the government subsidizing inputs, it should subsidize farm outputs. Nigeria should follow the path of developed countries like USA, the European Union and some developing countries who subsidize farm output to the tune of billions of dollars to assist their farmers. They do not provide input subsidy. The government should stop subsidizing inputs such as fertilizer. It should subsidise output instead.  A perfectly competitive market which can only be obtained through government’s complete deregulation of the fertilizer industry remains the best option for food security in Nigeria.  

Kwa is the Executive Secretary of the Fertilizer Suppliers Association of Nigeria (FEPSAN) 2nd Floor NIDB Building, 18, Muhammadu Buhari Way, Kaduna, E-mail:  [email protected]