NOTORE (AGRIC)

NOTORE (AGRIC) Put agricultural subsidy at output, not input end In this week’s interview, Dr Innocent Okuku, who heads the Commercial Services Department of Notore Chemical Industries Plc, X-rays the Nigerian agricultural subsidy issue and suggests where government should place the incentive for more productivity. Excerpts: By Vincent A. Yusuf Does the Nigeria farmer needs […]

NOTORE (AGRIC)

Put agricultural subsidy at output, not input end

In this week’s interview, Dr Innocent Okuku, who heads the Commercial

Services Department of Notore Chemical Industries Plc, X-rays the

Nigerian agricultural subsidy issue and suggests where government

should place the incentive for more productivity. Excerpts:

By Vincent A. Yusuf

Does the Nigeria farmer needs government agricultural subsidy?

My answer is yes. There is need to subsidise the system, to get the

system that is not performing optimally to begin to perform optimally.

Our yields are generally very low- unbelievably low for some crops.

Take cereals-maize for example, average yield for maize in Nigeria is

still below two tonnes per hectare, whereas, elsewhere in Africa, they

are getting an average of 8 tonnes per hectare in places like

Zimbabwe. So if you look at the country, Nigeria is still a net

importer of food and agricultural products. We import some two to

three million tonnes of rice every year. We import far more volumes of

wheat than that. The amount of money we spend in importing is

enormous. The system is not performing optimally. Subsidy is basically

a form of incentive to trigger the system to produce more.

How best should subsidy be applied and what area of agriculture do you

think needs to be subsidised?

As a nation, we need to determine what is our overall objective? If we

look at our country, we look at our geography, we look at our land

mass, we look at the nature of our soils and we look at the way we are

situated, we can say categorically that if we work to produce

optimally, we can become a net exporter of agricultural products. We

can produce enough for ourselves and export excess to neighbouring

countries or even far beyond. If that is an objective, then you put an

incentive in place that will move us in that direction. If that is the

objective of the country, then, it can put an incentive that will help

farmers to produce more, in a way that we get to a point where we can

produce sufficiently beyond what we can consume so that we can have

excess to sell. For such a system to emerge, the key attraction should

be the market. So it means you have to create an attractive system for

farmers to keep increasing their output.

What should be our agricultural objective as a country?

The objective should be to become a net exporter of food and

agricultural products. We need to produce beyond what we are able to

consume because we have natural resource, fertile land, diversity of

geographies and crops suitable for every part of the country. We have

a huge part of our country that is very wet, we have crops that are

very good for the savanna, we have a huge land mass in the middle-belt

that can accommodate these crops. We have crops that are suitable for

the slightly arid territories. So given our diversity of land and the

size of the land and the population that we have and our location, I

think we should just aim to become the food basket of Africa.

Therefore, if we are going to incentivise agriculture, our subsidy

should be around the area that will attract more production which, in

my view, is the market end.

So where has Nigeria achieved, as far as this subsidy programme is

concerned, in last 16 years?

I will say that the we have kept a lot of our interventions around the

inputs end (fertilisers and improved seeds), and when you do that,

what you get are the following: You increase the tendency of the

producers to be dependent on government. What you are doing once you

put the subsidy around the input side is that you are rubbing farmers

into the subsistence lifestyle the more. So it gets to a point where

the vast majority of our smallholder farmers today believe that

government owes them the obligation of paying a part for the inputs

they will use to produce the food that they will use to feed their

families. They are not thinking about producing for the market, they

think that government owes them responsibility to make inputs cheap.

If you are in business and use input to produce an output that you

will market, you don’t bother too much about the cost of those inputs.

The primary driver of your concern is what is the value I’m going to

get from the output? Once you’re getting good sufficient value from

the output, the cost of the input is not an issue. But if you are

facilitated in the way that government has been intervening, you don’t

care so much about the value you are getting from the output, you

become dependent. Unfortunately, we have also not structured our

system in a way that helps the intended beneficiaries to get the

benefit. What we have done is to create a subsidy system that is

loaded with opportunities for people to strip the benefit that was

meant for smallholder farmers. So executors, individuals that have

been saddled with responsibility of helping the subsidy programme to

work, ended up enriching themselves to the detriment of the farmers

for whom the subsidy was designed to help. I give an illustration, the

average subsidy programme over the last four to five years, has kept

subsidy level of 50% on farm inputs, fertiliser as a key example. Now,

when you subsidise an input for 50%, if somebody can get a hold of

what you are selling to farmers he can take it back to the market and

make 100% profit. There is no atmosphere where there is a business

opportunity for 100% profit that people are going to look away. This

is the reason why it is difficult to stop fraud and negative

tendencies in the government subsidy programme. The level of subsidy

is huge, making it difficult to take eyes of business traders away

from it. That price dichotomy encourages inter-trade and round

tripping. The farmer that gets subsidised product at half price does

not feel incentivised, he doesn’t feel excitement in going to buy the

balance that he needs. But guess what? The way the communication about

the subsidised product gets to him is as though that is the actual

value of the fertiliser. So, when he buys that from the subsidy

channel, he feels like he’s been cheated to go and buy the balance at

a higher price from the commercial channel. So, we end up running

subsidy programme that discourages farmers from making a proper

investment that they need in the input to be able to get optimal

output levels. These are issues around our subsidy programme over the

years. Quite a lot still needs to be done in terms of proper

structuring of government subsidy programme.

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