Free Fertilizer Market PDF Print E-mail
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Monday, 17 December 2012 18:57

 FREE FERTILIZER MARKET - BEST OPTION FOR NIGERIA’S FOOD SECURITY

 

Despite the huge amount of money spent by governments at Federal, States and Local governments on fertilizer subsidy annually, the impact of this extremely expensive incentive is yet to be felt.  The farmers who were the intended beneficiaries always ended up waiting, never to see the subsidised fertilizer, up to the end of the season. They ended up loosing substantial amount of produce and income by placing all their hopes and expectations that adequate fertilizers would be made available and at subsidised prises. This perpetual lack of access to the subsidised fertilizer and consequent loss in yields by most Nigerian farmers can only be confronted permanently through a lasting solution, because subsidy administration/implementation had proved to be defective and a complete failure over the years. The so called subsidized fertilizers mostly find their way back to the market where it is sold at much higher prices or smuggled out to neighbouring countries. The removal of subsidy and the complete deregulation of the fertilizer market remains the only all – encompassing panacea to the perennial inadequate supply of fertilizer to farmers (especially the small scale farmers) in Nigeria. The reasons for this submission are not far – fetched.

 

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 (Ghana News Agency, June 13, 2010).

 

The cost of Federal Government subsidy on fertilizer alone is presented in the following table. This does not include what the States and Local Governments spent on the subsidy and does not include other logistics, administrative and monitoring costs spent by the 3 tiers of government.

 

 

 

 

YEAR

COST OF SUBSIDY (N)

REMARKS

1976

23,727,000.00

 

1977

19,057,000.00

 

1978

19,270,000.00

 

1979

39,812,000.00

 

1980

35,467,000.00

 

1981

48,758,000.00

 

1982

68,136,000.00

 

1983

55,135,000.00

 

1984

42,655,000.00

 

1985

61,860,000.00

 

1986

260,552,000.00

 

1987

440,323,000.00

 

1988

694,493,000.00

 

1989

725,697,000.00

 

1990

1,999,979,000.00

 

1991

2,202,253,000.00

 

1992

6,826,277,000.00

 

1993

7,220,264,000.00

 

1994

8,917,725,000.00

 

1995

28,979,000,000.00

 

1996

17,711,000,000.00

 

1997

NIL

Subsidy withdrawn

1998

NIL

Subsidy withdrawn

1999

969,000,000.00

 

2000

NIL

Subsidy withdrawn

2001

1,683,000,000.00

 

2002

1,485,000,000.00

 

2003

1,188,000,000,.00

 

2004

2,459,160,000.00

 

2005

1,750,432,212.50

 

2006

3,507,200,000.00

 

2007

4,855,590,994.25

 

2008

14,263,875,990.00

 

2009

11,000,000,000.00

 

 











































Source: 
Adapted from Economic and Financial Weekly, CBN (1991) and FPDD/FFD and IFDC Reports (various years)

 

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. Agriculture contributes 41% of Nigeria’s GDP currently. However, the total output from farms in Nigeria is not enough to feed the Nigerian populace because of insufficient supply/availability/accessibility of inputs by farmers. Fertilizer is one of the major inputs for any successful farm 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 into the provision of better technical, marketing and consumer services by the new operators. In fact, more than 80million 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.

The current drive by the Federal Government to discontinue fuel subsidy is also a good example. The government has observed that the so-called benefits of subsidy are being reaped by a small cabal of middlemen   and the major marketers.  Petroleum products can only be made accessible and affordable for Nigerians if the down stream sector is deregulated. Similar deregulation is required in the fertilizer sector.

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. Nigeria spends about N 28 billion annually on food importation. Nigeria depends on China for clothes,   depends on Burkina Faso for beans, depends on Thailand for rice and depends on Italy for shoes. Nigeria imports 68% of the total rice consumed by its people, despite its enormous production potential. 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. This will also translate to increase in farmers’ revenue as the low income of farmers has been attributed to poor harvest caused by low and or non application of fertilizer, poor adoption of improved fertilizer use and improved farming technologies. This will also provide a veritable business venture and employment opportunities especially for the restive youths who might be interested in taking up farming as a business or engaged in the fertilizer industry.

 

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.  Government should take steps toward ensuring our national food security, conserving our foreign exchange, creating employment opportunities through agro industrial development and saving the common Nigerian from malnutrition, hunger and poverty.

 

 

Fertilizer Suppliers Association of Nigeria (FEPSAN)

2nd Floor NIDB Building

18 Muhammadu Buhari Way, Kaduna,

GSM: 08033174409

E-mail:   This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Website:  www.fepsannigeria.com

June, 2010

 

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