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Impact of fertilizer subsidies on the commercial fertilizer sector in Nigeria:

International Food Policy Research Institute (IFPRI);
  • Africa
  • Fertilizer
  • Nigeria
  • West Africa
  • Private Sector
  • Subsidies
  • Africa South Of Sahara
  • Fertilizer Distribution


Microsoft Word - WP_Impact of Fertilizer Subsidies on the Commercial Fertilizer Sector in Nigeria_FINAL VERSION.docx WORKING PAPER NO. 23 | December 2012 1 We greatly appreciate the comments from participants of the seminar at the International Food Policy Research Institute and International Fertilizer Development Center in Nigeria. We are also grateful for the Department of Fertilizer, Federal Ministry of Agricultural & Rural Development for sharing with us the information of port charges for fertilizer at Lagos port. We also thank Renato Folledo, Sheu Salau, Hyacinth Edeh, and Akeem Ajibola for their excellent research support. All remaining errors are ours. Impact of Fertilizer Subsidies on the Commercial Fertilizer Sector in Nigeria Evidence from Previous Fertilizer Subsidy Schemes1 Hiroyuki Takeshima, Ephraim Nkonya, and Sayon Deb We examine whether and how much previous fertilizer subsidy schemes in Nigeria crowded-in or crowded-out the private- sector fertilizer. We apply a system of endogenous Tobit regressions which account for interlinkages between the subsidized fertilizer market, the commercial fertilizer market, and the open-market fertilizer price. We use data from two separate agricultural household surveys, one of which is a pseudo-panel. We find that: 1) higher subsidy rates might have depressed the non-subsidized open-market fertilizer price; 2) a majority of farmers use either commercial or subsidized fertilizer, but rarely both sources; 3) one kg of subsidized fertilizer supplied reduces demand for commercial fertilizer by between 0.19 and 0.35 kg; 4) the characteristics of the ideal beneficiaries under a fertilizer subsidy scheme in Nigeria are quite different from the beneficiaries under previous schemes; and 5) fertilizer demand is not affected by price. We conclude that the success of any new fertilizer subsidy scheme in Nigeria partly depends on effectively reduc

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