UNDER optimal conditions, agricultural development has proven to be an effective engine not only to power a developing nation’s economy but also to sustain its prosperity. Growth in the sector has a multiplier effect in emerging markets, sparking growth in non-agriculture sectors as well. In the book The New Harvest: Agricultural Innovation in Africa, development expert Calestous Juma writes, “Prioritizing agricultural development could yield significant, interconnected benefits, particularly in achieving food security and reducing hunger; increasing incomes and reducing poverty; advancing the human development agenda in health and education; and reversing environmental damage.”
Recognizing this fact, and in light of the ongoing volatility of oil prices, the Federal Government of Nigeria (FGN) is recommitting itself to agricultural development. Since the oil boom of the 1970s, Nigeria has relied on oil revenue as the basis of its economy, with declining public funds allocated to agriculture that have given rise to higher annual food import bills. As a result of this dependency, when oil prices fluctuate, so does the nation’s GDP. To remedy this effect, the FGN attempted to begin implementing market-oriented reforms designed to diversify economic growth in 2008, with an emphasis on developing public-private partnerships (PPPs). However, this move toward privatization was slow and lacked the commitment and strategy to effect such a dramatic change. But, as it has been widely reported in recent months, the nation is now undergoing massive restructuring and transformation – led by a new ministerial administration – moving from subsistence farming to business-oriented agriculture designed to once again become a substantial portion of the nation’s GDP.
IFDC redemption clerks prepare vouchers for farmers in Taraba State during the 2012 Fertilizer Voucher Program. Nearly 40,000 farmers in Taraba were able to access discounted fertilizer from the private sector through the program.
“We are driving a public sector-enabled and private sector-led agricultural transformation,” said Nigerian Minister of Agriculture and Rural Development, Dr. Akinwunmi Adesina, in an address to the Earth Institute at Columbia University. “We must free ourselves from dependency on crude oil. Agriculture is the sector where we have the greatest potential to achieve this – and now is the time.”
This commitment was reiterated during the 19th Nigerian Economic Summit, held in September, which focused on the theme “Growing Agriculture as a Business to Diversify Nigeria’s Economy.” With intensified market development plans, the expansion of Notore – the only urea plant in Sub-Saharan Africa – and six new fertilizer plants expected to be operational by 2017, the goal of the FGN is to turn Nigeria into “a global agricultural powerhouse.”
But a nation’s sheer will to make such a change is insufficient in and of itself; development resources are critical. This is the primary reason that the FGN has enlisted IFDC to expand its efforts to build sustainable agro-input supply networks in the nation. In the past decade, IFDC has led more than a dozen Nigeria-based projects – seeding commercial input markets in the country, building the capacity of agro-dealers and working with private companies and farmers to create more functional value chains. Farmers are almost continuously trained in new technologies and methods, such as FDP and integrated soil fertility management (ISFM).
However, these agricultural development activities will achieve maximum impact only when a proper enabling environment is created in combination with the appropriate tools needed to employ yield-boosting practices. Thus, in Nigeria, the lack of timely access to affordable, high-quality inputs remains the smallholder farmer’s greatest limiting factor.
Targeted Support: the Impetus to Market Development
Targeted subsidies – if properly implemented – can serve as an effective way to get inputs (fertilizer and seed) into the hands of farmers. Input vouchers (both paper and electronic) are a popular form of targeted subsidies that act as discount coupons designed to transfer the purchasing power to targeted smallholder farmers. Successful voucher programs include heavy private sector participation and are customized to a country’s particular circumstances. IFDC first introduced vouchers in Afghanistan in 2002 to provide post-conflict emergency assistance. Since then, millions of farmers in countries across Africa and Eurasia have benefited from these programs. When implemented effectively, subsidy programs go far beyond merely distributing vouchers to farmers. The heart of a true “smart subsidy” initiative is the effective inclusion of the private sector at every possible level of the agricultural supply chain. These efforts build the foundation for sustainable, vibrant input market systems by empowering private sector companies to deliver inputs directly to farmers, with only participatory oversight from a given national government.
Conversely, heavy government subsidization almost always undermines the commercial agriculture sector and usually results in some levels of corruption and fraud. And with often-poor estimations in required fertilizer quantities and delays associated with poor infrastructure, little fertilizer actually reaches the farmers most in need. This was the reality for 40 years in Nigeria. The government subsidized fertilizer to such a degree that it, in essence, competed with the private sector rather than partnering to build a more effective input distribution system. “Under the past fertilizer subsidy interventions, the private sector was not able to do what it does best: provide products at an affordable price in a competitive market,” says Scott Wallace, IFDC country representative in Nigeria. “Middlemen received government contracts to deliver products to government warehouses, creating a situation in which the farmer was no longer part of the equation. Thus, fertilizer products of questionable quality were often delivered and redistributed through political connections before finding their way into the marketplace.”
Nevertheless, to address the immediate need to assist targeted farmers and the long-term need to strengthen the private sector, IFDC has led subsidy programs in select Nigerian states each year since 2008. Through these state-level programs, fertilizer reached a total of more than 300,000 farmers, most of whom had never before received subsidized fertilizer. Sustainable and direct linkages were created, from suppliers to distributors and from distributors to local agro-dealers.
Charting a New Development Course
With the 2010 appointment of Dr. Adesina as Minister of Agriculture and Rural Development, the FGN announced that it would be exiting the business of fertilizer distribution. “Within the first 90 days of this administration, we ended the 40-year-old fertilizer sector [issues],” said Adesina in an October Leadership article. “The old system of government buying and selling fertilizers was scrapped, and all fertilizer companies were required to sell directly to farmers, not to government warehouses.”
The FGN’s new Growth Enhancement Support (GES) program is one of the government’s first steps in balancing its focus between the oil and agriculture sectors. To reach farmers directly, the 2013 GES program utilized electronic vouchers that were received by farmers through mobile phones (also known as an “e-wallet” system). The system allowed registered farmers to receive text messages alerting them that they could pick up their input package at a local redemption center.
IFDC provided technical expertise in the design and implementation of the program and coordinated supply-side activities in 15 states. This included coordination with input suppliers and government officials to ensure that an adequate stock of fertilizers was available throughout the program. Covering the entire nation, the program linked more than 4.5 million farmers to subsidized fertilizer; IFDC directly helped 2.4 million farmers to access the critical input within the 15 states coordinated by the Center.
“It is nothing short of amazing that the GES has already reached such an enormous scale in just its second year of operation, especially considering the decades-old precedent of government procurement, which crowded out the private sector instead of fostering it,” said Luke McCarthy, IFDC input voucher specialist.
So, one might say that the FGN not only has the sheer will to transform the sector, it also has a plan. The GES program and other market-led efforts are putting Nigeria on track for substantial agricultural transformation. “We ended the approach of treating agriculture as a development program,” said Adesina during the 36th Session of the IFAD Governing Council. “We now treat agriculture as a business to generate wealth for millions of our people.”

Related News