Senegal's Fertilizer Subsidy: Boon for Agricultural Productivity?
In 2006, the African Union Ministers of Agriculture met in Abuja, Nigeria to discuss how to improve the region’s agricultural productivity through the increased use of fertilizers. The main goal of the subsequent Abuja Declaration was a regional increase in the level of fertilizers used from 8 kilograms per hectare to at least 50 kilograms per hectare by 2015. The Declaration also revived interest in the use of input subsidy programs.
In Senegal, according to a recent working paper from the African Growth and Development Policy (AGRODEP) Modelling Consortium, the amount of funding dedicated to input subsidy programs grew significantly following the Abuja Declaration, from FCFA 75 million 2001 to a record FCFA 36.3 billion (US$ 72.6 million) in 2011. In 2011-2012, close to half of the total amount of the country’s input subsidy program was directed to fertilizers.
The AGRODEP study analyzes farmers’ responses to the incentives provided by this fertilizer subsidy, as well as the extent to which these responses translate into improved agricultural productivity. Farm-level data was collected in the Senegal River Valley agro-ecological region from more than 180 farmers for 2013; about half of these farmers benefit from the subsidy program, with price coverage ranging from 5 to 100 percent of their fertilizer costs. The study utilizes a data envelope analysis to score the efficiency of the study farmers and then relates those scores to a variety of characteristics, including use of subsidized fertilizer.
The study finds that farmers who benefit from the input subsidy program use an average of 28.4 kg of fertilizer per hectare, compared to 23.3 kg/ha used by non-beneficiaries. The findings also suggest that land size matters in determining fertilizer use. Farmers with a plot size larger than 2.5 hectares use an average of 16.6 kg/ha of fertilizer; farmers with small plots, however, use more fertilizer, an average of 28.3 kg/ha. However, large farms are more likely than their smaller counter parts to use subsidized fertilizers (58.8 percent of large farms compared to 48.5 percent of small farms). The authors suggest that this could be due to large farms’ improved bargaining power in terms of accessing subsidized fertilizers or to larger farms’ more efficient use of the input.
Overall, the author concludes, there is some evidence that Senegal’s fertilizer subsidy program has helped improve farmers’ efficiency by reducing the price of fertilizer; this in turn encourages farmers to use more of the input and thus stimulates increased agricultural outputs.
However, the author points out that there remains much room for improvement in agricultural output. The average farmer in Senegal is still more than six times less productive than his/her average counterpart in the rest of the economy; this low productivity contributes to the country’s large gap between domestic food production and domestic food demand and is a significant factor in overall poverty, particularly in rural areas.
Identifying the characteristics of more efficient farmers can help identify ways in which the government of Senegal can further improve agricultural productivity, both through an improved fertilizer subsidy program and through complementary programs. The study finds that the most efficient farmers are more likely to benefit from the fertilizer subsidy program; they also tend to be larger (with plot sizes above 2.5 ha) and affiliated with unions or farmers groups. This latter result suggests that the benefits these groups offer to their members, including inputs and marketing assistance, are important in determining farmers’ productivity.
The author also suggests that inefficiencies appear to have more to do with farm management than with the scale of production, suggesting improved extension and education services as a channel to improve management practices and productivity.
The most efficient farms also tend to be relatively more capital-intensive, and skilled labor appears to matter more than simply the number of laborers working on a particular farm. Thus, the author suggests that a combination of improvements in both physical capital (i.e., number of workers) and workers’ skills could greatly enhance farm efficiency.
Surprisingly, the study found that farmers cultivating land that does not belong to them tend to be more efficient than their counterparts working their own land. The author suggests that existing contractual arrangements between farmers and land owners may provide similar levels of security as actual land ownership.
Thus, while Senegal’s fertilizer subsidy program has seen some success in increasing farm efficiency and productivity, there is ample room to increase the program’s effectiveness. The author suggests the need for more transparent implementation of the subsidy program, particularly regarding the timing of fertilizer distribution. In addition, allowing for more competition among fertilizer providers will help lower the overall cost of the program.
In addition to these improvements to the program itself, the government of Senegal should emphasize additional channels through which agricultural output can be increased. These include strengthening support for farmers’ organizations, providing agricultural extension services and marketing services, and easing constraints to credit and loans in order to help farmers invest in machinery and equipment. Combining these types of investments with the existing fertilizer subsidy program could significantly improve Senegal’s agricultural productivity.
By: Sara Gustafson, IFPRI