Fertilizers, particularly inorganic (chemical) fertilizers, have the ability to substantially increase farmers’ agricultural productivity. However, in Nigeria, fertilizer use remains low; according to a new AGRODEP working paper, inorganic fertilizer use in Nigeria is 11.3kg/ha and organic fertilizer use is only 0.2kg/ha. This puts Nigeria well below the targeted 50 kg/ha set forth in the Abuja Declaration. To address this low fertilizer use, the Nigerian Federal Government established a subsidy to help farmers access inorganic fertilizers.
However, as the paper points out, using solely inorganic fertilizers can cause long-term soil degradation and a loss of soil fertility. Using a combination of inorganic and organic fertilizers, on the other hand, can improve soil fertility in the long run. Thus, there is concern about whether Nigeria’s subsidization of inorganic fertilizers might crowd out the use of organic fertilizers, causing long-term environmental damage and reducing agricultural yields in the future.
To examine whether the inorganic fertilizer subsidy does in fact crowd out organic fertilizer use, the study examines 5,000 farming households covered by the 2010-2011 Nigeria General Household Survey (GHS) Dataset. The sample design used two-stage probability sampling and the analysis considered farm plots (both number of plots and plot size), farmers’ socio-economic characteristics, access to fertilizer, types of fertilizer used, fertilizer subsidy amount, cost of transportation, and fertilizer prices.
The authors found that among study households, only 44 percent used any type of fertilizer (either organic or inorganic) and only 38 percent accessed the fertilizer subsidy. The average subsidy amount was 896 Nigerian Naira, while average fertilizer costs were 11,969 Naira; this cost is more than most households’ non-food expenditures (N 11,211), meaning that the average Nigerian farmer may not be able to afford fertilizers. However, even with the subsidy, only 38 percent of the study farmers accessed inorganic fertilizer.
In terms of the subsidy’s impact on organic fertilizer use, the study found that all the farmers who accessed the fertilizer subsidy used inorganic fertilizers; however, less than 0.5 percent of those who accessed the subsidy used organic fertilizers. On the other hand, 79 percent of farmers who did not access the subsidy used organic fertilizers, while only 9 percent used inorganic fertilizers. The authors found the differences in farmers’ probability of using inorganic and organic fertilizer to be statistically significant at 5 percent. In addition, the intensity of organic fertilizer use is significantly higher for farmers who did not access the subsidy.
Taken together, these findings suggest that farmers who do not have access to the fertilizer subsidy use organic fertilizers as an alternative to the subsidized inorganic fertilizers. If the inorganic fertilizer subsidy amount were to double, organic fertilizer use intensity would fall by 0.31kg/ha and inorganic fertilizer use intensity would increase by 0.09kg/ha. Thus, the fertilizer subsidy does appear to have a crowding-out effect on organic fertilizer use. In addition, the authors found that the poorest farmers used 24 percent organic compared to 20 percent inorganic fertilizers and were only 22 percent likely to access the inorganic fertilizer subsidy.
The paper also examined the impact of transportation costs on fertilizer use, both organic and inorganic, and found that these costs pose a constraint for overall fertilizer use in rural areas. For example, a doubling of the cost to transport fertilizer would reduce inorganic fertilizer use intensity by 15.86kg/ha, thus offsetting the gains in inorganic fertilizer use intensity stemming from the subsidy.
The paper’s findings have several important policy implications for Nigeria. First, as the subsidy does seem to have a crowding-out effect on organic fertilizer use, the subsidy scheme should be expanded to include both organic and inorganic fertilizers to prevent overuse of inorganic varieties. Second, the transportation cost of fertilizers needs to be considered, as existing cost constraints limit the impact of the fertilizer subsidy in terms of fertilizer application (either organic or inorganic). Finally, farmers should be educated about integrated soil fertility management, including the importance of combining inorganic and organic fertilizers and the potential to convert livestock waste into simple organic fertilizers. Such education will help protect the country’s soil fertility.
By: Sara Gustafson, IFPRI