1st International Conference on Food and Agricultural Economics:MAIZE FARMERS IN GHANA RESPOND TO FERTILIZER SUBSIDY POLICY: WHAT NEXT TO ENSURE SUSTAINABILITY?

Abstract

Soil fertility loss issues in Ghana are crucial owing to the fact that Africa’s soils are known to be the poorest in the world and fertilizer use is low. In 2007, a re-thinking of the fertilizer subsidy policy of the 1970s to 1990s targeted poorer farmers’ inclusivity. The new Fertilizer Subsidy Programme (FSP) that was implemented in 2008 was designed as a public-private partnership agreement that allowed the private sector to supply fertilizer to farmers at half price. The aim was to increase use rate, crop yields and household food supply especially by small holder food crop farmers. In 2012, a subsidy on improved seeds was introduced as part of the FSP to support production of locally produced improved seed (germplasm) and use by farmers. This study used the Nerlove regression model to establish the positive effect of fertilizer policy on output of maize, a leading staple crop grown in all five agro-ecological zones in Ghana. The roles of good rainfall amounts, high product price and area expansion were also identified. By 2015, the use rate of fertilizer had increased from 8kg/Ha to 20kg/Ha and maize yield from 1.5 Mt/Ha to 1.9 Mt/Ha. However, the initial subsidy rate of 50 percent on mineral fertilizer reduced to an average of 20 percent by the end of 2015. In 2014, the government did not pay subsidy on any of the fertilizers, raising sustainability concerns by various stakeholders: 1) Adequacy of funding sources of Government and financing for input dealers, 2) When the crowding out effect on the private sector will cease, 3) Effectiveness of the electronic monitoring of fertilizer retailers by local Agricultural officers with limited ICT training and 4) The quality of road infrastructure to facilitate distribution of fertilizer to remote areas. To sustain the gains made and ensure continued increased application of fertilizers by farmers, the study recommends that: 1) The FSP should be re-designed to include a government exit plan, which involves two key paths: i) the poorer farmers should be linked to social protection projects to support the subsidy portion of the scheme and ii) non-poor farmer entrepreneurs should be linked to financial institutions in a contract farming scheme. Government exit at the appropriate time will assure competition in the market and lead to sustainable interest and participation by the private sector. 2) Integrated soil health management should be promoted among farmers since that ensures the practice of combined use of mineral and organic fertilizer with improved germplasm and local adaptation. 3) Farm income be improved through output support programmes that assures market access and adequate pricing.