Fertilizer subsidies, political influence and local food prices in sub-Saharan Africa: Evidence from Nigeria

Abstract

The last decade has seen a resurgence in the use of fertilizer subsidies in sub-Saharan Africa. However, there is limited empirical evidence on the effects of fertilizer subsidy programs on local food prices. Using an instrumental variables approach, we explore the effect of a fertilizer subsidy program on the seasonal growth rates of grain prices in Nigeria. Our results suggest that the fertilizer subsidy program had very small effects on the growth rates of grain prices between the post-planting and post-harvesting seasons. We also find that political influence played a role in the distribution of subsidized fertilizer. We discuss how the weak effects on the price growth rates may be caused by low market orientation, output market structures, greater focus on farmers’ incomes, low marginal productivity of fertilizer, and politically influenced targeting.