An Appraisal of Fertilizer Subsidy in Developing Countries

Abstract

Most developing countries’ fertilizer subsidy scheme is largely bureaucratically administered. Leakages occur causing unintended beneficiaries to benefit from the scheme while the intended beneficiaries are excluded. A cross-country survey of literature was carried out on fertilizer subsidy management in some selected developing countries. The survey largely revealed that fertilizer supply (availability) and demand improved in some developing countries that have made serious efforts at reforming their fertilizer supply and demand sectors; although some few observers hold dissenting views especially about the outcomes in the supply sector. Also, fertilizer supply and demand did not improve in the developing countries that did not make serious efforts at reforming these sectors. This suggests that the reform objectives of removing transaction costs and making fertilizers readily available to farmers at reduced prices seem to have been achieved in the reforming countries. The study therefore recommends that in order for the non-reforming countries’ farmers to be more accessible to fertilizers in sufficient quantities and at reduced prices, more serious efforts must be made at reforming these countries’ fertilizer supply and demand sectors. However, these reform efforts should be complemented with an institution of a workable output price support policy.

Keywords: fertilizer subsidy, leakages, fertilizer supply, fertilizer demand, shifting the fertilizer supply curve to the right (SSCR).