The development has a long ancestry. As contained in a report from proceedings of a National Workshop under the auspices of International Fertilizer Development Centre, held between 26 and 27 August 2003 in Abuja, the federal, state, and local governments have all been involved in fertilizer procurement and distribution and subsidy administration. Agriculture is, of course, on the concurrent list so it is the responsibility of the three tiers of government. The new agricultural policy has assigned each tier of government some common and some overlapping responsibilities.
Fertilizer subsidy administration in Nigeria started in the early 1970s when government was promoting the use of chemical fertilizers to Nigerian farmers. In 1976 the Fertilizer Procurement and Distribution Division (FPDD) was created and the Single Superphosphate FertilizerCompany (FSFC) began operation in Kaduna. Also, the federal government assumed full and overall responsibility of procurement and distributionof fertilizers throughout the country that year.
By 1992 the federal government was spending up to N30 billion (equal to US $222,929,367.70) annually in fertilizer subsidy. The years 2000 and 2001 were, according to the report, marked with the rapid increase in annual imports with 437,320tons and 615, 000 tons, respectively. The sudden surge in the annual imports within this period was due to an increase in the number of companies involved in the importation and distribution of fertilizers; this led to an increase in demand and consumption.
However, due to lack of quality control and monitoring mechanisms, the abolished 10 per cent duty was, as contained in the report was being abused. Other trade malpractices were perpetuated by some of the fertilizer companies. Imports declined to 340,746 tons in 2002, perhaps due to the identification and consequent penalty meted out to companies involved in malpractices. In addition, the government intervention policy, which came into effect in 1999, was, as the report put it, beginning to take a toll on the companies involved in importation and distribution of fertilizers. The policy, which allows for the simultaneous sale of subsidized fertilizers with unsubsidized ones, has affected sales of most fertilizer companies.
According to the report: “In 2003 these effects continue to manifest and total fertilizer imported and distributed declined to 268,801 tons as of August 18, 2003. In addition, only seven fertilizer companies were involved in the importation and distribution of fertilizers. Worse still, there were late payments for fertilizer supplied to federal and state governments by the suppliers and there were discouraging price offers for fertilizer supplies.”
In the same report, recommendations were given that the government should appreciate that agricultural production is a profit-making business and it could only survive if it, at least, “breaks even and all stakeholders derive some benefits from it” and that it “should therefore understand the implications and be honest about price subsidy on agricultural inputs.” Surely, subsidy is, as contained in the document, meant to ameliorate the poverty of the farmer or to improve national food security or both. “It is certainly not meant for public officials at various levels of government bureaucracy to illegally enrich themselves from public coffers. Thus, we must clearly identify the beneficiaries of government subsidies on agricultural inputs ranging from the poor to the poorest in the farming populace. Nigeria, according to the report must expand its network of agricultural input agencies (producers, importers, distributors) at all levels.”
It was for this reason that the Federal Ministry of Agriculture, under Dr. Adesina, changed the policy of feritiler distribution and today, farmers are smiling to the banks!
Government No Longer Involved In Fertilizer Importation
How does the GES work? Special Assistant (Media) to the Minister of Agriculture, Dr Oluwakayode Oyeleye, explained the ministry has already registered 14.5 million farmers in its database. “GES implementation was built on the premise that, given some sort of incentives, farmers can produce more, earn more and grow”.
The idea of creation of farmers’ database was to know the farmers to be reached and be able to measure impact. This is transparency in practice as it makes accountability not only possible but inventory-taking an easy task. The federal government, under ATA, set out in 2011 with a goal of registering 20 million farmers by 2015 on a 5 million year-by-year basis. As at 2014, no fewer than 14.5 million farmers have been registered on the database all across the country and the process continues. It is important to understand the logistic challenges of reaching the rural people, particularly the farming population. It is also important to understand the context of GES, which was not designed for rich farmers, but for the extremely poor farmers. The implementation of GES exposed the stark realities and depth of poverty of many of the farmers who mostly produce our national food output. The federal government came up with the idea of subsidy on major inputs, namely: fertiliser and seeds.
He said further that under the subsidy arrangement, the federal government got states to take up 25 per cent subsidy while the federal government takes 25 per cent and the beneficiary farmers pay the remaining 50 per cent for commodities covered under the GES subsidy scheme. The farmers are entitled to two bags of fertiliser, but they are to pay the price of one, while the price of the other is picked up by both the government of the federal and participating states. Although the federal government subsidises, it is no longer involved in fertiliser purchase, warehousing or distribution. These are now the business of the private sector input suppliers. What the federal government does now is to help encourage and promote the use of fertiliser through the subsidy policy support.
The database, managed by Cellulant, an ICT platform, is used for the purpose of input delivery and subsidy administration. The federal government, under the Agriculture Transformation Agenda, ATA, has disengaged from direct procurement of fertilisers. Instead, private companies involved in agro-input supplies have been allowed to register to participate in the input supply under ATA. Their identities and corporate details are registered with Cellulant and Central Bank of Nigeria (CBN) for operational purposes.
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