C H A P T E R

5
The linkage between agricultural
input subsidies, productivity, food
security, and nutrition
Abiodun Elijah Obayelu, Aisha Olushola Arowolo, Funminiyi Peter
Oyawole, Raheem Olatunji Aminu and Shakirat Bolatito Ibrahim
Department of Agricultural Economics and Farm Management, Federal University of Agriculture,
Abeokuta, Nigeria

5.1 Background of the study boosting farmers’ financial ability to buy inputs
they cannot or are reluctant to get at showcase
Agricultural inputs are a collective term for a rates. Thus, AIS is considered as a way of attain-
range of materials needed to enhance agricultural ing higher agricultural productivity, improved
productivity, and the most important among food security through lesser food prices and
these are fertilizers and improved seeds. nutrition security (Walls et al., 2018).
Agricultural inputs are central to agricultural Vosters (2018) described subsidies as any
innovation and productivity improvement, but disbursement that provides a farmer with an
their rising prices make it difficult for smallholder incentive to cultivate a particular crop or fol-
farmers to embrace thereby hindering improve- low a precise “best management practice” or
ment in agricultural productivity. Agricultural retain prices low for customers. AIS is any
input subsidy (AIS) was, therefore, a key feature allowance (or loan, if repaid below market
of agricultural development policies in rural prices) given to lessen the cost of purchasing
economies from the 1960s to 1980s (Chirwa and specific inputs (such as inorganic fertilizer or
Dorward, 2013) and currently one of the more hybrid seeds) used in agricultural production
controversial agricultural policies in sub-Saharan (Ecker and Qaim, 2011).
Africa (SSA). AISs are disbursements, monetary Subsidies can be separated into two, depend-
concessions, or benefits given by the government ing upon whether they are focused at a specific
to support farmers and are huge spending on class of farmers, crops, and land or whether they
public resources (Chirwa and Dorward, 2013; are applied pretty much consistently (Asfaw
Jayne and Rashid, 2013). AIS is a method for et al., 2017). The five AIS programs lately

Food Security and Nutrition

DOI: https://doi.org/10.1016/B978-0-12-820521-1.00005-8 107 © 2021 Elsevier Inc. All rights reserved.
108 5. The linkage between agricultural input subsidies, productivity, food security, and nutrition

executed in Kenya, Malawi, Rwanda, Tanzania, Dorward, 2013). Usually, the issues raised
and Zambia are essential examples of the regarding AISs are about effective targeting,
focused/targeted subsidies. These subsidies refer consequences for agricultural budgets, and pos-
to what is comprehended as another model of sible exploitation for personal or political bene-
pro-poor, focused, and market-friendly “smart” fit. As a result of these, only SSA farmers use
subsidies. These programs practically have some few modern inputs (such as improved seed, fer-
joint and significant characteristics; such as their tilizers and other agrochemicals, machinery,
enormous scope as far as the number of recipi- and irrigation) (Sheahan and Barrett, 2017).
ents (for instance, 2.5 million in Kenya), time In developed countries, agricultural, input
allotment (multiyear—10 years in Zambia), scope subsidies have been mostly in the form of price
(nation-wide), and usage structures (targeted support for both domestic production and
and/or using vouchers). West African countries export (Maene, 2000), but due to distortion in
(such as Burkina Faso, Ghana, Mali, Nigeria, and the global crop prices, the level of domestic
Senegal) appear to be executing fertilizer subsi- supports and export, subsidies were reduced
dies that are widespread (untargeted) in nature, in developed countries under the Uruguay
with the targeting of particular crops (instead of Round Agreement on Agriculture (World
farmers). Under this scheme, all farmers who Trade Organization WTO, 1995; Bumb et al.,
cultivate the focused crops are qualified and 2000). However, SSA has often used AISs to
receive fertilizer infraction to the size of the area develop agricultural systems, enhance food
they planted. The application of the universal security by altering relative prices, and encour-
agricultural input scheme is quite difficult and age farmers to increase the usage of fertilizer
contains a paper form (“caution technique”) and hybrid/modern seeds (Asfaw et al., 2017;
requiring the number of bags each farmer is Holden and Lunduka, 2014; Jayne and Rashid,
allowed and which is used both at the time of 2013). The program also aims to make invest-
inputs distribution and refund of suppliers/deal- ments in new technologies more attractive to
ers. Both the focused (targeted) and universal smallholder farmers. AISs are designed to pre-
subsidies intend to make specific inputs such as vent the extinction of the small farmers and
fertilizer and seeds available to probable users at make inputs affordable on a very large scale
prices lower than market costs as a way of incen- over a longer period (Druilhe and Barreiro-
tivizing adoption, increasing productivity and Hurlé, 2012).
profitability, and finally, poverty as well as Subsidizing agricultural inputs has been a
encourage economic growth among farming controversial issue. While the proponents view
households (Hemming et al., 2018). this as a good government policy, the oppo-
Some researchers have identified AIS pro- nents see it as bad. Opponents of AIS were of
grams as a popular program among politicians the view that that the provision of AIS system
since they provided direct support to rural is wasteful. Subsidies involve high costs char-
voters and due to their lack of provision of acterized by a lot of fraud and mismanagement
longer-term investment for infrastructure, they (World Bank, 2007b; Ricker-Gilbert et al., 2013).
used subsidy as a way of compensating the Besides, input subsidy tends to be more benefi-
voters who are mainly the small, poor farmers cial to the wealthier farmers, rather than
(Poulton et al., 2010). The theoretical argument resource-poor farmers, thereby creating a wid-
for agricultural subsidies is based on their pro- ening gap between these two classes (Ricker-
motion of agricultural productivity by making Gilbert and Jayne, 2012). Late distributions of
an investment in new technologies more vouchers causing farmers not to use the inputs
appealing to smallholder farmers (Chirwa and such as fertilizers at the right time, thefts of

Food Security and Nutrition

 5.3 Justification of the chapter 109
agricultural inputs vouchers, farmers’ resis- 3. review the theoretical and empirical
tance to using of inputs chosen by the govern- applications of AIS,
ment, and financial inabilities of some farmers 4. investigate the determinants of supply and
to copay the price are also identified (Druilhe demand for AIS,
and Barreiro-Hurlé, 2012). Jayne and Rashid 5. assess the demerits of AIS,
(2013) observed in their study that the costs of 6. identify the roles of the private sector at
the AIS program often outweigh their benefits. reducing food insecurity through AIS.
The subsidy in some cases led to tension
among villagers, village leaders, agro-dealers,
government officers, and lower-level politi- 5.3 Justification of the chapter
cians. African AISs are viewed as a wicked
problem (Ricker-Gilbert and Jayne, 2012). The understanding of AIS is essential for
This study, therefore, attempts to answer the improving agricultural productivity and
following questions: growth. Given the widespread use of subsidies
for agricultural inputs as a crucial agricultural
1. What are the merits of AISs?
policy for reducing food insecurity in SSA
2. Do AISs have a positive or negative
countries, their specific nutritional effects are
relationship with agricultural productivity?
not well known, and their role on productivity
3. Do AISs have a positive or negative
and food security remains unclear (Assima
relationship with food security?
et al., 2019). The lack of evidence, due to the
4. Do AISs have a positive or negative
scarcity of data and impact evaluation studies
relationship with nutrition?
of AISs on food security and nutrition, lead
5. What are the theoretical and empirical
this study to systematically review the links
applications of AIS?
between the three concepts (input subsidies,
6. What are the determinants of supply and
agricultural productivity, food, and nutrition
demand for AIS? 7. What are the demerits of
security) (Fig. 5.1). The few nutritional outcome
AIS?
studies relating to AIS have often concentrated
7. What are the demerits of AIS?
on the consumption of the target staple, calcu-
8. How can the private sector be involved in
lated in terms of calorie intake. In light of the
AIS?
impact of food quality on human health and
welfare, broader consideration of the impact
on nutrition and dietary diversity is important
(Walls et al., 2018, Gaiha et al., 2012). Much of
5.2 The objective of the study
the existing literature on inputs such as fertil-
izer subsidies focused only on program effi-
The main aim of the chapter is to assess the
ciency, crop productivity, and intensity of use.
relationships between AISs, productivity, food
Most of these few available pieces of evidence
security, and nutrition considering some
did not use a systematic approach to show
experiences of some selected countries in SSA.
how AISs affect productivity, food, and nutri-
The specific objectives are to:
tional status. The evidence base is not large
1. examine the concept of AISs and states the and comes from a few schemes and countries.
merits, Agricultural subsidies in developed coun-
2. identify the relationship of AIS to tries work through a diversity of methods that
agricultural productivity, food security, and offer smallholder farmers, in particular, the
nutrition, incentives to remain in farming, even if not

Food Security and Nutrition

110 5. The linkage between agricultural input subsidies, productivity, food security, and nutrition

Households Nutrition
Security

Adequate
Good Health
nutrient intake

Changes in food
consumption Changes in health
environment (Health
security)
Household food
security

Impact on households
Changes in non- Change in
cash income (economic
food consumption household behaviour
accessibility)

Households food
production and Changes in
productivity government revenue
(spendings)
Agricultural input
subsidies

FIGURE 5.1 Conceptual framework of Key pathways from agricultural input subsidies to productivity, food and nutri-
tion securities. Source: Authors.

because of output and prices (Josling, 2015). likely to have an impact on policymakers and
Some countries have recognized methods of which stakeholder interests are most important
regulating policy instruments to look like trade- to consider (Resnick et al., 2017).
distorting decreases in support even when This chapter seeks to fill this gap to help at
incentives are maintained for producers. strengthening the policy recommendations.
Emerging and developing countries have Understanding the linkages of AISs to agricul-
expanded their farming help, frequently in tural productivity and how it affects food and
manners that mutilate exchange. This chapter nutrition would be of great worth to policy-
raises some questions that need to be faced makers and their partners for improving the
while further preparing subsidy rules by the nutrition sensitivity of agricultural invest-
World Trade Organization. The resurgence in ments. This chapter, in addition, is expected to
AISs that started in the early 2000s and renew interest in the use of AISs that promote
expanded during that decade throughout Africa agricultural productivity, food, and nutrition
calls for a new wave of rigorous empirical security with a view to give a greater under-
research on the effectiveness of various modali- standing of the advantages and drawbacks of
ties and challenges for these interventions AISs as tools for promoting food and nutrition
across countries (Jayne and Rashid, 2013; Minot security and improve productivity.
and Benson, 2009). Understanding the varia-
tions in input policy across various countries in
SSA and the links between AISs to productiv- 5.4 Material and methods
ities, food security, and nutrition is useful for
the international development and research This chapter relies extensively on theoretical
communities to recognize when evidence is and empirical literature to address the major

Food Security and Nutrition

 5.5 Results and discussion 111
questions of the investigation. Information for AIS was motivated by the fact that farmers
chapter was obtained principally from secondary were mostly poor, and they may not be able to
sources. Sources include published articles and allocate limited household income to often
books, unpublished discussion papers, research costly improved inputs such as improved seeds,
reports, national and international databases, pesticides, fertilizer, and agricultural machinery
policy documents, position papers on AISs, pro- at their market price. This resulted in lower
ductivity, and food security. The information agricultural productivity, and lower incomes,
gathered covers a range of conceptual and and as such, farmers were locked in a vicious
empirical issues relating to the advantages and cycle of poverty. Theoretically, as a result of
challenges of AISs in SSA, and the importance of poor road infrastructure and market failures
the subsidies to agricultural productivity, as well (credit constraints, imperfect competition, and
as food security. The study uses a combination risk of crop failure among others), farmers’ pri-
of techniques, such as expository analysis and vate input costs are often higher than true social
comparative analysis to analyze the information or economic costs, and as such, input subsidies
collected. can generate a positive overall net economic
return (Baltzer and Hansen, 2011). In summary,
input subsidies encourage farmers’ investment
5.5 Results and discussion in new technologies, which is expected to
improve productivity, and consequently, their
5.5.1 Agricultural input subsidies as a income (Chirwa and Dorward, 2013).
This section discusses relevant empirical
driver of increased productivity and
findings on the impact of input subsidies on
income agricultural productivity and income in Africa.
The low agricultural productivity is Walls et al. (2018) in their logical review of the
attributable to the low level of agricultural input impact of AISs on food and nutrition security
use such as improved farm inputs, primarily observed that AISs are a type of social protec-
inorganic fertilizers and hybrid seeds (Crawford tion frequently considered as a significant
et al., 2006; Lopez et al., 2017; Mwesigye et al., method for improving agricultural productivity
2017) for small resource-poor farmers in devel- in low- and middle-income nations. Though,
oping countries. Subsidies are geared toward the success and effectiveness of the program
improving food security in most SSA countries, still continue contentious with respect to agri-
particularly among vulnerable households. cultural productivity, food, and nutrition secu-
Wealthier, mid to large-scale farmers are able to rity. Chibwana et al. (2014) utilized a panel
produce without subsidies and in theory, pro- dataset to evaluate the Farmer Input Support
duce at lower costs to sell cheaply to small-scale Program (FISP) in Malawi. The FISP was the
farmers. Agricultural productivity requires first widely acclaimed successful second-
access and the use of improved seed as one of generation input subsidy program and had an
the critical inputs (World Bank, 2012). AISs are important knock-on effect in the agricultural
considered a practicable policy to improving policy and political economy landscape of
agricultural productivity, increasing farmers’ Africa (Jayne et al., 2018). FISP was implemen-
income, and achieving national food security ted as a voucher-based input subsidy program,
(Jayne and Rashid, 2013; Shively and Ricker- which enabled households to purchase fertil-
Gilbert, 2013; World Bank, 2014; Walls et al., izer, hybrid seed, and/or pesticides at heavily
2018), which are major policy concerns in many subsidized prices—for instance, 50 kg fertilizer
postindependence SSA countries. Conceptually, was sold at 8% of the market price. The goal

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112 5. The linkage between agricultural input subsidies, productivity, food security, and nutrition

was to promote improved inputs use among fertilizer subsidy program, primarily to forestall a
smallholder farmers by lowering the market corresponding fall in the use of fertilizers by
price and was expected to increase productivity. farmers (Baltzer and Hansen, 2011). Wiredu
The study reported an increase of 447 kg/ha of (2015) assessed the effect of this program on the
maize among farmers who accessed both subsi- productivity of rice farmers in Northern Ghana.
dized maize seed and fertilizer, while an addi- The study reported a modest positive impact;
tional 249 kg/ha of maize was observed among farmers who benefitted from the subsidy had an
farmers who accessed only subsidized fertilizer. increase of 29 kg/ha of rice on average, which
Before long, Zambia also implemented the FISP. represents an increase of about 2% relative to
Using a nationally representative dataset of nonparticipating households. Furthermore, the
3200 smallholder maize farmers, Mason and Federal Government of Nigeria implemented an
Smale (2013) investigated the impact of subsi- electronic voucher-based input subsidy program
dized hybrid seed on maize yield and income (Growth Enhancement Support Scheme [GESS])
in the country. They reported a positive, albeit between 2011 and 2015. The program was aimed
small impact; on the average, a 10 kg increase in at improving fertilizer and improved seeds’ use
subsidized hybrid seed planted increases house- among smallholder farmers, in a bid to boost
hold maize output by 106 kg and maize income agricultural productivity and reduce poverty.
by 1.1%, among other economic indicators. Accordingly, many studies have evaluated the
Following the food price increases between impact of the program in different regions of
2007 and 2008, Africa Rice Centre, as part of the Nigeria. For example, Wossen et al. (2017) evalu-
Food and Agricultural Organization’s Initiative ated the impact of GESS on smallholder farmers’
on Soaring Food Prices implemented an maize yield and income, among other welfare
improved rice seed subsidy in 2008. Awotide variables. The result showed that maize yield
et al. (2013) evaluated the impact of this program increased by 26.3% among participants relative to
on farmers’ output and income in Nigeria. Using nonparticipants, while maize income of GESS
an inverse propensity score weighting technique participants also increased by ₦19,730 (54.12 USD)
within a randomized control trial approach, the per hectare. The study further demonstrated
study conclusively showed that farmers in the that the impact was not heterogeneously dis-
treatment group (received subsidized improved tributed across gender and land size catego-
rice seed vouchers) had higher rice output and ries. Using Propensity Score Matching
income per hectare than the farmers in the con- approach, the results of Adenegan et al. (2018)
trol group, even though the latter group culti- also showed that the farm income of the aver-
vated larger rice farms. Specifically, farmers who age farmer that participated in GESS in Oyo
received subsidized improved rice seed vouchers State (Southwestern Nigeria) improved by
have a significant increase in their rice income ₦119, 927.05 ($399.98), compared to if he/she
by ₦32,199.03(88.33 USD)1 per hectare, compared did not participate in the input subsidy
to the counterfactual case that they did not program.
receive any subsidy. Similarly, there was a signif- Likewise, Ibrahim et al. (2018) also show that
icant mean difference of ₦25,007.91(68.60 USD) GESS participation positively influenced pro-
per hectare in rice income between the treatment ductivity and farm income among maize farm-
and control groups. ers in Katsina (Northern Nigeria). Specifically,
Similarly, due to the sharp increase in fertilizer the study showed that maize productivity for
prices, the government of Ghana implemented a the beneficiaries of the scheme increased by a

1
1USD (United States Dollar) is equivalent to ₦362.03.

Food Security and Nutrition

 5.5 Results and discussion 113
factor of 2.25, while the productivity of nonbe- drought, flood, global warming among others.
neficiaries could have increased by a factor of These have resulted in low economic return and
0.73, if they had benefited from the scheme. poor agricultural productivity (FAO, 2011;
Treated farmers’ maize income also increased Akaakohol and Aye, 2016).
by ₦58,614 (160.79 USD) per hectare, while In the years before the mid-1970s, a number
maize income for nonbeneficiaries could have of SSA countries established food security pro-
increased by ₦32,804 (89.99 USD), if they had grams by providing farmers with subsidized
benefited from the scheme. Some other studies inputs, agricultural credit, extension services,
suggest that input subsidies have had a wider and marketing facilities, and by regulating mar-
impact on the economy through increased food kets and food prices (Maxwell, 2001). AIS pro-
crop production, which resulted in a decline in grams have continued in many SSA countries
consumer food prices to the advantage of poor such as Malawi and Zambia and justified on the
food consumers; and a rise in rural agricultural basis of the threat of food insecurity from
wages (Druilhe and Barreiro-Hurlé, 2012; drought and a stagnant economy. AISs improve
Chirwa and Dorward, 2013; Dorward and agricultural production and productivity for
Chirwa, 2013). Agricultural subsidies increase small scale resource-poor farmers in developing
fertilizer use, average food crop yields, and countries by encouraging the use of improved
food crop production, and the success depends farm inputs, primarily inorganic fertilizers and
on the context, the design, and implementation hybrid seeds (Mwesigye et al., 2017). This is
features (Dorward and Kydd, 2005; Druilhe and expected to contribute to increased revenue
Barreiro-Hurlé, 2012; Chirwa and Dorward, from sales of produce, improved food security
2013). The benefit also varied with the nature of at the household and national level and, hence,
the subsidies and their context in the market. contribute to poverty alleviation. There is little
insight, however, into the effect of this program
on productivity and food security.
A subsidy can only generate a positive net
5.5.2 Agricultural inputs subsidies as a
monetary return if there is some market disap-
driver of food security pointment with the goal that the descending
Agriculture has continued to be the lifesaving movement in the stockpile bend is more promi-
option for most of the population in terms of its nent than the absolute expense of the subsidy.
contribution to employment and income gener- Persistent food insecurity and low agricultural
ation as well as food security in the developing productivity in most SSA countries such as
countries most especially SSA countries (Dillon Malawi had led to the revival of agricultural
and Voena, 2018). Agriculture is predominantly subsidies such as fertilizer subsidies in recent
occupied by smallholder farmers who engage in years (Harrigan, 2008; Denning et al., 2009).
small-scale farming (mainly subsistence) and The rising poverty profiles and food insecurity
employ traditional methods for cultivating their among smallholder farmers in the SSA region
crops. It is characterized by low productivity, are linked to the weak growth of agricultural
and low economic returns, which are caused by productivity thereby posing serious concern to
numerous factors such as lack of access to better the government, policymakers, and other key
inputs, inadequate storage facilities, lack of stakeholders (including donor agencies and
proper processing techniques, inadequate gov- academia). One of the significant interventions
ernment policies, gender difference in terms of adopted by the government to combat poverty,
land tenure, sparse transportation networks, improve food security, and enhance agricul-
adverse effect of climate change such as tural productivity among the farmers in the

Food Security and Nutrition

114 5. The linkage between agricultural input subsidies, productivity, food security, and nutrition

recent decade is the resurgence of the AIS pro- favorable economic and weather conditions as
gram (Jayne and Rashid, 2013). In light of the well as the promotion of private rural input busi-
persistent low harvest and high food costs, var- ness in Malawi. Similarly, Chirwa and Dorward
ious SSA nations have initiated AIS programs (2013) observed that input subsidy in Ruvuma
to improve food production and lessen destitu- Region of Malawi had led to a fall in maize
tion among small-scale farmers (Frempong, prices, an increase in local agricultural wages,
2018). It is generally believed that subsidizing and promoted net food buyers and labor-surplus
agricultural inputs will enhance the purchas- smallholders.
ing power of majorly poor smallholder farm- In Tanzania, Lameck (2016) observed that
ers, thereby increasing their ability to procure food insecurity was associated with a low rate
more inputs that translate to more output of application of fertilizers and usage of
and in doing so increase their level of income improved seeds among smallholder farmers
that influences the share of both household due to high fertilizer and seed costs, which led
total food and nonfood expenditure posi- to an increase in food prices. Lameck (2016)
tively and finally have impact on the nutri- studied the impact of agricultural subsidies on
tional outcomes (Walls et al., 2018). As of smallholder maize farmers with a specific focus
2011, about US$ 1.05 billion was spent on on agricultural productivity, food security,
AISs by 10 African countries, amounting to usage of improved inputs, and farmers’ percep-
28.6% of their public expenditures on agricul- tion of how the program functioned. The inves-
ture. Despite the massive spending, access, tigation involved 60 smallholder farmers who
availability, and use of improved technology received subsidies and 60 who did not. The
(inputs) remain a key constraint to many study findings show that most farmers agree
agricultural smallholders in Africa (World that the availability of maize stored in their
Bank, 2012). household makes them feel secured in terms of
The primary importance of AISs is the ability food. In addition to that, 90% of the farmers
to result in higher incomes, lowered poverty, who received subsidies have a positive opinion
and enhanced food security for farmers (Wiggins on the improvement of food security due to
and Brooks, 2010). However, the efficiency and their participation in the subsidy program.
effectiveness of AISs remain contentious. Thus However, it was observed that the study does
this section provides empirical findings from not establish causality and thereby made it chal-
previous studies on the role of agricultural subsi- lenging to rely on the effect.
dies as a driver of food security. It is worthy to Mkwara and Marsh (2011) in their assess-
note that there is a massive gap that exists in the ment of the impact of smallholder fertilizer
literature as far as the impact of AISs on small- subsidies on national and household food secu-
holder farmer food security is concerned. Jayne rity in Malawi observed that at the national
et al. (2018) identified only two studies (Gilligan level, food security has direct effect on fertilizer
et al., 2009; Karamba and Winters, 2015) that subsidies, but at the household level, maize
have assessed the impact of AIS on food security. production was severely lopsided, with the
Similarly, Walls et al. (2018) also noted the lack south lagging behind the center and the north.
of ample studies on the subject matter, thus caus- In the short-to-medium term, the authors sug-
ing limitation in accessing studies for review. gest substituting the use of a universal subsidy
Kato and Greeley (2016) reported that Malawi program in Malawi with a more targeted one.
has generally been successful in increasing agri- Gilligan et al. (2009) assessed the favorable
cultural input use leading to an increase in maize impact of Ethiopia’s Productive Safety Nets
production, maize yields, and food security under Program (PSNP) and its linkages. This social

Food Security and Nutrition

 5.5 Results and discussion 115
protection program is the largest of its kind in not influence their interest in commercial fertil-
SSA outside South Africa. The program had izer; however, the choice to take an interest in
four goals primarily: to provide transfers to the the program positively affects the amount of
food insecure population; to prevent the sales commercial fertilizer bought. One main reason
of household assets; to create assets at the com- for executing input, for example, input sub-
munity level; and to bridge the food gap that sidy is the need to battle the disturbing
arises when there are insufficient income and decrease in soil nutrients in many different
food production. The study used the Propensity parts of Africa and the requirement for their
Score matching to assess the impact of the PSNP renewal. Subsidies to advance fertilizer appli-
and other food security programs after their first cation may then be advocated as far as posi-
18 months of operation on household food inse- tive externalities where expanded fertilizer
curity and concluded that there was an improve- use prompts higher farm yields, decreases in
ment in one measure of the household food soil disintegration and downstream flooding
security (caloric acquisition above a minimum and siltation, in deforestation and carbon dis-
threshold). charges, and decreases in poverty and provin-
The small demand for agricultural input in cial urban movement.
SSA countries has been acknowledged to be
brought about by insignificant use, auxiliary
market contacts, for example, high transporta-
5.5.3 Linking agricultural input subsidies
tion costs, value variances, or a frail conveyance
framework keeping farmers from approaching
to nutrition
quality sources of inputs or to help present-day Nutrition security exists when, other than
agriculture monetarily (Liverpool and Winter- access to a healthy and balanced eating routine,
Nelson, 2010; Conley and Udry, 2010, Dercon individuals likewise have access to sufficient care-
and Gollin, 2014; Collier and Dercon, 2014). giving practices, and to a protected and clean
Increasing expenses of farm inputs debilitate environment that permits them to remain sound
their utilization and lead to a decrease in com- and utilize the foods they eat (Ruel, 2013). Three
modity supply and the painfulness of farm- explicit variables that impact nutrition status are
ers. The greater part of the farming sources food, well-being (health), and treatment, which
of input has been dependent upon sensa- directly affect the consumption of nutrients and
tional cost increments (FAO, 2009). Once in a the occurrence of disease (Ruel, 2013). The
while, farmers are subsequently ready to amount, assortment, and nutritional quality and
bear the cost of bought inputs especially safety of foods in diets are to a great extent influ-
those that are not part of the government- enced by the accessibility and availability of dif-
supported plan since they have restricted ferent foods whether available from the market or
buying power as their normal yearly income from farmers’ own production. There is no uni-
per household. Low and capricious rainfall versal pathway through which AISs affect nutri-
is firmly connected to low utilization of pur- tion outcomes. However, the results of all the
chased inputs as it makes extra yield hazard, literature reviewed in this study show a kind of
and farmers are hesitant to apply inputs in indirect links between AISs and nutrition.
light of the precariousness of yield costs, for Johnson-Welch et al. (2005) suggest that the pro-
dread that they may not take care of motion of smallholder agricultural production
expenses (Gordon, 2000). through AIS will lead to more food products
Liverpool-Tasie (2012) discovered that farm- entering the market, leading to lower food prices,
ers’ investment in the subsidy program does greater access to food and micronutrients by the

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116 5. The linkage between agricultural input subsidies, productivity, food security, and nutrition

poor people. Agricultural input policies such as 5.5.4 Case studies of countries using
fertilizer subsidies may increase staple food pro- agricultural input subsidies to boost food
duction, thereby improving food availability and security in sub-Saharan Africa
increased energy intake. It can also encourage
diversity of food production, including vegeta- In SSA, Asfaw et al. (2017) discern three spe-
bles, fruits, and animal source foods through cific types of program design for farm input sub-
improved productivity. In this case, it directly sidies. Demonstration packages were used in the
affects smallholder nutrition and diet quality mid-1990s, and large-scale multiyear projects
(World Bank, 2007a). AISs help to increase the were later introduced that was targeted in East
purchasing power of large numbers of small and Southern Africa, and universal in West
farmers by lowering commodity prices, which Africa. In the early 2000s, AISs were intro-
should lead to increased demand for nonstaples duced in many countries as demonstration
food and off-farm products and services, boosting packs with the main objective of bringing
nearby labor requests and compensation and issues to light about the utilization of fertili-
improve individuals’ nutrition (Chirwa and zers and showing their usefulness to small-
Dorward, 2013). The diminished expenses of sub- holder farmers. Demonstration packs such as
sidized inputs increase their profitability and the Starter Pack (universal, rationed subsidy)
reduce the apparent dangers by farmers with and Targeted Input Programme (targeted
inadequate information on input benefits and version of the Starter Pack) implemented in
appropriate utilization. Absence of agricultural Malawi, or the Sasakawa Global Initiative
input such as subsidies on seeds can make it hard programs implemented in several African
to improve yields and efficiency in the production countries in the mid-1990s to early 2000s
of nutritious foods. Agricultural productivity can (Druilhe and Barreiro-Hurlé, 2012) were the
be improved by giving prompt access to inputs, programs introduced on a consistent basis
expansion of rural and marketing infrastructure, (one to a few years) to give modest quantities
and adherence to timelines in subsidized inputs of free or intensely subsidized fertilizer to
delivery to the farm households (Gulati et al., countless farmers, usually as a component of
2012, Webb and Block, 2012; Shively et al., 2012). a complementary input and training/exten-
Shankar et al. (2019) in their study of a “sys- sion package. The second approach of the use
tematic review of links between agricultural of AIS encompasses subsidizing inputs so as
inputs and diet and nutrition outcomes of farm to make them more inexpensive on a large
households in South Asia,” observed that stud- scale and over a longer time period, with the
ies have gradually and consistently been devel- aim of expanding national production and
oped since the mid-2010s on the effect of productivity.
agricultural inputs on diet and nutrition out- This section gives brief synthesizes findings
comes of farm households, yet there is still a from SSA countries case studies of AISs even
far way to go. Shankar et al. (2019) results sug- though several SSA countries, including Mali,
gest that while there is no sign that land pos- Zimbabwe, Zambia, Mozambique, Malawi,
session or size alone has a clear relationship Tanzania have AISs policy to boost agricul-
with farm household dietary or nutrition out- tural production in order to improve food
comes, land productivity due to AIS is more security. Countries such as Zambia, the
clearly connected with improved nutrition. United Republic of Tanzania, Kenya, Nigeria,
However, studies, for example, connecting spe- and Ghana run a targeted input subsidy pro-
cific inputs such as improved seeds or irriga- gram (e.g., fertilizer voucher program) under
tion with nutrition remain very few. which farmers who satisfy various essentials,

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 5.5 Results and discussion 117
for example, growing targeted crops (usually productivity and yields (Arndt et al., 2016).
staple crops), having smallholdings, as well as Vouchers are given, permitting qualified
being situated in specific area, are qualified farmers to trade them for fixed measures of
and get a volume of subsidized inputs. These inputs at subsidized rates, with the essential
vouchers permit moving buying capacity to point of raising the food self-sufficiency of
smallholder farmers either by diminishing the asset poor smallholder farmers and income
price of the input at a price beneath market through expanded maize yield (Asfaw et al.,
(for example United Republic of Tanzania) or 2017, Lunduka et al., 2013). Findings from
by permitting farmers to get a foreordained previous studies such as Chibwana et al.
volume of fertilizer at a fixed discounted cost (2012) showed that Malawi’s FISP had led to
as in the case in Malawi (Riesgo et al., 2016). a stagy upsurge in maize productivity since
Countries such as Ethiopia where the univer- the execution of the program. National maize
sal subsidy program is in use, the govern- yields were reported to have increased from
ment imports agricultural inputs (such as 1.06 million tons to 3.62 million metric tons over
fertilizer) and distributes it among farmers at the duration of the program. Also, the empirical
below market price via cooperative unions finding by Schiesari et al. (2016) also revealed
network. that the Malawi FISP increased productivity,
The Zambia Fertilizer Input Support Programme households’ income, and rural wages as
in 2002 was introduced to allocate inorganic expected from theory, but failed to improve
fertilizers to farmer groups and later rechris- access to food at the national level. This study
tened when other inputs such as hybrid maize acknowledged a high cost and targeting ineffi-
seed were included in the dissemination. ciency as limitations for preserving the input
Fertilizer Input Support Programme is an input subsidy program.
subsidy aimed at improving the asset base of As a case study, the United Republic of
small farmers and advancing farming as a busi- Tanzania presents itself as a long-standing
ness for smallholder farmers, just as supporting champion of AISs. It has subsidized the costs of
on-farm production and nearby accessibility of seed and fertilizer to farmers for many years,
maize to escape food insecurity. Evaluations of and as a result, the country has remained
this input programme, however, have discov- largely food secure. In Zimbabwe, subsidies are
ered that more unfortunate (poor) farming apparently paid for nonfood, largely export-
households cannot access the program, which oriented crops such as tobacco and cotton.
therefore tends to benefit mainly wealthier Credit support is a major source of agricultural
farmers; with a general improvement in yields. assistance, largely as a response from the donor
According to the findings by Chapoto et al. community to food shortages at the household
(2015) is found not to have fulfilled its objec- level. Contrast with African nations, for exam-
tives of food security, reduction in hunger, or ple, Malawi or Tanzania where AISs programs
improvement in households’ assets. have been focusing on a huge number of farm-
The most widely discussed Malawi Farm ers and expending a lot of the national agricul-
Input Subsidy Program (FISP) smart subsi- ture spending plan, Mozambique’s fertilizer
dies in Africa was introduced in the 2005/ input subsidy program is a small scheme, in
2006 season as a result of weather shocks that terms of total number of recipient (farmers) cov-
affected production and caused persistent ering only 0.5% of the farmers owing to defi-
food shortages. Malawi FISP was initiated to ciency of economic resources (FAO, 2016).
improve poverty and guarantee the nation’s Nigerian government as a component of her
food security by upgrading agricultural AISs started the GESS to improve agricultural

Food Security and Nutrition

118 5. The linkage between agricultural input subsidies, productivity, food security, and nutrition

production by offering “smart subsidies” on Resnick and Mather, 2015). On the link between
certain farm inputs to small-scale farmers AIS and food security, Wiredu (2015) discov-
(Amurtiya et al., 2018). The discoveries from ered a direct effect of subsidized fertilizer on
the investigation uncovered that the scheme food security of smallholders of rice in northern
had the option to convey subsidized agricul- Ghana and proposed extra strategy measures to
tural inputs to small-scale farmers moderately, improve food security.
effectively, and at a reasonable rate, which The case of Kenya: Kenya subsidizes the pro-
assisted with expanding farm yield. Be that as duction of food crops in order to achieve sus-
it may, the plan is influenced significantly by tained levels of availability. Subsidizing output
its politicization, the failure of the governments means the government, on behalf of farmers,
to discharge funds to agro-vendors prompting procures agricultural inputs and distributes
late conveyance of inputs and the absence of these inputs to farmers below the rates of the
support service (extension) to farmers commercial outlets. The goal is to reduce farm-
In Ghana, the relic of subsidizing inputs ing costs, thus keeping the prices of output rela-
dates back to the 1970s, when the government tively inexpensive and accessible to consumers.
monopolizes the early version of the program Examples of inputs that are subsidized are ferti-
for importation and distribution, as in many lizers, hybrid maize, and sorghum seeds and
other countries. With the acknowledgment that land ploughing/tractor services.
the early program was financially unreliable
and damaging to Ghana’s macroeconomy, in
the early 1980s and compulsion from the
5.5.5 Drawbacks in agricultural input
World Bank and other donors, the parastatal-
led subsidies were phased out in the late 1980s
subsidy
and detached by 1990 (Jebuni and Seini, 1992; Agricultural subsidy programs are intended
Resnick and Mather, 2015). The entire supply to promote the growth of input supply systems
chain of fertilizers was then managed by the by taking careful account of the structure, con-
private sector (Resnick and Mather, 2015). duct, and performance of input supply markets,
Fertilizer subsidies were reinstated in 2003 in careful program design, efficiency-focused, and
Ghana for the country’s main cash crop (cocoa) long-term trust between governments and pri-
and in 2008 for food crops (such as maize) and vate suppliers. However, unclear program
named Ghana Fertilizer Subsidy Program design and various problems in implementation
(GFSP). Under the GFSP, more food crops such (Obayelu, 2016) coupled with quick exits and
as maize, rice, and soybean seed inputs were unstable/changeable subsidy programs have
introduced in 2012 (Resnick and Mather, 2015). hindered the program from yielding the
The GFSP was intended to be an impermanent expected effects (Chirwa and Dorward, 2013).
program; however, it has gotten a normal (and These challenges along with others have been
obviously perpetual) some portion of the agri- the major concern by a lot of subsidy analysts
cultural budget of Ghana. The revived subsidy (such as Crawford et al., 2006; Morris et al.,
program came to fruition for various reasons, 2007; Jayne et al., 2009; Bumb et al., 2011) over
including inspiration from the private sector, the years. Campbell systematic review in 2018
fertilizer and food price rises, political ubiquity on the “effects of input subsidies on agricultural
and unavoidable decisions in 2008, and the productivity, beneficiary incomes and welfare,
observation that Ghana confronted testing consumer welfare and broader economic
issues of soil barrenness and undernormal fertil- growth” revealed that subsidy schemes though
izer use among African countries (Banful, 2011; results in positive results for purchasers and

Food Security and Nutrition

 5.5 Results and discussion 119
more extensive monetary development, in any identifying the required inputs for distribution in
case, proof have demonstrated that they are collaboration with service providers and planning
inclined to wastefulness, inclination, and for the seasons. Limitations in logistics and
defilement in the SSA (Hemming et al., 2018). human resources often hinder the timely delivery
The reintroduction of input subsidies in some of inputs (Cantore, 2011). For instance, in 2009 the
countries (such as Kenya, Malawi, Rwanda, the distribution of vouchers in Rwanda was discon-
United Republic of Tanzania, Zambia, tinued due to difficulties in printing and on-time
Mozambique, Nigeria, and Ghana) frequently issuance to farmers (Mwesigye et al., 2017).
caused extensive strain among the government
and contributors. The position of the contribu-
tors fluctuated over time and was not reliable
5.5.6 Roles of the private sector in
even inside similar organizations (Potter, 2005;
Chirwa and Dorward, 2013), due to either
agricultural inputs subsidy
contrasts in a belief system or absence of proof Smart AISs are distinguished from universal
on the impacts and adequacy of the subsidies. input subsidies of the 1980s by three design prin-
In general, the main challenge of AISs alludes to ciples: its emphasis on targeting specific farmers
a history of inefficiencies due to mismanage- who do not already utilize the agricultural input
ment and scam. being subsidized (usually the poorest and most
The program’s execution has likewise been vulnerable households); its reliance on private
imperfect because of the regular late conveyance sector supply networks to distribute as opposed
of vouchers, debasement, benefactor customer to government distribution systems; and the exis-
relationship, politicized voucher distribution, tence of a firm and credible exit strategy (Baltzer
unlawful arrangement among leaders and and Hansen, 2011). AIS programs had been
agro-vendors, missing vouchers, and resale of established to encourage increased participation
vouchers by farmers. The investigation saw that of the private sector in the transfer of technology
subsidy vouchers do not generally arrive at farm- to farmers (Mwesigye et al., 2017). Private com-
ers in the amounts proposed. Nonetheless, even panies have been involved in a myriad of ways.
those that arrive at the farmers are not constantly Shreds of evidence have shown that the private
utilized, and consequently, the supply of subsi- input suppliers are largely replacing the parasta-
dized inputs may not really increase in outright tals of the green revolution era and now provide
terms the number of inputs utilized by farmers. an increasing volume of diverse products such
Various studies (Ellis et al., 2009; FAO, 2015) have as improved seed and breeding stock, fertilizers,
stated first-class catch and illegal conduct as a sig- agrochemicals, feed, and mechanization. The pri-
nificant issue with AISs. Quantitative and qualita- vate sectors helped at reducing food insecurity,
tive studies have also shown that unclear input especially in developing countries, through the
subsidies program design in some countries provision of agricultural inputs in a proficient,
besides the problems in implementation has practical, and manageable way. Private sector
made it unlikely challenging to yield the expected interest in the subsidies on some occasions is dis-
effects. African AISs are targeted based on politi- turbed by inconsistent changes in the projects.
cal considerations rather than, beneficiaries’ All together for input supply organizations to
inability to afford the inputs at unsubsidized assume this significant job, there is a need to
prices or the expected profitability of the subsi- build and keep up suitable infrastructure and
dized inputs, thereby undermining the stated institutions for innovation spread by the govern-
objectives (Pan and Christiaensen, 2012). ment as well as being consistent and straightfor-
Operational challenges affecting AIS involve ward in government choices. The integration of

Food Security and Nutrition

120 5. The linkage between agricultural input subsidies, productivity, food security, and nutrition

the private sector in the execution of a large and implementation of the subsidy program, by
nation-wide AIS program according to Imperial leveraging on the private sector for input distri-
College (2007) makes the program to be done bution. Thus, the government disengages itself
more efficiently with less bureaucracy associated from the direct supply of fertilizer to perform-
with state delivery of services. Second, pri- ing facilitation functions such as regulation of
vate sector engagement in agricultural input fertilizer quality and provision of enabling envi-
makes it feasible for the government to utilize ronment to make fertilizer value chain a
rare assets on different tasks through a private-sector-driven (Grossman and Tarzai,
decrease in expenses in subsidy. Third, pri- 2014; Uduji et al., 2019). This was done by regis-
vate sector participation is seen as a strategy tering existing agro-dealers and facilitating a
for improving the private market system. conducive business environment by supporting
Fourth, private sector inclusion in input the sector with a government-backed credit
retailing diminishes the removal of fare deals guarantee program, which worked to mitigate
by financed inputs. Chirwa and Dorward the risks of lending by commercial banks to
(2013), in their results of findings on private agriculture.
sector involvement in input subsidy program The GESS approach has been more success-
in Malawi, discovered that increasing the ful on two fronts: a wider reach of the fertil-
investment of the private sector in the sub- izer subsidy and a reduction in government
sidy program not just empowers the develop- subsidy expenditure. Compared to the diver-
ment of the private sector in input but sion of an estimated 89% of the subsidized fer-
likewise improves the productivity of the tilizers under the old system in which the
program’s execution. government was in charge of the whole pro-
The GESS launched by the Federal Government cess, GESS delivered subsidized inputs to one
of Nigeria in 2012 highlights the importance million farmers in 2012 and grew to five mil-
of the private sector inclusion in the imple- lion farmers in 2013. Second, while the gov-
mentation of AISs. The previous system of fer- ernment expended about US$180 million to
tilizer subsidy was characterized by the subsidize fertilizer, most of which never
complete dominance of government in fertil- reached the intended beneficiaries in 2011 (the
izer delivery, from procurement to retail. In year preceding GESS), 1.2 million farmers
order to do this, the government had to main- were able to purchase subsidized fertilizers
tain staff and offices/warehouses in all 36 states, under GESS in 2012 at a cost of about US$53
776 local government areas as well as outlets at million to the government. This implied that
the ward levels (a ward is the smallest unit in the cost per farmer had reduced from about
the political architecture of Nigeria). This US$230 to US$46 in just under a year. By the
bureaucratic system was rife with inefficiencies second year of GESS implementation, 4.3 mil-
(late distribution of fertilizers) and wide-scale lion farmers benefitted from the fertilizer sub-
corruption (large scale diversion and smuggling sidy program at a total cost of about US$96
of subsidized fertilizers), so much so, that it is million. Thus engaging the private sector had
estimated that farmers actually got only 11% of freed up scarce government resources that
the subsidized fertilizers. Indeed, interested had other important alternative uses,
farmers often had to buy subsidized fertilizer at increased the efficiency of the subsidy pro-
unsubsidized prices (Grossman and Tarzai, 2014; gram in terms of reach, and created additional
Grow Africa, 2016). jobs along the private sector fertilizer value
Thus the primary policy objective of GESS chain (Grossman and Tarzai, 2014; Grow
was to divest the government from the Africa, 2016).

Food Security and Nutrition

 References 121

5.6 Conclusion and Recommendations To overcome some of the drawbacks in AIS,

there is a need for clarity in subsidy program
The chapter aims to establish what is known objectives as well as appropriate design and
through literature about AIS and the relation- implementation plans to achieve such objectives.
ships with agricultural productivities, food, The private sector involvement for procurement
and nutrition security. Some policy implica- and delivery, monitoring and evaluation of pro-
tions have been generated from this review. grams should be strengthened. Input subsidies
This study observed that AIS is an efficient should be aimed more directly at disadvan-
way to support a country by increasing pro- taged, small-scale farmers, to serve as social pro-
ductivity to produce enough food for house- tection. Subsidies should not be continued after
hold consumption and surplus for the market. farmers have learned about the use and benefits
There is almost a complete lack of studies that of inputs to discourage farmers’ overuse of
systematically review the links between AISs inputs, incurring deadweight, and administra-
and productivity and explaining the implica- tion costs and also potential environmental
tions of food security and nutrition. We investi- costs. Also, to increase agricultural productivity
gated whether literature established links and ensure food security, subsidies should not
between AISs, agricultural productivity, food, be applied to inputs and technologies that are
and nutrition security. The outcomes from the not fundamentally profitable.
review and the experiences of selected coun-
tries show that there is a link between AISs,
agricultural productivities, food, and nutrition 5.7 Additional Research
security. While input subsidies have a kind of
direct link with productivity, the relationship Based on the findings in this chapter, we sug-
to foods and nutrition security appears to be gest that future research could be directed at: (1)
indirect. In order for AISs to have any mean- evaluating the impact of transitions in AISs on
ingful effect, subsidies need to be “smart,” prices of agricultural produce, food, and nutrition
with a clearly defined purpose, and instru- security; (2) conducting an economic analysis of
ments are intended for that purpose. input subsidies on agricultural productivities,
This chapter also confirmed that though food, and nutrition security among smallholder
AIS is a contentious issue in policy debate, the farmers; (3) identification of alternative ways of
policy leads to agricultural productivity, and reducing the costs of the AISs while still increas-
agricultural productivity, in turn, enhances ing agricultural productivity, food, and nutrition
food and nutrition security although with security of smallholder farmers, given the huge
some drawbacks in an attempt to implement budgetary implications of the subsidies. Our
the subsidies program. Subsidized input sys- study could not accomplish these due to limita-
tems looked good to farmers, but the theoreti- tions of data, time, and funding.
cal problems in terms of diversion and
inefficiency have limited the actual benefits to
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