IMPACT OF FERTILIZER POLICY ON CROP PRODUCTION IN NIGERIA

IMPACT OF FERTILIZER POLICY ON CROP PRODUCTION IN NIGERIA

                                                          ABSTRACT:         

This study examined the impact of fertilizer policy on crop production.  The various trends in fertilizer policy reform were explored.  Specifically, the fertilizer policy was studied under two policy regimes: the pre-liberalization and the liberalization periods.  The first period is between 1986 and 1996, which otherwise constituted the pre-liberalization era while the years between 1997 and 2006 make up the second period, otherwise called the liberalization era.  Secondary data on the distribution of fertilizer, usage-rate, fertilizer cost, yield of selected cereals, as well as the time series features of the variables, test for cointegration and the error correction mechanism were used in this research.  The descriptive analysis, students’ t-test and the regression model were used to analyze the data.  It was discovered that there was an increase in the distribution of fertilizer in the second period.  There was also an increase in the yield of the selected cereals.  Among the selected crops, rice had the highest yield in the first era.  The quantity of fertilizer distributed, the usage-rate of fertilizer, the price and the policy periods of the variables were found to have significant effect on agricultural production.  The quantity of fertilizer distributed and the price of fertilizer were found to have positive effect on agricultural production.  In order to increase agricultural production in Nigeria through an effective fertilizer policy: the distribution of fertilizer to farmers has to be timely.  Farmers should be educated on the dangers of excessive use of fertilizer in order to prevent environmental pollution.  Complementary use of inorganic and organic fertilizer should be encouraged so as toensure eco-balance and food security.

TABLE OF CONTENTS

Dedication         i

Acknowledgement         ii

Table of contents        iii

List of tables        v

Abstract        vi

CHAPTER ONE:    INTRODUCTION   

1.1Background Information        1

1.2 Problem Statement        4

1.3 Objective of the Study        5

1.4 Research Hypotheses        6

1.5 Justification        6

CHAPTER TWO:  LITERATURE REVIEW

2.1 Fertilizer Procurement, Distribution and Subsidy        7

2.2 Constraints to Fertilizer Supply and Use        11

2.3 Policy Performance Criteria        13

2.4 Environmental Issues on the Use of Fertilizer        14

2.5 Economic Regulation        16

2.6 Economic Deregulation        16

2.7 Theoretical Framework        17

2.8 Analytical Framework        20

2.9 Time Series Features of the Variables        23

2.10 Relationship between the explanatory and explained variables        23

2.11 Residual test for Cointegration        24   

2.12 The Error Correction Model        24

CHAPTER THREE:  METHODOLOGY

3.1 Study Area        25

3.2 Period of Study        26

3.3 Data Collection        26

3.4 Data Analysis        27

3.5 Model Specification        27

CHAPTER FOUR: RESULT AND DISCUSSION

4.1 Distribution of fertilizer between 1986 -1996 and 1997-2006        30

4.2 Usage-rate of Fertilizer between ‘86/’96 and ‘97/’06        33

4.3 Yield of selected Fertilizer Dependent Crops for the two periods         36

4.4 Determinants of Time Series Properties        37

CHAPTER FIVE: SUMMARY, RECOMMENDATION AND CONCLUSION  

5.1 Summary        44

5.2 Recommendation        44

5.3 Conclusion         45

References        46

LIST OF TABLES

Table 1: Total Fertilizer Production, Importation, Exports and Use in Nigeria        10   

Table 2: Nigeria Fertilizer Use, Procurement, Subsidy, Price and Tariffs    11   

Table 3:  Distribution of Fertilizer between 1986/1996 and 1997/2006        30

Table 4: Price of Fertilizer between 1986/1996 and 1997/2006        31

Table 5: Subsidy Cost of Fertilizer between 1986/2006 and 1997/2006        32

Table 5.1: Nigerian National and Agric Budgets  & FertilizerSubsidy Costs          33

Table 6: Fertilizer Usage-rate for the periods        34

Table 7: Yield of Maize, Millet, Rice and Sorghum for the two Eras        36

Table 8: ADF Root values at Order (1)        37

Table 9: Augmented Engel-Granger Test for Cointegration at Order 1 (0)    38

Table 10: Maize yields Response to price and other factors of Fertilizer         39

Table 11: Rice yield response to price and other factors of Fertilizer         40

Table 12: Millet yield response to price and other factors of Fertilizer         41

Table 13: Sorghum yield response to price and other factors of Fertilizer     42

CHAPTER ONE

INTRODUCTION

1.1    Background of the Study

Fertilizer is one of the major farm inputs for achieving the green revolution objective in the world. According to Dada (2006), during the Africa Fertilizer Summit, it is generally believed that not less than 50% of incremental crop output in the past five decades is attributable to fertilizer use.

Owing to fertilizer use, along with other inputs such as seeds and agro chemicals, many countries of the world with high population densities have been able to achieve, relatively, food self-sufficiency in the past decades (World Bank, 2004).

Unfortunately, the benefits of green revolution did not accrue significantly to sub-Saharan Africa to any perceptible extent due, among other reasons, to inadequate use of fertilizer (FGN, 2005).

    The Food and Agriculture Organization (FAO) estimates of fertilizer need in Africa concomitant to yield and area expansions for meeting the Millennium Development Goals (MDGs) amount to an increase in total nutrients of 47% or 26% average annual growth rate (UN, 2000).

This is why members of New Partnership for African Development (NEPAD) of the African Union (AU) had formulated the Comprehensive Africa Agriculture Development Plan (CAADP) predicated on increased and efficient use of fertilizer. The components of CAADP are consistent with the global objectives set in the MDGs as well as the national objectives of Nigeria contained in the National Economic Empowerment and Development Strategy (NEEDS) document (NEEDS, 2004). The critical aspect of the MDGs in relation to the fertilizer sector is the goal to reduce poverty by half by 2015, taking cognizance of the role of agriculture in the economy wherein about 70% of the people are employed or engaged (Dada, 2006).

    The role of fertilizer is well established all over the world; crop output of countries correlate strongly and positively with fertilizer consumption: World average = 91kg/ha; North America = 93kg/ha; Western Europe = 186kg/ha; South Asia = 96kg/ha; East Asia = 201kg/ha; All Asia = 141kg/ha; Africa = 19kg/ha; Nigeria = 8kg/ha (IFDC, 2003; Idachaba, 2006). But the FAO recommended 200kg/ha; therefore, the need for Nigeria to redouble fertilizer use, improve agricultural production and productivity and raise rural income in the face of a rapidly growing population and worsening poverty incidence has become obvious (Idachaba, 2006).

    Okolo (2004) described the fertilizer supply in Nigeria as still inadequate. This accounts to some extent for its low usage. One major impetus to fertilizer usage is an improvement of the fertilizer market. Olomola (2005) stated that there is need to improve the agribusiness market structure and performance.

    Since the establishment of a ministry for agriculture at the Federal level in 1967 followed by the creation of the first professional department (Federal Department of Agriculture (FDA), in the ministry in 1970, the promotion of fertilizer and other green revolution technologies has become a deliberate government policy (Bello, 2006). The institutional policy on fertilizer involved the subsequent establishment of the erstwhile Fertilizer Procurement and Distribution Division (FPDD), which was established in the FDA in an effort to co-ordinate the activities of the states in the importation of fertilizer (Dada, 2006).

For many years, the FPDD served as the central agency for fertilizer importation and its delivery to designated points in the country till the liberalization of the sub-sector began in 1995 following which the division was re-designated as Federal Fertilizer Department in 2001. During this period (1976-1995), the main statute in force was the National Fertilizer Board Act of 1977 which provided for the establishment of “a body corporate to be charged with the responsibility for purchasing and distributing fertilizer to state government at such subsidized prices as may be determined by the Federal Government” (FFD, 2006b).

    Generally “Fertilizer” means any substance containing one or more recognized plant nutrient(s) that is used for its plant nutrient content and is designed for use or claimed to have value in promoting plant growth (FFD, 2006a)

Specifically, “mineral fertilizer” means fertilizer produced by mineral processes or mined and derived from an organic substance or synthetic organic substance; while “organic fertilizer” means fertilizer derived from non-synthetic organic material, including sewage sludge, animal manures and plant residues produced through the process of drying, cooking, composting, chopping, grinding, fermenting or other methods and makes a declaration of nutrient value on the label (FFD, 2006a).

          Cereals are those members of the grass family, Poeceace grown for their characteristic fruit, the caryopsis, which have been the most important sources of world’s food for the last 10,000 years ( Onwueme and Sinha, 1991). Wheat and barley are the oldest cultivated cereals. Their cultivation started in the fertile crescent of Mesopotamia some 10,000 years ago, this region now include parts of Turkey, Syria, Irag and Iran ( Onwueme and Sinha, 1991).

            The major cereal crops in Nigeria are rice, maize, sorghum, millet, wheat, pearl, sugar cane and fonio millet with rice ranking as the sixth major crop in terms of the land area while sorghum account for 50% of the total cereal production and occupies about 45% of the total land area devoted to cereal production in Nigeria ( NEARLS, 1996 ).

            The role of cereals to modern society is related to its importance as food crop throughout the world. In most parts of Asia and Africa, cereals products comprises 80% or more of the average diet, in the United State, between 20-25% ( Onwueme and Sinha, 1991). Cereals are the major dietary energy suppliers and provide significant amount of protein, minerals (potassium and calcium) and vitamins ( vitamin A and C) ( Idem and Showemimo, 2004). Cereals are consumed in a variety of forms, including pastes, noodles, cakes, breads, drinks etc. depending on the ethnic or religious affiliation. The bran, husk, plant parts and other residues( after processing) are useful as animal feeds and in the culture of micro-organism. Wax syrup and gum are extracted from cereals for industrial purposes ( Ismaila, Gana, Tswanya and Dogara, 2010).

Agriculture is the economic heart of most countries and most likely source of significant economic growth (DFID, 2003). It has been observed as the major and certain path to economic growth and sustainability. In spite of the dominant role of the petroleum sector as the major foreign exchange earner in Nigeria, agriculture remains the mainstay of the economy (NEEDS, 2004). Apart from contributing the largest share of gross domestic product (GDP), it is the largest non-oil export earner, the largest employer of labour and a key contributor to wealth and poverty alleviation, as a large percentage of the population derive their income from agriculture and related activities (Ayinde, Adewumi and Omotosho, 2009).

    Moreover, in order to increase productivity, Nigeria’s agriculture needs to embrace science-based technology and the use of fertilizer, improved seed and crop protection products. Since land expansion is limited, without science based agricultural inputs, agricultural production will decline and fall (Ayinde et al, 2009). Despite the laudable efforts of the nation to improve crop production, Nigeria’s agricultural sector is still characterized by low yields attributable to the use of crude implements, a low level of input and limited area under cultivation among others.

Hence, Nigeria has to adopt policies that will encourage an agricultural sector that has a high investment rate. A key element of this strategy is an efficient and well functioning policy on agricultural inputs market, making use of the following complements, among which are: Fertilizer, improved seed variety and crop protection product. Thompson, Vander-Meer, Alex and Kane (2004) saw the need to invest in policy and regulatory reforms in the fertilizer sector as well as establishment of government and regulatory capacity.

1.2    Problem Statement

The fragility and high susceptibility of the soils in Nigeria to degradation and loss of nutrients make augmentation through the use of fertilizers necessary to obtain reasonable yield (Alimi, Ajewole, Awosola and Idowu, 2006). Nigeria’s agricultural policy framework has gone through a number of evolutionary process and fundamental changes that reflected, in a historical perspective, the changing character of agricultural development problems and the roles which different segments of the society were expected to play in tackling these problems. But in the main, the form and direction of agricultural policy vis-à-vis fertilizer policy at a point in time were dictated by the philosophical stance of government on the content of agricultural development and the role of government in the development process (Olukoya, 2007).

There have been inconsistencies in fertilizer policy in Nigeria over the years. Making retrospectical review of the Nigerian fertilizer policy reveals an inconsistency of government fertilizer policy over the years. Many policies have been formulated right from the pre-structural adjustment period (1970-1985), the Structural Adjustment Period (SAP) in 1986 and the post structural adjustment period (Bello, 2006). Up till 1996, the federal government had free monopoly on the distribution of fertilizer in Nigeria. But with effect from 1997, trade in fertilizer was liberalized and private importers were now free to import and sell fertilizer in the open market, subsequently, this forms the liberalization period.

Despite the various policy reforms and campaign by the federal government to encourage the use of fertilizer, farmers are yet to attain the optimum fertilizer use rate. Fertilizer use in Nigeria averages 8-10kg/ha (FFD, 2006A). If all our production stays in Nigeria, we can raise fertilizer use rate to 100kg/ha (Okoloko, 2006). If this is required when Nigeria does not want to export food or cash crop at all, then a higher rate should be expected if we are to consider exporting products, in order to meet up with the NEEDS agricultural crop production target. With the current application rate, Nigeria is still far from achieving this (NEEDS, 2004).

In other words, critical questions which this research attempts to answer include:

Does the distribution of fertilizer in 1997-2006 any better off to the distribution in 1986-1995/6?

Do farmers’ use- rate of fertilizer in the second policy (1997-2006) better than in the first policy era (1986-1995/6)?

Has the use of fertilizer in the second policy era (1997-2006) any improvement on crop yield over the first policy era (1986-1995/6) upon which the new fertilizer policy was formulated, especially cereal crops that depend on fertilizer so much?

What has been the effect of the past fertilizer policy on crop production?

These questions require deep scientific analysis so that current efforts to revamp the fertilizer sector will be well guided and based on sound judgement. Previous studies by Olukoya (2007) limits itself to the important role of the agricultural sector in engendering sustainable development; and also Ayinde et al (2009) focused on crop production in Nigeria. Nagy and Edun (2002) focused mainly on Nigeria’s fertilizer policy and suggested alternative market-friendly policies.

While these studies are important, they do not alone provide the critical information required by policy makers towards the reforms in the fertilizer sector. This, therefore, informed the need for this study so as to bridge the knowledge gap in the impact of past fertilizer policy on crop production in Nigeria.

1.3    Objective of the Study

The broad objective of this study was to examine the impact of fertilizer policy on crop production in Nigeria. Specifically, the study sought to:

(i)    identify, and compare the distribution of fertilizer for the two policy periods (1986-1995/6) and (1997-2006);

(ii)    compare the use rate of fertilizer for the two policy periods;

(iii)    compare the yield of some fertilizer dependent crops over those policy periods, especially cereal crops (such as maize, rice, millet and sorghum);

(iv)    determine the impact of fertilizer policy on crop production, and

(v)    derive lessons from the study and proffer appropriate measures.

1.4    Hypotheses of the Study

The null hypotheses that guided the study are that:

(i)    there is no significant difference in the amount of fertilizer distributed during the two policy periods,

(ii)    there is no significant difference on  cereal crop yield (maize, rice  sorghum and millet) in the two periods; and

(iii)      fertilizer policy variables did not influence  cereal crop production.

1.5    Justification

Liberalization policies have been advocated and implemented both at international and national levels. Despite the application of fertilizer, crop yield at the average has not met up with food demand. Can Nigeria’s crop production output keep pace with the future demand? (AIAE, 2005).

Nigeria’s food import bill for 2000 was N164 billion (2001 constant in naira) or 13.3% of total value of imports and N173 billion in 2005 (CBN, 2006). This implies that there should be a campaign for a better fertilizer use via policy(s) that must meet up with the food demand (Nwagbo, 2005).

    From the foregoing, an efficient fertilizer policy is urgently needed. But how can a better and an efficient fertilizer policy be formulated if a critical look is not done 

Therefore, there is a need to examine the impact of the past Nigerian fertilizer policy. There should be juxtaposition, critique and a better policy framed out to meet the present need of improved agricultural production in Nigeria.