Final Report
The Future of Agricultural Inputs Market
in Nigeria – Policy Recommendations
and Actions
Introduction
The future of the Agricultural Inputs market was discussed in a workshop at Ibeto
Hotel on 1 June, 2016. The workshop was attended by invited key stakeholders in the
agricultural input sub-sectors, comprising of private sector businesses, government
officials, IFDC, NIRSAL and other partner organizations. The workshop was initiated,
funded and facilitated by Propcom Mai-karfi, a DFID-funded project, and technically
managed by Professor Ode Ojowu, a policy consultant with wide experience and
knowledge of Nigeria, who provided the discussion paper and facilitated the technical
session.
The opening address to the round table was delivered by Eng. O. Jatto - Director
Federal Agriculture Inputs Department, Federal Ministry of Agriculture and Rural
Development.
The key objectives of the round table were:

To identify one or two policy issues critical to the development of the agriculture
inputs sector in Nigeria.

To develop a framework for engaging with key policy institutions (government) to
influence agriculture inputs policy development in Nigeria.
The round table provided an opportunity for various stakeholders to reflect on their
experiences and to suggest ways in which the agricultural inputs sector can be
supported to anchor the revival and growth of agriculture and agribusiness sector in
Nigeria.
Summary of discussion
Participants generally acknowledged the achievement of government in developing
the agricultural sector since the return to democratic rule in 1999. This has been made
possible through the introduction of several agricultural programmes, particularly the
Growth Enhancement Scheme (GES) component of the Agricultural Transformation
Agenda (ATA). These efforts have culminated in the growth of the agriculture sector
far above the population growth rate thereby stabilizing the price of staple foods and
kept headline inflation low up to the current economic crisis.

In spite of these laudable achievements, the forum noted that policy inconsistency
both in content and frequency of policy change has slowed down the pace of
development in the sector.

It was noted that prior to the implementation of the GES, government’s direct
participation as an intermediary in the subsidy scheme weakened the link between
input suppliers and end users thereby stunting the input market.

It was widely acknowledged that the implementation of the GES in 2012 has
substantially reduced the persistent cycle of inefficient and ineffective input system
due to government withdrawal from direct procurement and distribution

Consequently, it has encouraged the development of private sector competitive
markets that would administer subsidy more successfully than through
government channels.

In particular the development of farmer database has been acknowledged to
facilitate accurate targeting of intended beneficiaries and improve transparency
and accountability in the procurement and distribution system.

The forum welcomes the recent commencement of the implementation of Nigeria
Agriculture Payment Initiative (NAPI) meant to eliminate multiple registrations of
farmers, domesticate the technology and reduce costs of registration. NAPI will
facilitate farmers’ access to the national ID card. This is expected to address all
challenges associated with farmers’ identity, clustering and payment systems.
Essentially, the forum noted that NAPI has potential to facilitate the delivery of
fertilizer and seeds to most of the targeted beneficiaries that will be a stimulant to
private sector investment in the input market through enhanced integrity of the
farmer data base.
The forum identified key challenges facing the GES including:

Inadequate quantity of fertilizer of about two bags of 100kg each to a farmer and
small quantity of improved seeds that is not always considered of good quality;

Late arrival of inputs especially fertilizer and mismatch between available fertilizer
types and farmers requirements;

Long distance to redemption centres and cumbersome redemption procedures;

There were reported cases of leakages such as re-sales of subsidized fertilizer by
farmers at the redemption centres resulting in the product finding its way back to
the market;

Challenges faced by input dealers relate to logistics and payments, ignorance of
farmers with respect to the GES operational mechanism and poor access to
finance;

Fertilizer producers complained of the seasonal nature of the GES market. While,
fertilizer companies produce the commodities throughout the year, demand
through GES occurs mostly during the farming season thereby compelling them to
export the surplus;

Also the ostensibly high subsidy element of the GES attracted speculative
importers with sharp practices that included importation of low quality fertilizers
that tended to crowd out the investment incentives for local production.
Policy recommendations

Boost stakeholders’ confidence by stabilizing the input policy environment.
Government should avoid frequent policy reversals that have often characterized
past input policies leading to poor outcomes. In this regard, the private sector is
urged to initiate demand-driven policy changes going forward.

Given the overall success recorded by the implementation of the GES, it was
generally agreed that efforts should be geared towards addressing observable
weaknesses in the GES. This would require the following:
o Reduce the size of the subsidy to between 20-25% consistent with
international practice and in view of the current economic realities. This
will reduce the number of speculative investors in favour of genuine
domestic producers.
o Strengthen the database through sustenance of the NAPI.
o The nexus between financing, insurance and farmer participation and local
producers and distributors should be strengthened relying on the
experiences of banks, FEPSAN, NIRSAL, GES, input producers and
distributors.
o The first two policy recommendations are for the immediate attention of
the federal government. The third recommendation will require further
discussion by a technical team that will focus among others on.

Working out a viable vertical policy coordination between the Federal government
and the states since agriculture is on the concurrent legislative list.

Mechanisms for wider collaboration to facilitate speedy payment of redemption to
suppliers.

Facilitate the completion of the legal framework to protect fertiliser consumers
(weight and quality).

Redirect subsidy to producers so as to encourage genuine private sector investment
and development of the output market through proactive regulation
General points and key themes
Growth Enhancement Support Scheme (GESS)
GESS has had mixed success over time. This is acknowledged by those in government
and in the private sector.

Improved subsidy delivery;
o Evidence abound that show GESS has improved over time. Recognition as
one of the best efforts to distribute subsided inputs. Over time it has
reached more poor farmers with inputs. And has reduced the number of
loopholes in the system. The GESS TAP was specifically outlines as a major
improvement instituted to ensure better service delivery
o It has strengthened private sector role in the distribution of subsidised
inputs as opposed to the past when distribution was in the hands of
government officials. The inclusion of suppliers and distributors as major
players in the scheme was a good effort.

Major challenges are still at play
o Many unintended beneficiaries gained from the scheme, and in many
instances it crowded out genuine businesses, while creating opportunistic
business entities with little interest in developing the inputs market.
o GESS serves as a disincentive to developing the open market. The GES
requires huge volumes to be traded during certain times of the year and
nothing for the rest of the year. GESS inputs then find their way back into
the market through leakages in the system. This acts as a disincentive for
fertiliser producers because they cannot compete in the open market where
inputs at sold at half price.
o The scheme kills local investments and production. The high profit margin
of the GES attracts opportunistic investors to enter the market in search for
quick profits. These investors look outside the country to import cheap,
lower quality fertiliser, ultimately hurting the local producers who have
invested heavily on producing quality fertiliser.
o With the advent of austerity measures, the subsidy mechanism has also led
to closure of some businesses. Currently, there is about 70 billion naira
outstanding payments owed to agro-dealers and fertiliser companies from
the GES. This has adversely affected private sector businesses and
investments likely to hurt the sector in the future.
o Some key players in the scheme got their hands burnt with some anomalies
within the GES because of some poor management and implementation.
Some of the businesses that engaged in GES were not genuine businesses.
Resulting in hefty pay-outs due to non-perfo4rmance or lack of traceability.
Suggestions from participants

Opportunity to develop an exit strategy for GES
o GES could perform better if re-engineered and improved from the lessons
learnt. These learning points however need to be well articulated and
shared with the stakeholders and Federal government. An exit strategy
needs to be developed jointly by key stakeholders and federal government
to lay a path for the complete exit of government from the procurement and
distribution of agricultural inputs (with an appropriate timetable). This
needs to be done in a way that is inclusive and negotiated in the light of
prevailing economic circumstances and the need to reposition agriculture as
a major sector.

Opportunity to develop both supply and demand side of the agricultural inputs
market
o Subsidy could be used in a way that it encourages local production of
agricultural inputs. For instance, subsidy could be used to incentivise
establishment and production of high quality fertiliser production which in
turn drives down costs to the farmer. This is in the light that Nigeria has the
main input to fertiliser production. The current and growing unmet
demand of about 1.2 million metric tonnes of Fertilizer, close to over 0.5
million metric tonnes of seeds is an attractive commercial opportunity for
most private sector partners.
o Another suggestion was for government to incentivise the development of
local distribution channels that enable farmers to access quality fertiliser
closer to them. Producers and suppliers could be encouraged to establish
distribution and warehousing in key rural areas so that farmers have access
to fertiliser on time.
o Government and private sector could work out a programme that ensures
that the supply shortfall (not met by GES) is covered by the private sector
through a well-crafted scheme of support (similar to the scheme used to
grow the cement sector in Nigeria). Currently, Notore & Indorama fertiliser
companies have about 3.5 million metric tonnes capacity of Urea production
in Nigeria. The total blending capacity of different fertiliser blends in
Nigeria is about 3.5 million MT annually.
o Government policy has neglected the output market which is key to driving
a vibrant input market. Farmers do not use inputs if the excess production
does not attract better prices. Policy should focus on some level of
guarantee to farmers for their product. Such policy would pump prime the
markets and hence increase adoption and demand for high quality inputs
with the resultant production increases.

GES could learn from what has worked
o Suggestion was made to borrow or learn from successful innovations,
especially those being implemented by development programmes such as
Propcom Mai-karfi (PM). PM’s success story on mechanization financing &
other accomplished business models focusing on agricultural inputs could
be adapted to suit the needs of Government and private sector in the inputs
market.
o Improve on existing mobile-solutions (Cellulant & Chyp models) to
facilitate business innovations to reach more smallholder market segment
at the rural locations through: provision of appropriate agronomic practices,
effective market distribution network and access to mobile money.
o The GES TAP model had its strong points. It ensured outreach and
eliminated some inefficiencies in the system. The technology could be
strengthened to be used to strengthen private sector distribution channel.
Farmers should be redeeming inputs from commercial channels as a way to
encourage commercial transaction.

Redefining and mainstreaming role of Federal Government vis a vis that of State
governments
o There is inconsistency in the way agriculture inputs policy is defined and
implemented. State governments seem to have their own policies on
agriculture, and seem to implement their own inputs programmes in
parallel to federal government. How can the gap be narrowed for the benefit
of the farmer and market?
o Public sector should focus on the enabling environment and regulatory
aspects of the input market. For instance there are policies and regulations
that increase cost of importing inputs. Processes and operations at ports of
entry are a major hurdle that the government could focus on.
o There are also other policies that do not protect intellectual property of
private sector players. Federal government should be helped to identify
such policies and regulations that benefit the whole sector and has the
farmer at the heart of the policy/regulation. For instance lack of quality
seeds especially Breeder and Foundation seeds, which leads to poor seeds
available in the market, could be reduced if Intellectual property of private
sector was protected through robust legislation/regulation. Government
could also focus on enforcing ethical standards in the sector.
o Currently extension workers ratio to farmers in Nigeria is: 1 extension officer
to 5,000 farmers! Revival of agriculture as a key sector depends on the
quality of extension, and this can be driven by the government policy and
incentives. For instance policy should encourage and incentivise private
sector investments into extension services. Opportunities could also be
explored for PPP models that allow private sector to use government
extension agents to reach farmers with education and training.

Working more closely with private sector to develop new models of delivery
o FEPSAN has so far developed and presented a strategy paper to the
government on various issues and suggestions. There is scope to revisit this
paper and build on it so as to establish ways to work with the Government
to better implement the ideas shared with the government. This can be
sorted out through a multi-stakeholder participation.
o All participants acknowledged the current severe security challenges in the
movement of agricultural inputs (especially fertiliser) within the country.
However the FMARD and the private sector seem to have succeeded in
convincing the NSA (National security adviser) to back down on the stiff
restrictions of agric. inputs distribution. Similar initiatives should be
undertaken through fast tracked consultation and policy amendments in
cases of emergencies that have potential to adversely affect agriculture. An
example was given of the effects of Tuta Absoluta and how urgent policy
intervention would have enabled private sector to import the right
agrochemicals to deal with the problem.
o Nigerian Incentive Based Risk Sharing System for Agricultural Lending
(NIRSAL) has started a process of developing a mechanism to finance
agricultural inputs similar to the one used in financing agricultural
mechanisation. There is a clear opportunity that this model could be designed
jointly as a PPP model which can then be used as a platform for future fertiliser
distribution to smallholder farmers. There is scope for this model to be used to
inform future agricultural input incentive schemes.
Other comments and suggestions

A framework should be established and implemented that protects the consumer
from poor quality inputs. Documentation and branding that allows traceability and
should be put in place so that producers/importers/distributors can be held
accountable for poor quality inputs This framework should also protect
consumers/farmers (e.g. weights and quality).

Redirect subsidy to be SMART (we need to define smart) so as to encourage
increased genuine private sector investment. Reduce the size of subsidy from its
current level to between 20%-25% overall to discourage rent seeking.

Modernise the Agricultural sector and move it away from subsistence to more
commercial
agriculture.
The
future
of
agriculture
should
be
towards
commercialisation, and encouraging investments that drive commercialisation.
Conclusions and recommendations of the round table
There is need to have further wider technical sessions and consultations on some key
policy issues and to agree ways of effectively engaging with government to influence
and craft good policies that will shape the future of Agricultural Inputs market in
Nigeria. The aim should be to have consistency and predictability in policy
formulation and implementation irrespective of changes in the political economy.
Objective 1: Policy priorities
Two policy issues were agreed as providing entry points for such consultation
processes

Reviewing the GES to adapt to the reality of the economy and agriculture
inputs market: The government is currently reviewing the GES policy with a view
to improving design and implementation of the policy.
o The round table also recommended that Federal government could work
with key stakeholders to redefine the size of subsidy so as to reduce its
attractiveness to rent seekers. This could include refocusing it towards
production of inputs or defining an exit strategy for government.
o Utilise experiences and models in the market place to design a better
subsidy programme that encourages and strengthens market forces. This
could be built around models currently being implemented by NIRSAL,
Propcom Mai-karfi, Cellulant and others and aim for PPP framework that
delivers results to farmers.

Strengthening multi stakeholder participation and involvement in policy
formulation for the agricultural inputs sector/market
o Towards this the round table agreed that FEPSAN strategy paper should be
re-visited with a view to reviving conversation with federal government on
the proposals already presented to government. The focus to be on how to
support local production of fertiliser to meet the demand gap in the market
Objective 2: Framework for engagement
The participants agreed that there is value in further consultation to prepare quality
papers that should inform policy engagement with governments – Federal and State
levels.

The deliberations of the round table to be produced and circulated to all
participants for comments and further refinement

The final report to be sent to Eng. O. Jatto - Director Federal Agriculture Inputs
Department, Federal Ministry of Agriculture and Rural Development as a first step
towards seeking engagement

A small working group to be established within June 2016 to identify and elaborate
key issues for engagement. Volunteers to this small group will be constituted
within the month. The staring points were identified as;
o FEPSAN strategy paper with lead from FEPSAN
o Design of a agriculture input financing with lead from NIRSAL
o Proposal for an exit strategy/reduction of size of subsidy

Propcom Mai-karfi will coordinate further consultative processes to take forward
the engagement process between government and other agricultural input
stakeholders.