Subsidies to promote fertiliser use in Ghana have been largely successful

In 2008 Ghana implemented the Fertiliser Subsidy Programme (FSP), aimed at using fertiliser to boost overall crop productivity. While it increased domestic consumption, it also entailed considerable financial outlay. From the GHS395.2m ($109.7m) allocated to the agriculture sector in the 2015 national budget, about GHS347.2m ($96.3m) – or 87.9% – is earmarked for initiatives like the FSP, Agricultural Mechanisation Services and the Youth in Agriculture Block Farm Programme, with the government aiming to subsidise 180,000 tonnes of granular fertiliser at a cost of GHS80.4m ($22.3m).

History

Although fertiliser has been used in Ghana for decades, penetration has been low. According to the Ministry of Food and Agriculture, when the government subsidy programme came into effect in 2008, fertiliser usage was just 8 kg per ha, down from 21.9 kg per ha in 1978, one of the lowest rates in sub-Saharan Africa at the time. When used, it was primarily for cash crops like cocoa, cotton and palm oil.

At a press conference in April 2015, Fiifi Kwetey, the minister of food and agriculture, said that since the introduction of the subsidy average rates of fertiliser use increased from 8 kg per ha in 2008 to 12 kg per ha in 2013. This has improved yields, but at a financial cost. “It is a big drain on the economy, and the government obviously does not plan for it to last forever,” Kofi Debrah, chief of party for the US Agency for International Development (USAID) West Africa Fertiliser Programme, told OBG.

According to Debrah, even with the subsidies, fertiliser use in Ghana remains low. “Only 1.8% of households use a combination of organic and inorganic fertiliser, 12.2% use only organic, 31.2% only inorganic and 54.8% still use none,” he said. “Mass education is very important at the moment.”

The government scaled up the programme from $10.8m in 2008 to $63m in 2012, according to the UN Food and Agriculture Organisation, although overall subsidies were reduced by 21% in 2013. In the 2014 crop season the government elected not to provide fertiliser through a subsidy programme. According to 2015 government policy, Ghana’s farmers can purchase 10 50-kg bags of subsidised compound fertiliser, along with five bags of urea, with the government paying 20% of the costs.

Yield Rises

An academic study in 2015 looking at the effects of the fertiliser subsidy on crop yields in the Sudan Savannah and Guinea Savannah areas found that average output for those who had benefitted from the fertiliser subsidy programme before it began was 16.15 kg per acre for maize, 7 kg per acre for soybean, 40.4 kg per acre for rice and 8 kg per acre for groundnut. Conversely, after subsidies came into effect, output increased to 19.54 kg per acre for maize, 8 kg per acre for soybean, 29 kg per acre for rice and 4.2 kg per acre for groundnut. As a result, the study concluded that scrapping subsidies on fertiliser would be “disastrous” for the sector.

Indeed, although the subsidy programme has benefitted local farmers, cheaper prices have contributed to smuggling into neighbouring countries. In May 2015 speech, Alhaji Amidu Sulemana, the minister of the Upper West Region, said that rampant smuggling of fertiliser across the border was reducing government revenue, and that farmers had trouble obtaining fertiliser.

The Future

Representatives of farming organisations have made appeals to the government to increase the subsidy to as much as 50% of the total cost. Even so, the expense of the programme means that there is a good chance the fertiliser subsidy may be scaled back or even cancelled in the years to come. “I think farmers can now survive without it,” said USAID’s Debrah. “Last year, when there was the non-supply of the subsidy, the same amount of fertiliser was imported and sold in Ghana.”

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The Report: Ghana 2016

Agriculture chapter from The Report: Ghana 2016

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