Incentives for Fertilizer Use in Sub-Saharan Africa: A Review of Empirical Evidence on Fertilizer Response and Profitability

Why is fertilizer notyet fulfilling its potential as a major stimulus to agricultural productivity in SSA? What can bedone to improve the situation?Much of the debate about fertilizer use in SSA focuses on two issues: whether theprofit incentive is adequate and, if so, whether farmers have the capacity to access and use it.<B>Policy implications:</B> It is necessary to break the high-price, low-demand cycle by stimulating a strong increase in fertilizer demand at the same time that programs are implemented to improve market efficiency. The focus needs to be on the narrow issue of getting fertilizer prices down and increasing demand in a cost-effective, sustainable manner. A combination of public and private actions is needed; the objective should not be getting government out of agriculture but identifying its proper role given the situation prevailing in each country. For most countries, the following five steps will be prerequisites for developing a viable program to simultaneously stimulate fertilizer demand and supply. Prepare an inventory of what is known about fertilizer response and profitability by zone and crop (Kenya and Malawi provide good examples).Using the inventory, identify the crops, zones, and types of households with the greatest potential for rapid increases in fertilizer demand, taking into account demand projections for domestic and export crops. Fertilizer consumption increases most rapidly on crops with strong demand and stable prices, but such crops can stimulate fertilizer use on other crops (e.g., cotton/maize complementarities).Examine potential economies of size and scale capable of reducing fertilizer prices, including economies that could be realized by regional pooling of fertilizer procurement activities. Using information from step 2, identify a combination of market, research, and extension activities to stimulate demand for selected target groups, aiming for the level of demand required to realize the economies identified in step 3. Determine which of the initiatives identified have the strongest economic justification for a particular country and period of development. The key to developing successful programs that improve input market efficiency while increasing fertilizer use is careful analysis of the costs and benefits of the many options discussed above, including the possibility that some type of subsidy might be an efficient way of priming the pump to get more efficient private sector involvement in the fertilizer sector. This will require careful identification and valuation of both private and social costs and benefits. A major shortcoming in the past has been the lack of attention to social costs and benefits. As concerns for the environment increase, more attention to fertilizer’s environmental benefits (e.g., less production moving into marginal lands) and potential inconveniences once high levels of use are attained (e.g., soil acidification, water pollution) will be needed. [author]