Browsing by Person "Wiredu, Alexander Nimo"

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Impacts of fertilizer subsidy on farm-level productivity and food security : a case study of rice-producing households in Northtern Ghana
(2015) Wiredu, Alexander Nimo; Zeller, Manfred
Subsidies are policy tools that support specific sectors of an economy with the intention of revamping performance or protecting a sector. They are often criticized as ineffective policy tools since they can lead to dependency or even crowd out the private sector. Depending on the implementation strategy and the situation, policies can be beneficial, destructive, or have no apparent impact. Despite the debate about their appropriateness as policy tools, input subsidies have been re-introduced in sub-Saharan Africa with the initial intention of mitigating the effect of global food price hikes, which peaked in 2008. The new generation of subsidy programs are expected to improve access and use of fertilizers, increase agricultural production and productivity, and ultimately improve the well-being of arable crop farmers. So far, evidence only available for countries in eastern Africa, suggests that the programs have largely succeeded in increasing productivity, production, incomes, and food security. Between 2008 and 2013, the Government of Ghana spent over United States Dollar (USD) 215 million on 724,005 metric tons (MT) of subsidized fertilizers. Justification of these expenditures is therefore necessary. This research is motivated by the quest to provide evidence on the impacts the new subsidy programs in Western Africa. The research identifies and assesses the impacts of the Fertilizer Subsidy Program of Ghana on farm-level performance and food security of rice-producing households in the northern part of the country. Rice-producing households are the focus since rice is a commodity of strategic economic importance in Ghana, as well as in Africa as a whole. This is because domestic demand for rice in Ghana is far higher than domestic supply, causing a gap which is filled by imports. The cost of importing rice is paid for with scarce foreign currency. This situation may threaten national food security. The fertilizer subsidy is an imperative component of the national rice development strategy as it seeks to improve access to fertilizers with the aim to enhance productivity and production. Northern Ghana contributes about 30% of the nation’s rice production and has the potential to increase this share. Meanwhile, agriculture in northern Ghana is rain-fed and farmers struggle with declining soil fertility, which negatively impacts productivity and food security. Increasing fertilizer use through the subsidy could greatly improve the livelihoods of rice-producing households in northern Ghana. This research begins with an exploratory study on determinants of fertilizer adoption among 330 smallholder farmers. This exploratory study is, however, less robust since the sampled households were likely to be beneficiaries of a soil health project from the Alliance for a Green Revolution in Africa (AGRA) and, selectivity bias associated with participation in the subsidy program was not accounted for. The study however shows that fertilizer adoption decisions are in two stages. It recommends the need for regular training of members of farmer based organizations as a way of improving farm-level performance through the adoption of fertilizer. This recommendation is more general as it does not analyze any specific agricultural production system. The study provides useful insights on the design of activities and on analytic procedures which address the core questions of this research. Chapter 3 contains a more in-depth study of fertilizer use in rice-growing households. It examines the role of the fertilizer subsidy program in fertilizer adoption decisions based on data from a cross-section of 820 systematically selected rice-producing households. The analyses show that these rice-producing households use different combinations of fertilizers. Overall, nearly 67% use at least one type of fertilizer and 44% use a combination of nitrogen-phosphorus-potassium (NPK) and ammonium (NH4) fertilizers. Using Cragg’s two-step regression models, the fertilizer subsidy program is shown to increase the probability and intensity of fertilizer adoption. The study shows that effective adoption of the recommended combination of NPK and NH4 fertilizers can be achieved by linking farmers to training programs on good agricultural practices. Moreover, enhancing access to information and complementary technologies can improve adoption of the recommended fertilizer combination. Chapter 4 assesses the impact of the program on farm-level productivity and computes partial factor productivity of land and labor using the same database as the previous chapter. The average land productivity of rice, 1,309 kg/ha, is still below the national and global average of 2,539 kg/ha and 4,548 kg/ha, respectively. Correcting for endogeneity of participation in the fertilizer subsidy program, the estimated local average treatment effect (LATE) impact parameters show that the fertilizer subsidy increases land productivity modestly and decreases labor productivity. Increased access to fertilizers requires the use of additional labor for fertilizer application. The negative impact of the subsidy program on productivity may be because yield increases are not enough to compensate for the extra labor employed. Including the provision of labor saving technologies and intensive training in productivity enhancing techniques as part of fertilizer subsidy programs may help unleash the full benefits of the program. Chapter 5 examines the impact of the program on food security. More specifically, a sample of 740 rice-producing households is used to compute the amount of calories, proteins, and fats consumed in the abundant, normal, and lean periods of the year. The results show that at any point in time, some households are food insecure. The incidence of food insecurity is highest during lean periods and lowest during periods of abundance, implying instability in household food security throughout the year. Most households have adequate access to calories and proteins, although the majority does not have access to an adequate amount of fats. Improving the crop mix to include crops that can provide adequate access to these nutrients is recommended to improve food security. This part of the research also used the LATE procedure to estimate the impact of the subsidy program on food security. The results show a positive impact of the subsidy program on the nutritional value consumed food and the effect is highest during the lean period. In conclusion, this thesis shows that the fertilizer subsidy program is effective at increasing the adoption of fertilizers. The program increases the land productivity of rice, but decreases labor productivity. The subsidy leads to significant improvements in the food security of rice-producing households. Linking fertilizer subsidy programs to productivity enhancing interventions and the availability of complementary technologies is necessary to maximize its impact. Technology adoption studies should endeavor to consider technologies as a package, instead of individual components. Going forward, it is recommended that the Government should compare the cost effectiveness of the subsidy program to alternative policy options, such as rice importation, to guide the allocation of scarce financial resources. The focus of this study on lowland rice-ecologies in northern Ghana limits the ability to extend the recommendations to other rice ecologies and to the country as a whole. Nevertheless, the recommendations may be useful for neighboring countries which have similar ecologies, such as Ivory Coast, Burkina Faso, Togo, Benin, and Nigeria.