Abstract

Jonas N. Chianu*, Akin Adesina, Pascal Sanginga, Andre Bationo, Justina Chianu and Nteranya Sanginga

In June 2006, African Heads of State declared support for increase in quantity of fertilizers used by farmers from about 8 to about 50 kg ha-1 . Following realization of the structural weaknesses in African fertilizer industry, regional joint procurement capable of reducing fertilizer farm gate price and increase demand has been noted as a potential route to attain this goal. Structural changes in fertilizer procurement in Africa can reduce farm gate price by 11 - 18%. This study compares the effect of fertilizer market structural changes on demand and farm income for 11 countries with base situation under three price elasticity of demand scenarios (-0.38, -1.43, and -2.24). Data analysis combined simulation techniques with regional farm enterprise analysis based on ex-ante information to assess the impact on farm income of alternative fertilizer pricing policies. Result showed that structural change in fertilizer procurement (reducing price by 15%) led to 6% additional income (US$125 million) under low elasticity (-0.38), 22% (US$472 million) under medium elasticity (-1.43), and 34% (US$730 million) under high elasticity ( -2.24) compared with base. Switching from one scenario to another indicated the potential for 20 – 32% further increase in farm income. The paper concluded with a recommendation for increased support for structural interventions that reduce farm gate price of inputs because they increase production, productivity, and total income, leading to improved livelihoods.