ABSTRACT

The study examined the effect of subsidy on fertilizer demand and agricultural production. The withdrawal of subsidies on fertilizer by the Federal Government of Nigeria in 1997 has impacted significantly on the availability of the product to especially the small-holder arable crop farmers. The result from the multiple and stepwise regression analysis shows that price of fertilizers, area of arable farmland, availability of credit, and transportation cost are factors significantly affecting the demand for fertilizer. Subsidy was found to be a significant determinant of both demand for fertilizer and agricultural output. Also, Naira Exchange Rate to the US Dollar and budgetary cost on fertilizer were variables that significantly influenced crop output positively. Overall, expenditure on fertilizer had been on the increase during the survey period. It further shows that the difference between the official and 'Black market' selling prices ranged from N1,000.00 to N1,320.00 per bag during the period of subsidy withdrawal. Demand for fertilizer outstripped supply partly on account of inefficiencies in the distribution arrangements. This precipitated into an increase in the retail price of fertilizer which led to fertilizer use of below the agronomic recommendation of about 6 to 8 (50kg bags) of fertilizer for good yield on 4 to 6 hectares of land. 'some of the challenges faced by farmers in obtaining fertilizers include high prices (50.5%), in availability (62.5%), high transportation costs (15%), bureaucratic bottlenecks (39.5%), inavailability and bureaucracy (9.5%), high price, inavailability and bureaucracy (7.5%) and others (15.5%). The study also reveals that although the farmers were generally experienced, they earned less than N3,000 per month which prevailed in the private sector, and this may  constrain them to demand for the agronomic input. This was further worsened by the to which have continued to characterize agricultural policies in Nigeria