Lessons from Fertilizer Subsidy Programs
For decades, fertilizer subsidies have been a central tool of agricultural policy across Africa. Governments have used them to reduce the cost of inputs, increase fertilizer use and help farmers raise production. But as agricultural systems face growing fiscal, productivity and market pressures, a critical question is emerging: Are fertilizer subsidies delivering the agricultural transformation they were designed to achieve?
This was the central question at the AFIDA–ANAPRI Policy Dialogue, “Crowding In or Crowding Out? Lessons from Fertilizer Subsidy Programs,” which brought together researchers, policymakers, farmers, development partners and private-sector representatives to examine evidence from Uganda, Senegal and Malawi. The discussion made one point clear: the debate is no longer simply about whether governments should subsidize fertilizer, but about how agricultural support can generate lasting productivity gains while strengthening, rather than displacing, agricultural markets.
Beyond Fertilizer: What Really Drives Productivity
Across the country experiences presented, subsidies have generally improved access to fertilizer. But increased fertilizer use has not always translated into comparable increases in yields or agricultural productivity.
Uganda provides a clear illustration. Fertilizer use increased across successive government support programs, but cereal yields and agricultural GDP did not show a similarly consistent improvement. The evidence suggests that simply increasing the quantity of fertilizer available to farmers is not enough to generate sustained productivity growth.
Malawi’s experience raises a similar concern. Despite decades of subsidy programs and expanded access to fertilizer, national maize yields have remained relatively low and volatile. The presentation highlighted the role of rainfall, declining soil organic matter, limited extension support and continuous monocropping in limiting the response to increased fertilizer use. In other words, fertilizer cannot solve a soil fertility or productivity problem on its own.
Senegal, however, offered a different dimension. Evidence presented during the dialogue indicated increases in production across cereals as well as non-cereal crops such as peanuts and vegetables. This suggests that outcomes can differ considerably depending on program design, targeting, local market conditions and the broader agricultural system in which fertilizer is used.
The cost of getting subsidies wrong
The challenge extends beyond productivity. Poorly designed programs can also create significant fiscal and market distortions.
Malawi’s experience showed how subsidy programs can absorb substantial public resources while leaving less funding available for agricultural research, extension, infrastructure and other investments that make fertilizer more productive. The program was described as performing reasonably well in terms of delivery and coverage, but much less strongly on targeting, productivity, fiscal sustainability and private-sector development.
Targeting was another recurring concern. Programs intended to support poorer, commercially active smallholders can struggle to reach those farmers effectively when beneficiary selection relies heavily on local discretion or weak systems. Digital registration, transparent eligibility criteria and better beneficiary identification were therefore highlighted as important reforms.
The discussion also exposed the risk of crowding out the private sector. When governments dominate procurement and distribution, private retailers and distributors may have fewer incentives to invest in rural networks, new products and long-term market development.
From government distribution to market development
One of the strongest messages from the dialogue was the need to rethink the relationship between government and the private sector.
Uganda’s experience showed a transition from programs dominated by government or military-led distribution towards models in which farmers, government and private actors share roles. The later use of e-vouchers and private agro-dealers demonstrated how public support can be used to stimulate, rather than replace, commercial input markets.
The private-sector perspective reinforced the need to involve industry in subsidy design from the outset. The case argued is that private-sector participation from the onset can bring market intelligence to program design and help prevent restrictions on product choice, innovation and pricing that can distort input markets. A notable mention was Brazil as an example of what can happen when governments focus on making fertilizer use more profitable rather than simply making fertilizer cheaper: despite having no fertilizer subsidy, Brazil consumes about 363 kilograms of fertilizer per hectare, compared with roughly 21.5 kilograms in Africa, supported by investments in soil science, farmer finance, infrastructure and reliable output markets. For Africa, she suggested that more open, competitive and market-driven approaches, including digital e-voucher systems, could help ensure that public support strengthens private-sector investment rather than crowds it out.
Zambia’s experience also points towards this direction. Its e-voucher approach allows farmers to select from a broader range of inputs through registered private agro-dealers, while the expansion of the program has generated wider effects in the agro-dealer market, including increased hiring.
The next generation of subsidies must be smarter
The dialogue did not conclude that subsidies have no place in African agriculture. Rather, it pointed towards a different model: subsidies should be designed as a bridge to productive, commercially viable farming, not as a permanent system of input distribution.
Several principles emerged from the discussion.
First, programs need better and more transparent targeting, using objective criteria and digital systems where appropriate. Second, subsidy demand should be channeled through private retailers wherever feasible so that public resources help build functioning markets. Third, fertilizer support should be combined with extension, improved seed, soil-health management and other complementary inputs. Fourth, governments need clear fiscal limits. Finally, programs should have a credible graduation and exit pathway from the beginning.
This means changing what governments invest in over time. Rather than continually paying for fertilizer, public resources could increasingly support irrigation, roads, storage, extension, research, market infrastructure and financing systems that make fertilizer use more profitable and sustainable for farmers.
Measuring what really matters
Ultimately, the success of a fertilizer subsidy should not be measured simply by tons of fertilizer distributed or the number of farmers enrolled.
The more important questions are:
- Are yields increasing?
- Are farmers adopting complementary inputs and better agronomic practices?
- Are markets becoming stronger?
- Are farmers becoming more commercially viable?
- And can governments sustain the program without sacrificing other essential agricultural investments?
The dialogue’s participant poll reflected this broader understanding. Respondents identified farmer access, agricultural productivity, stronger input markets and rural livelihoods as important objectives, while higher crop productivity emerged as a particularly important measure of success. There was also strong support for a model in which government creates an enabling environment while the private sector leads agricultural input delivery.
The message from AFIDA and ANAPRI’s dialogue is therefore not “subsidies or no subsidies.” It is about moving from subsidy as an end in itself to subsidy as one instrument within a broader agricultural transformation strategy.
For Africa to raise productivity sustainably, farmers need more than cheaper fertilizer. They need healthy soils, appropriate inputs, reliable markets, finance, infrastructure, knowledge and the confidence to invest. The future of fertilizer support will depend on whether governments can use limited public resources to build that ecosystem, and ultimately enable farmers and markets to sustain productivity beyond the subsidy itself.
