Cost components in the Fertilizer Value Chain and Implications for Accessibility by Farmers in Ghana
Date
2020-10
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Abstract
In this policy brief, we delve into the intricacies of the fertilizer value chain in Ghana, particularly its cost components, and their implications for farmers' accessibility. The analysis focuses on the transformative impact of the Planting for Food and Jobs Program (PFJ) and the Fertilizer Subsidy Program (FSP), both initiatives by Ghana's Ministry of Food and Agriculture (MoFA). These programs have substantially increased fertilizer consumption by offering subsidies on fertilizer prices. However, our study reveals a critical issue – non-competitive margins within the value chain that may obstruct accessibility, especially for farmers in remote areas.
The research demonstrates how PFJ's fertilizer quota system has reshaped the landscape by boosting the number of fertilizer importers and turning certain distributors in Tamale into importers, thereby establishing Tamale as a major fertilizer distribution hub. Nevertheless, the FSP's approach appears to create disparities in profit margins, with importers benefiting while distributors and retailers grapple with negative margins, potentially leading to financial challenges. Additionally, the study uncovers weak fertilizer price transmission across various regions, indicating market inefficiencies that hinder farmers' access to affordable fertilizers.
To tackle these economic challenges, we propose several solutions. Firstly, we recommend an inclusive subsidy negotiation process involving multiple stakeholders to ensure equitable cost distribution throughout the last mile of fertilizer delivery. Secondly, a comprehensive cost-benefit analysis of the FSP could identify alternative investments with higher returns and broader social impacts, helping policymakers make informed decisions. Thirdly, implementing an in-country fertilizer subsidy credit scheme, aligned with the Abuja Declaration, could grant value chain actors access to low-interest loans, stimulating economies of scale and encouraging private sector participation. Finally, there's a need to explore the feasibility of retailers and distributors providing microcredit in the form of inputs to farmers, potentially alleviating the farm input challenge and enhancing commodity market access. By addressing these challenges and adopting these recommendations, Ghana can optimize its fertilizer distribution system, enhance farmer accessibility, and improve the overall effectiveness of its agricultural subsidy programs.
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Keywords
Fertilizers, Value chains