Fertilizer Subsidy and Rice Productivity in Ghana: A Microeconomic Study

Abstract

Across Africa, agricultural productivity continues to decline due to poor soil fertility. Smallholder farmers have less access to fertilizers to improve yields. Past and present governments in Ghana have made some efforts to raise productivity and to deepen the economic and social potentials of the agricultural sector by implementing fertilizer subsidy programs. Using data from 543 smallholder rice farmers in northern Ghana, we estimated both endogenous switching regression and treatment effect models to examine the factors that influenced participation in fertilizer subsidy programs, and rice productivity differences among beneficiary and non-beneficiary farmers. This was to address heterogeneity and biases stemming from unobservable characteristics at farm and farmer levels. Farmers’ participation in fertilizer subsidy programs was influenced by age, sex, education, farm size, membership of Farmer-Based Organization (FBO), access to media, knowledge of integrated soil and water conservation (SWC) practices, farm to market distance and herbicides application. Productivity of rice was mainly influenced by age, knowledge of integrated SWC, seed and herbicides usage. The outcomes from the treatment effect model revealed a negatively and significant effect of fertilizer subsidy on rice productivity. It is recommended that ways to improve the effectiveness of the fertilizer subsidy policy and distributional mechanisms to farmers should be given much attention to unlock the agricultural potential of Ghana.