Review: Taking stock of Africa’s second-generation agricultural input subsidy programs

Abstract

Input subsidy programs (ISPs) remain one of the most contentiously debated development issues in sub-Saharan Africa (SSA). After ISPs were phased out during the 1980s and 1990s, the landscape has changed profoundly since the early 2000s. By 2010, at least 10 African governments initiated a new wave of subsidy programs that were designed to overcome past performance challenges. This study provides the most comprehensive review of recent evidence to date regarding the performance of these second generation ISPs, synthesizing nearly 80 ISP-related studies from seven countries (Ghana, Nigeria, Kenya, Tanzania, Malawi, Zambia, and Ethiopia). We specifically evaluate ISP impacts on total fertilizer use, food production, commercial input distribution systems, food prices, wages, and poverty. We also consider measures that could enable ISPs to more cost-effectively achieve their objectives. We find that ISPs can quickly raise national food production, and that receiving subsidized inputs raises beneficiary households’ grain yields and production levels at least in the short-term. However, the overall production and welfare effects of subsidy programs tend to be smaller than expected. Two characteristics of program implementation consistently mitigate the intended effects of ISPs: (1) subsidy programs partially crowd out commercial fertilizer demand due to difficulties associated with targeting and sale of inputs by program implementers, and (2) lower than expected crop yield response to fertilizer on smallholder-managed fields. If these challenges could be addressed, ISPs could more effectively mitigate the concurrent challenges of rapid population growth and climate change in SSA.