Agricultural Subsidies

An agricultural subsidy is a form of financial assistance provided to farmers by the government to support and promote agricultural activities. It is an important tool used by governments worldwide to help farmers deal with challenges such as market fluctuations, droughts, natural disasters, and pests. In this blog post, we will discuss the types and sources of agricultural subsidies, as well as the problems and solutions to agricultural subsidies in Nigeria.

Types of Agricultural Subsidies:

There are several types of agricultural subsidies, and they vary depending on the objectives of the government. Some of the most common types of agricultural subsidies include:

  1. Production Subsidies: These are subsidies given to farmers to increase their production and reduce the cost of production. Examples of production subsidies include subsidies for inputs such as fertilizers, seeds, and pesticides.
  2. Income Support Subsidies: These are subsidies given to farmers to supplement their income when prices are low or when there is a drop in production due to natural disasters. Examples of income support subsidies include direct payments, market price supports, and crop insurance.
  3. Export Subsidies: These are subsidies given to farmers to help them export their produce at competitive prices. Examples of export subsidies include export credit guarantees, export subsidies, and export subsidies.

Sources of Agricultural Subsidies:

Agricultural subsidies can come from various sources, including government budgets, international organizations, and private sector investments. Some of the most common sources of agricultural subsidies include:

  1. Government Budgets: Governments provide subsidies to farmers through their national budgets. These subsidies are often in the form of direct payments or tax breaks.
  2. International Organizations: International organizations such as the World Bank, International Monetary Fund (IMF), and the United Nations Food and Agriculture Organization (FAO) provide financial assistance to farmers through grants and loans.
  3. Private Sector Investments: Private sector investments in agriculture can also lead to subsidies. Companies that invest in agriculture may offer incentives such as reduced prices on inputs or access to credit.

Problems of Agricultural Subsidy in Nigeria:

Despite the benefits of agricultural subsidies, Nigeria has faced several challenges in implementing effective subsidy programs. Some of the major problems of agricultural subsidies in Nigeria include:

  1. Corruption: Corruption has been a major obstacle to the effectiveness of agricultural subsidies in Nigeria. Often, government officials divert funds meant for agricultural subsidies to their personal accounts.
  2. Inefficiency: The implementation of agricultural subsidies in Nigeria has been inefficient, leading to a waste of resources and ineffective results.
  3. Lack of Access: Small-scale farmers have limited access to agricultural subsidies due to bureaucratic processes and lack of information.

Solutions to Agricultural Subsidy in Nigeria:

To address the problems of agricultural subsidies in Nigeria, several solutions can be implemented. Some of these solutions include:

  1. Transparency: The government should ensure transparency in the allocation and distribution of agricultural subsidies.
  2. Efficient Implementation: Agricultural subsidies should be implemented in a way that is efficient and effective.
  3. Access to Information: Small-scale farmers should be given access to information about agricultural subsidies and how to access them.
  4. Diversification: The government should consider diversifying the agricultural sector by supporting other value chains beyond traditional ones like rice, maize, and beans. This can help to reduce pressure on traditional crops and increase the income of farmers.


Agricultural subsidies can be a valuable tool in promoting agricultural development in Nigeria. However, the effectiveness of these subsidies depends on their implementation. The government needs to address the challenges of corruption, inefficiency, and lack of access to ensure that agricultural subsidies reach the intended beneficiaries. With transparent and efficient implementation, agricultural subsidies can contribute significantly to the growth and development of Nigeria\’s agricultural sector.

Agricultural subsidies are financial incentives or support given by governments to farmers or agricultural producers to help them deal with various challenges that they may face, such as market fluctuations, natural disasters, and other economic factors. Agricultural subsidies can take many forms, including direct payments, crop insurance, price support, tax credits, and low-interest loans.

There are several reasons why governments provide an agricultural subsidy. One of the main reasons is to support domestic food production and ensure food security. By providing subsidies, governments can help farmers produce more food at a lower cost, which can make food more affordable for consumers. Agricultural subsidies can also be used to promote rural development, reduce poverty, and create jobs in rural areas.

However, agricultural subsidies have been the subject of much debate, with some arguing that they create market distortions and lead to overproduction, while others argue that they are necessary to support farmers and maintain food security.

One of the main criticisms of agricultural subsidies is that they can lead to overproduction, which can drive down prices and hurt farmers in other countries who cannot compete. For example, if a country provides subsidies to its farmers to produce more wheat, it can flood the market with cheap wheat, making it difficult for farmers in other countries to sell their wheat at a competitive price.

Another criticism of agricultural subsidies is that they can be expensive and can create dependency on government support. In some cases, subsidies can be misused or diverted to unintended beneficiaries, such as large agribusinesses or wealthy landowners.

Despite these criticisms, many countries continue to provide agricultural subsidies. In the United States, for example, the government provides billions of dollars in subsidies each year to farmers to support crop production, conservation efforts, and rural development.

In conclusion, an agricultural subsidy can be an effective way to support farmers and promote food security, but they also have the potential to create market distortions and increase dependency on government support. To be effective, agricultural subsidies need to be targeted, transparent, and properly regulated to ensure that they are benefiting the intended beneficiaries and not creating unintended consequences.

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    2. It adds nutrients to the soil for increased ciop yield,
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    4. It helps to maintain equal amounts of acid and ha-. the soil.
    5. It helps to conserve soil moisture and prevents erosion
    6. It has a modifying effect on soil temperature


  1. It involves much labour in preparation.
  2. It is time involving and not economic for use in large farms.
  3. It could cause scorching if applied when not fully matured
  4. It may introduce disease-causing agents. This will happen if not may properly handled or allowed to mature befonb use.

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Credit is a repayable loan It is a non-repayable loan
Credit is always in cash land It may be in cash or in
It includes bank loans, schemes and cooperatives It includes a reduction in prices of input credit like chemicals, seeds and fertilizers
It has a time period for its return It is given and never to be returned
The government does not bear part of the burden of a loan Government bears part of the burden of a subsidy

  1. h

Agricultural credits are loans


(1) Commercial Banks
(i) They are usually biased in favour of large-scale farmers only.
(ii) They demand collateral which farmers cannot provide.
(iii) There is the problem of relatively high-interest rates.

Agricultural credits are loans
(2) Community Banks
(i) The amount of credit is usually small and inadequate to meet the needs of farmers
(ii) They insist on a would-be lender coming to open an account with them before loans are given.

(3) Money Lenders
(i) They are usually biased towards enterprises that bring in quick return to repay the loan.
(ii) Their interest rates are too high to allow for an appreciable input from the farm business.

(4) Family Sources
(i) The use of loan is usually small and inadequate

(ii) They usually insist on short-term credit.


The procurement of loans or credits for farming activities is associated with some implications. In other words, farmers find it difficult to get loans from banks because of the following reasons: Agricultural credits are loans


Interest rates:

interest rate is the rate at which farmers can borrow money from banks, i.e the amount of interest a farmer will have to pay on the money borrowed. High-interest rate discourages borrowing while low-interest rate encourages borrowing. Therefore, a farmer cannot borrow when the interest rate is too high. Agricultural credits are loans

Collateral security:

This is what the banks and other financial institutions will want a borrower to present before a loan can be given. Such securities are landed property and buildings. Most farmers do not have these securities and therefore, cannot borrow money. Agricultural credits are loans

The long gestation period of some crops:

Some crops like rubber, cocoa and oil palm take a very long time to mature. Banks, therefore, find it very difficult to grant loan to farmers engaged in the cultivation of such crops. Agricultural credits are loans

An unpredictable climate which can lead to crop failure:

agricultural activities in Nigeria depend naturally on rainfall. Good rainfall encourages productivity but a lack of rainfall is doom to farming activities. Banks, therefore, are always afraid to lend money to farmers because an unfavourable climate can lead to crop failure. Agricultural credits are loans


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