For fifty years, Nigeria’s default answer to agricultural underperformance has been the same: subsidise the fertiliser bag. First-generation schemes in the 1970s and 1980s relied on direct state procurement and distribution. Second-generation programmes — GESS, the e-Wallet platform, the Presidential Fertiliser Initiative — introduced market-smart design improvements. The Anchor Borrowers Programme brought in an offtaker linkage model. Each iteration was a genuine attempt to fix what the previous one had broken. Yet across all of them, the empirical record is consistent: productivity stagnated, food import bills grew, and a disproportionate share of public resources was captured before reaching the smallholder farmers in whose name the programmes were justified.
Nigeria’s cereal yield per hectare in 2022 stood at 1,656 kg — compared to the African average improvement of 36.9% over the same period and a global average improvement of 56.6% (FAOSTAT/AERC, 2021). Rice imports surged to 2.4 million metric tonnes in 2024 — the highest in recent years — despite a decade of subsidy-driven import substitution claims. The fertiliser application rate collapsed from a peak of 22.6 kg/ha during the ABP/GESS subsidy period to just 4.2 kg/ha within three years of programme suspension, against a 50 kg/ha Abuja Declaration target. This is not stagnation. It is a dependency cycle: inflate the metric during disbursement, then let it drop when funding stops.
I want to be clear: I am not arguing that Nigeria should stop supporting its farmers. Every successful agricultural economy on earth supports its farmers, at scale — the United States through crop insurance subsidies and price floor mechanisms, the European Union through decoupled direct payments, India through its Minimum Support Price system. The question is not whether to provide support. The question is whether the support must flow before a seed is planted, against a beneficiary list, through a procurement chain that has been documented as capturable at every node.
A Hypothesis Worth Modelling
In a paper I recently published — What If We Try Agricultural Output Subsidy? — I hypothesise an alternative instrument: a three-layer, performance-linked agricultural finance ecosystem in which government money flows only when verifiable production has occurred.
The architecture works in three reinforcing layers:
Layer 1 — Input Credit Financing. Farmers access seeds, fertiliser, and crop protection through structured commercial credit — originated by microfinance institutions and development finance institutions under a national credit guarantee framework. Government provides partial guarantees that lower borrowing costs, without procuring a single bag of fertiliser. Inputs are purchased commercially, preserving private agro-dealer market development.
Layer 2 — Offtaker Linkage Infrastructure. Farmers are matched to verified offtakers — commodity processors, grain millers, institutional buyers — through a digital commodity matching platform. Offtaker contracts are registered and enforceable, and serve as collateral for Layer 1 credit. Floor price agreements are negotiated per commodity season, giving farmers price certainty before they plant.
Layer 3 — Government Output Top-Up. Upon receipt of a verified delivery receipt from a licensed offtaker, government pays a percentage top-up on the market value of produce delivered. The top-up covers verified production costs plus say a 20% profit margin. Where market prices already exceed the cost-plus-20% threshold, no top-up is paid — the mechanism is counter-cyclical and self-extinguishing. Zero delivery equals zero disbursement.
The structural property that distinguishes this from every input subsidy variant is simple: no government money leaves the treasury until grain arrives at a registered mill. A farmer who receives credit and sells inputs on the open market bears commercial consequence. A political operative who inflates a beneficiary list cannot generate a delivery receipt from an arm’s-length licensed offtaker. The extraction opportunities that have been documented at every node of Nigeria’s fertiliser distribution chain — procurement diversion, ghost farmer registration, timing arbitrage, political patronage targeting — are structurally eliminated, not administratively managed.
What the Modelling Shows
The companion Technical Annex to this paper models the economics of production and Layer 3 top-up calculations for four priority crops — maize, soybeans, cassava, and paddy rice — under Q1 2026 market conditions, including the documented price-suppressive effects of the 2024–2025 import duty waiver on grain markets.
The findings are instructive. Under current market conditions:
- Paddy rice is structurally loss-making for Nigerian smallholders. At the Q1 2026 farmgate price of ₦420/kg — itself reflecting a more than 50% collapse from pre-waiver levels documented by RIFAN — market revenue falls ₦324,000 per hectare below the cost-plus-20% viability threshold. An output top-up of 38.6% would apply at this price, rising to 55.2% at RIFAN’s reported lower bound of ₦375/kg. These are the actual market conditions under which Nigerian rice farmers are currently operating. An output subsidy model, had it been in place during the waiver period, would have provided this protection to every farmer who delivered verified paddy to a registered mill — automatically, digitally, within 48 hours, and without a procurement chain to capture.
- Maize is in active top-up territory across the entire observed Q1 2026 wholesale price range, as NBS-confirmed price declines of 32.85% year-on-year have pushed market revenue below the cost-plus-20% threshold. The mechanism is doing precisely what it is designed to do: respond to import-driven price suppression without requiring a ministerial decision or a distribution campaign.
- Soybeans remain dormant at current prices, with a slim buffer of ₦48,744 per hectare above the threshold — flagging the crop as near-threshold under current conditions, with limited capacity to absorb further price deterioration.
- Cassava is comfortably dormant in the dry season, with activation expected during the August–October harvest glut period when processor gate prices collapse — the crop’s primary price risk.
The annex also includes a counterfactual case study of the Anchor Borrowers Programme: what would the same ₦1.08 trillion have produced if deployed as an output subsidy rather than as input credit? The modelling, using verified independent yield data and the IMF’s own repayment findings, projects 6.58 million metric tonnes of annual rice production against the ABP’s verified independent estimate of 2.17 million metric tonnes — a 7-year cumulative additional output of 30.90 MMT, at a government cost per tonne of ₦56,635 against the ABP’s ₦366,173. The fiscal efficiency differential is 6.5× in favour of the output subsidy model — not because the output subsidy is cheaper in absolute terms, but because every naira it disburses corresponds to a verified tonne of grain delivered to a registered processor.
This Is a Hypothesis, Not a Prescription
I want to be precise about what this paper claims and what it does not.
This is a hypothetical framework with modelled simulations, not a completed field trial. The three-layer model requires institutional prerequisites that do not yet exist at adequate scale in Nigeria: a universal agricultural farmer registry, a network of licensed and audited offtakers with real-time reporting capability, and digital disbursement infrastructure capable of reaching rural smallholders within 48 hours of delivery verification. Building these is an investment — in permanent institutional capacity, not recurring commodity expenditure.
I also recognise that the output subsidy model, as designed, may not be immediately accessible to all Nigerian smallholders. Farmers who are too remote, too smallholding, or operating in too insecure an environment to reach a licensed offtaker or access commercial credit will need transitional support. A time-limited, geographically specific input transfer — designed with explicit graduation criteria toward the output subsidy architecture — remains warranted for this population. Acknowledging this does not weaken the case for the model; it demonstrates that the case for reform does not require pretending that every Nigerian farmer can immediately operate in a commercially integrated value chain.
What I am arguing is narrower and I believe more defensible than a wholesale rejection of agricultural subsidy: that within the category of direct producer support, the input subsidy mechanism is structurally inferior to output-linked alternatives, and that the evidence base — from the ABP’s repayment crisis to four decades of stagnant cereal yields — is now sufficient to justify a serious, independently evaluated pilot.
The immediate policy ask in the paper is a three-state, two-crop, two-season pilot, using a quasi-experimental design with three arms: current input subsidy recipients as control, individual output subsidy treatment, and a cooperative-channelled variant. Eight primary outcomes measured — yield per hectare, volume delivered to registered offtakers, fiscal cost per kilogram of produce generated, leakage rate, farmer net income, credit repayment rate, gender-disaggregated access, and new commercial input purchases triggered.
Nigeria has spent fifty years and hundreds of billions of naira finding out what does not work. The question is not whether we can afford to test what might. The question is whether we can continue to afford not to.
The full paper — What If We Try Agricultural Output Subsidy? Hypothesising a Performance-Linked Agricultural Finance Ecosystem for Nigerian Smallholders — is available on request. A companion Technical Annex provides detailed Economics of Production calculations for maize, soybeans, cassava, and paddy rice, Layer 3 top-up rate modelling under Q1 2026 market conditions, and a full counterfactual case study of the Anchor Borrowers Programme.
I welcome engagement from researchers, policymakers, and practitioners working on agricultural finance reform in Nigeria and across sub-Saharan Africa.
