Innovative solutions: A new e-wallet system seeks to reach farmers in more remote areas

The removal of fuel subsidies in Nigeria made headlines in early 2012, but another halt to an expensive, inefficient state intervention took place in the agricultural sector. Fertiliser subsidies were the target of this reform and were replaced with the Growth Enhancement Support Scheme (GES). A first in Africa, the system helps ensure that farmers can access subsidies directly, using mobile phones as a platform to conduct basic transactions and make payments. As in the fuel markets, fertiliser distributors profited illegally as middlemen. The now-dismantled system featured the state as the sole procurer of fertilisers, which it then re-sold at subsidised prices to distributors on the expectation that they would sell them on to farmers on the same terms. However, higher retail prices by vendors were a common occurrence – which in turn helped to limit the overall usage of fertiliser by farmers. Just 11% of farmers in the 2011 growing season actually used fertilisers.

MAKING WAY: This method was replaced with the GES, in which the import of fertiliser and seeds was no longer the sole purview of the government. Now the market is open to all wishing to participate, and prices are set by supply and demand. The GES allows farmers to get a 50% subsidy on a maximum of two bags of fertiliser. That subsidy is to go from state to farmer directly, cutting out the middlemen. Farmers can pay either via a mobile phone platform called the “e-wallet”, or by vouchers for those who cannot access the mobile phone platform. In order to monitor progress, the Federal Ministry of Agriculture and Rural Development created a database of 4.5m farmers that includes biometric information, and 1.2m farmers signed up for e-wallet accounts to buy fertiliser. As of late 2012, directly comparable statistics were not available to compare with past performance, but anecdotal evidence encouraged the ministry to scale up the programme. The goal now is to reach 20m farmers in the next four years. To reach that goal, the ministry has paired with the Federal Ministry of Communication Technology to distribute 10m mobile phones to farmers.

RAPID CHANGE: The e-wallet system has had a long gestation, with inspiration in part from a pilot project that was rolled out in Taraba state to try and improve fertiliser usage rates amongst farmers. An equally significant motivation came from a push to end what was previous endemic corruption in Nigeria’s fertiliser and seed markets, where an inefficient distribution system reduced the ability of farmers to benefit from available subsidies. The new system has taken an innovative approach, allowing seed and fertiliser companies to sell and market directly to farmers, bypassing the government and the middlemen, which in turn has helped to encourage a significant increase in fertiliser usage.

LASTING EFFECTS: The agricultural sector has been among the economy’s most frustrating underperformers, given its importance for employment and the increasing exposure to heavy import bills and inflation that has come alongside being a major food importer. The cost of bringing in food from foreign markets is about N1.3trn ($8.19bn), according to Akinwunmi Adesina, the Minister of Agriculture and Rural Development, and rising at a rate of about 11% a year, according to ministry calculations. With the e-wallet system, the ministry is eliminating many of the obstacles that currently limit yields and output.