Groundnut Sector Liberalization in Senegal: A Multi-household CGE Analysis

In Senegal, the poverty reduction strategy is taking place in a context where international trade liberalization impacts the agricultural sector as a whole, and the groundnut sector in particular. Against this backdrop, we have developed a micro-simulated multiple-household computable general equilibrium model similar to the one proposed by Decaluwe et al. (1999b, How to Measure Poverty and Inequfality in General Equilibrium Framework, CREFA Working Paper No. 9920, Universite Laval, Quebec). Five simulations have been carried out in order to assess their impact on several levels—namely the macroeconomic, sector-based and household levels. The first two simulations concern tariff reforms, whereas the last three examine the external shocks resulting from a change in export prices on the world market (namely, for groundnuts and groundnut oil). The point of these simulations is to assess how the liberalization of the groundnut industry and the privatization of the Societe Nationale de Commercialisation des Oleagineux du Senegal—two major elements in the Framework Agreement—may impact households, and thus to see in what ways these economic reforms relate to poverty and income distribution. The results show that reducing the special tax on edible oils is positive in terms of poverty effects and the reduction of world prices of groundnut has relatively strong negative effects on poor households if farmers are not protected via a fixed price.