Distortions to Agricultural Incentives in Nigeria

Agricultural policy makers need detailed information on the effectiveness of past policies, in order to increase the efficiency of government interventions to foster agricultural development and poverty reduction. The indicators of policy distortions reported in this study aim to contribute to a better understanding of the direction and magnitude to which policy instruments have affected incentives that agricultural producers and food consumers in Nigeria have faced over the past 50 years. In particular, the distortion indicators attempt to measure the divergence between the price actually paid to the agricultural producer and the price that the farmer would have received in a distortion-free policy environment. The findings indicate that Nigeria’s policies towards agricultural producers have shifted significantly over time, with agricultural producer support first declining after the country’s independence, then increasing again between the mid-1970s and the mid-1980s, and afterwards moving towards an incentive-neutral stance. The sectoral averages hide large support differences across commodities though. Export commodities have consistently been explicitly or implicitly taxed, while import-competing commodities have benefitted from producer support through tariff and non-tariff barriers and, to a lesser extent, budgetary payments. In this context, recent policy reforms towards greater regional and global trade integration promise to remove the remaining anti-trade bias and provide producers with a more market-friendly policy environment.