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African Journal of Agricultural Marketing ISSN: 2375-1061 Vol. 2 (7), pp. 149-153, July, 2014. Available online at 
www.internationalscholarsjournals.org © International Scholars Journals 

 

Author(s) retain the copyright of this article. 
 
 
 

Review 
 

Responsibilities of Agricultural market improvement in 
enhancing farmers’ income in Nigeria 

 

Elumelu Ovigwe Daniel 
 

Department of Agricultural Economics, Faculty of Agriculture, Niger Delta University, Amassama, Nigeria. 
Email: ovigsdan1@ndu.edu.ng 

 

Accepted 12 May, 2014 
 

Agricultural market reforms are imperative, given the yearly experiences of small scale farmers in marketing 

their produce. The outcome of farmers’ efforts has not translated into commensurate income overtime. 

However, reformative efforts at improving value chain, productivity and market access have culminated into 

a wide range of technological solutions in the recent times. Efforts should therefore be concentrated on 

reforms aimed at not only adding value to agricultural products but to the development of market 

infrastructure and adoption of information and communication technology (ICT) information solutions. 

These are keys to resolving the chain problems and ensuring enhanced welfare of farmers.The paper 

recommends that promoting smallholder production of export crops should have beneficial impacts on 

agricultural production in general and on the food security and income of smallholder farmers in particular. 
 

Key words: Agricultural marketing systems, market reforms, farmers and Nigeria. 

 
INTRODUCTION 
 
During the past two decades, Nigeria undertook extensive 
economic reforms to reduce the role of government and 
increase the role of the market in their economies. 
Because of the importance of agricultural sector in the 
country, agricultural market reforms occupied a central 
place in these liberalization efforts. Agriculture is the 
mainstay of African economies. In Sub-Saharan Africa, it 
represents between 27 and 42% of gross domestic 
product, employs between 65 and 80% of the labor force, 
and in more than half of the countries accounts for as 
much as 60% of export revenue (Abdulai and Delgado, 
1995).  

Agricultural reforms included the removal of price 

controls, deregulation of agricultural marketing, closure of 

state-owned enterprises that monopolized agricultural 

trade, and   changes   in   the foreign exchange market to 

 
 
 
 
provide greater incentives for exports. The expectation 
was that improving price incentives for farmers and 
reducing government intervention in the agricultural 
sector would be enough to generate a supply response 
and allow well-functioning markets to emerge quickly 
(Mylène et al., 2000). Almost two decades later, the 
general consensus is that the reform programs in Nigeria 
have not met the expectations. Average annual growth 
rates of per capita gross domestic product (GDP) and 
agricultural value-added have been negative throughout 
the 1980s and 1990s. Economic performance has trailed 
that of other developing regions. At the beginning of the 
21st century, Nigeria confronts a number of daunting 
problems: extensive hunger, malnutrition, poverty 
resource degradation, and the spread of HIV/AIDS. 
Because the majority of the  country‟s population remains 

 



Elumelu         149 
 
 
 
dependent on agriculture for its livelihood, well-functioning 
and efficient agricultural markets continue to have key 
rule for improving the nation‟s economic health.  

It is important to review some major problems/ 
constraints to agriculture in Nigeria that necessitated the 
reform poli-cies. Increasing agricultural production 
however, does not automatically translate to improving 
living standard of farm family or even the dependant 
populace. Once prod-uction increases, marketing is the 
next major hurdle. Far-mers face lots of challenges 
moving their produce to the market (Okunmadewa, 
2007). They often time experie-nce a high transport cost 
which impacts on their margin. Access to the market and 
poor organisation of African farmers often leave them 
prey to the middlemen who pur-chase their produce and 
make huge mark-ups before selling them in the cities. 
Hence, rural farmers remain trapped at the bottom end of 
the food chain. Farmers‟ share of retail prices is as low 
40% for most food crops. Also a major constraint to 
marketing is the boom- and burst- price fluctuations 
resulting from glut du-ring harvest and scarcity at off-
seasons. This glut usually results from the lack of 
storage, processing and preservation tech-niques and 
facilities, which ordinarily should assist farm-ers in 
helping to add value to their produce to earn good price 
and manage price fluctuations. Infrastructure is a key to 
ensure remunerative prices for agricultural produce.  

Farmers who are near market and roads have access 
to inexpensive transport and also can store their produce 
for a prolonged period, and are therefore in a better 
position to obtain higher prices. The higher the prices are 
expected to translate to higher margin and improved 
household welfare in the form of increased rural income. 
It is also established that the negotiating power of the 
farmers in determining prices for their produce could be 
improved through prompt dissemination of price informa-
tion or agricultural market information. An informed 
farmer is in vantage position to ask for a better farm gate 
price. The rural access and mobility, as well as informa-
tion dispersion remains poor in African countries consti-
tute a major challenge in the marketing of agricultural 
products and particularly in the widening gap between 
farm gate price and retail prices.  

According to Okunmadewa (2007), the widening 
disparity between farm gate price and retail price calls for 
a serious attention. This disparity has continually 
diminished the percentage of the retail price that farmers 
receive and this has effect on the future viability of 
thousands of rural African farm families. This is the main 
concern. The reality is that farmers cannot be expected to 
produce and receive relatively low returns, year in year 
out, and still remain viable. That defies basic logic of 
sustainability. In addition, it is more welfare depressing 
that the same farmer and farm family face increased and 
increasing retail prices of food and non-food consumption 
items. 

 
 
 

 
Finally, the National Agricultural Marketing Research 

System in Nigeria is bedevilled by a number of 
constraints. Idachaba (1998) and Okunmadewa and 
Olayemi (2002) provide an excellent discourse of these 
constraints. In particular, Idachaba (1998) categorises the 
constraints into two viz: system wide and institute 
specific. Further, he identifies the constraints in terms of 
hierarchy to include primary, secondary and tertiary 
constraints which include: lack of adequate funding, 
shortage and instability of qualified researchers and weak 
linkage of research institute and other stake holders. 
Thus, this paper reviews the extensive evidence on 
agricultural market reforms in Nigeria and summarizes 
the impact reforms have had on market performance, 
agricultural production, use of modern inputs and poverty. 
The paper offers recommendations for completing the 
reform process and developing a new agenda for 
agricultural markets in Nigeria. 
 
 
Need for Agricultural market reform 
 
Why was agricultural market reforms needed? Answering 

this question calls for a look at the agricultural policies of 

the 1960s and 1970s and the problems that resulted. 

 
Agricultural policies before reforms 
 
Independence through the 1970s, Nigerian government 
played a relatively large role in national economies, and 
the agricultural sector was no exception. Policymakers 
held the common view that private traders were exploit-
tative and that markets could not be trusted with the 
critical task of feeding the nation. Furthermore, they 
equated economic development with industrialization, 
relegating agriculture to the role of supplier of labor, raw 
material, and cheap food to industry. Small-scale agri-
culture was seen as inherently inefficient because 
uneducated farmers were unable or unwilling to apply 
modern techniques such as mechanization. Because of 
these views, state enterprises (often inherited from 
colonial powers) were given the responsibility of 
organizing food markets and fixing nationwide prices for 
farmers and consumers. Their success in doing so 
varied. State enterprises also managed export crop 
production by farmers by providing inputs on credit, fixing 
crop prices, and monopolizing the processing and export 
of the crop. The prices farmers received were generally 
low because of taxation or high costs incurred by state 
enterprises, or both. In many countries, export crop prices 
averaged less than half the world market rate (World 
Bank (1981). Lele (1990) and Jaeger (1992)). State 
enterprises also monopolized the import and distribution 
of fertilizer and other inputs, which were often supplied to 
farmers at subsidized prices and on credit. 



 
 
 

 
Pressure for reform 
 
Pressure for economic reforms came from several 
sources. In the 1970s, commodity prices boomed, allo-
wing governments to expand their operations and greatly 
increase the size of the civil service. When commodity 
prices declined in the late 1970s, governments found it 
difficult to cut expenditures, resulting in large fiscal 
deficits. Significant losses incurred by state-owned enter-
prises exacerbated these deficits. Governments generally 
used monetary expansion to cover the deficits, thus 
causing inflation. Because exchange rates were fixed, 
inflation made export commodities less competitive on 
the international market, simultaneously increasing incen-
tives to import goods that could be produced locally. 
Import tariffs and other barriers, already kept high to 
protect domestic industry, were increased further to stem 
the growing flow of imports.  

These policies often had adverse effects on farmers 
and on the agricultural sector generally. Explicit taxation, 
the high marketing costs of state enterprises and the 
overvaluation of the currency hurt export crop production 
in particular. In countries with repressive food marketing 
policies, farmers switched into unregulated crops such as 
roots and tubers. The emergence of parallel or black 
markets and cross-border smuggling provided additional 
evidence of the failure of Interventionist policies. Although 
inputs were subsidized, budget constraints and bureau-
cratic problems often led to shortages and delays in 
delivery of these goods. 

Inflation, stagnant economic growth, and shortages of 
consumer goods created doubts about the existing 
economic strategy. For many countries, however, signifi-

cant reforms were postponed until trade deficits began 
depleting foreign reserves and could no longer be covered 
by foreign borrowing. At this point, political leaders were 
forced to seek funding from the World Bank and the 
International Monetary Fund (IMF), accepting the policy 
conditions that were attached. Although the process was 
not uniform across the region, almost all countries 
adopted a series of economic reforms, including agri-
cultural market liberalization, during the 1980s and early 
1990s. 
 
 
The nature of the reforms 
 
The agricultural reforms introduced by the World Bank 

and IMF were designed to reduce or eliminate the bias 

against agriculture and open the sector to market forces 
(World Bank, 1981). The reforms were based on two 

beliefs: that reducing or eliminating state control over 

marketing would promote private-sector activity and that 

fostering competitive markets would lead to increased 

agricultural production. To these ends the reforms 
included four types of measures: 

 

150          Afr. J. Agric. Mark. 
 
 
 
1. Liberalizing input and output prices by eliminating 
subsidies on agricultural inputs such as fertilizer and 
credit, by bringing domestic crop prices in line with world 
prices, and by ending the practice of imposing a single 
price for all regions and seasons   
2. Reducing overvalued exchange rates by partially 
liberalizing the market for foreign exchange   
3. Encouraging private-sector activity by removing regu-
latory controls in input and output markets, lifting 
restrictions on the internal movement of food crops, and 
relaxing delivery quotas, licensing arrangements, and 
similar regulations   
4. Restructuring public enterprises and restricting mar-

keting boards to activities such as providing market 

information and maintaining security stocks.  

 
Nigeria’s market reform in the export crop sector 

compared with other African countries. 
 
The pace and extent of reforms have varied widely 
across countries and crop subsectors (Table 1). For the 
most part, reforms were not fully implemented. For 
example, many governments liberalized internal trade but 
maintained a state monopoly over external trade. In other 
instances, although fixed prices were eliminated, price 
bands for food crops were imposed to limit market price 
fluctuations and protect consumers and producers from 
the allegedly “exploitative” behaviour of private traders. 
State-owned enterprises remain active in several 
commodity subsectors, notably cotton in West Africa and 
maize in Kenya, Malawi and Zimbabwe. (Washington, 
D.C.: World Bank, 1999) . Information on cashews for 
Tanzania comes from C. L. Delgado and N. W. Minot, 
Agriculture in Tanzaniasince 1986: Follower or Leader of 
Growth? World Bank Country Study (Dar es Salaam and 
Washington, D.C.: Government of the United Republic of 
Tanzania, World Bank, and IFPRI, 2000).  

Many countries reversed reforms as a result of external 
shocks or changing economic conditions. Malawi, for 
instance, reinstated fertilizer subsidies that were to be 
phased out in the mid-1980s because currency deva-
luation and the severance of transport routes through 
Mozambique significantly raised fertilizer prices. Zambia 
reversed maize market liberalization under pressure from 
urban consumers who faced higher prices. In general, 
countries did not follow a linear path toward liberalization, 
and reforms often were not seriously implemented until 
the early to mid-1990s. In Nigeria, the reform process 
was quick and short owing to the fact that farmers 
benefited immensely from sharp and increased market 
margins resulting from direct export and the policy also 
exposed the corrupt and inefficient activities of the 
Marketing Boards. A slow and incomplete reform process 

resulted from several factors, including weak commitment 

on the part of African   policymakers   to reforms imposed 



Elumelu         151 
 
 
 

Table 1. Extent of market reform in the export crop sector in some African Countries 
 

Country Commodity Marketing channel after reforms  
Benin Cotton 

 

Cameroon Cocoa, coffee 
 

Côte d‟Ivoire Cocoa 
 

Ghana Cocoa 
 

Malawi Tobacco 
 

Mali Cotton 
 

Nigeria Cocoa 
 

Senegal Groundnuts 
 

Tanzania 
Coffee, cotton, 

 

cashew Coffee  

 
 

 
Full parastatal control of prices, marketing, and inputs. 

Liberalized marketing and export starting in 1994 for both 

crops. Stabilization system until 1998/99; liberalized thereafter.  
Full parastatal control of prices and marketing.  
All marketing through private auctions with low 

competition. Full parastatal control of prices, marketing, 

and inputs. Complete liberalization in a short period. 
Most groundnuts exported as oil. Marketing and processing onlypartially  
Largely liberalized starting in 1990/1991. Cotton partially liberalized at first, now fully, 

as is cashew. State-run cooperative unions continue to compete with the private sector 

but only handle a small share of crop output.  
Uganda Coffee Full liberalization, with parastatal primarily playing a regulatory function. 
 
Sources. R. F. Townsend, Agricultural Incentives in Sub-Saharan Africa: Policy Challenges, Technical Paper No. 444 

 
 

 
by donors, fear of disturbing existing patron-client rela-
tionships, and concern over losing important sources of 
public revenue.  

Reforms designed to eliminate the rents and privileges 
enjoyed by public enterprise employees met with strong 
resistance. And because governments negotiated and 
implemented the structural adjustment programs, they 
often continued the old ways of doing business (Bates 
1989). For the most part, governments did not encourage 
the participation of important constituents such as private 
businesses and nongovernmental organizations, choosing 
instead a top-down approach. At the same time, govern-
ments themselves rarely felt the sense of ownership 
necessary to sustain the reform effort (Helleiner, 1994; 
and Meerman, 1997). The resulting climate of uncertainty 
and mistrust affected private investment, because private 
businesses were generally reluctant to invest in countries 
where governments lacked credibility. 
 
 
The impact of the reform 
 
How successful has agricultural market reform been in 

Sub-Saharan Africa? How has it affected market perfor-

mance, agricultural production, input use, farm produc-

tivity and poverty? The available evidence shows clear 

progress in some areas and mixed results in others. 
 
 
Market performance 
 
Assessments of market performance since the reforms 

have focused on the expansionof private trading, reduc-

tions in marketing margins, and increases in market 

efficiency measured by the degree of market integration). 

In general, all three areas have seenimprovements since 

the 1980s. However,  further  expansion   of  private trade 

 
 

 
facesmany constraints and marketing boards are still 

active in some countries. 

 
Private trade has expanded 
 
Market liberalization has encouraged private trade, even 
in cases where parastatals are still active. Small private 
traders have emerged in response to increased market 
opportunities (Badiane,et al, 1997, Barrett,1997 and and 
Minten, 1998). In certain export markets, the presence of 
multinationals has fostered a well-coordinated domestic 
private-trading sector. In Tanzania, multinationals contract 
with private, domestictraders to buy tobacco and cashew 
nuts from small farmers, and these traders have little 
difficulty accessing credit or finding buyers. In Malawi and 

Nigeria small farmers sell their tobacco, cocoa and palm 
oil on auction floors to international buyers, something 
only large estate farms could do before the reforms. 
 
 
Markets have become increasingly integrated 
 
In general, market integration is measured by how well 
price signals are transmitted among markets. Integrated 
markets allow the efficient flow of commodities from 
surplus to deficit regions. While the level of market 
integration in Africa remain slower than in other deve-
loping countries, it has improved since the reforms were 
instituted, Goletti and Babu (1994). In part, this improve-
ment has depended on the pre-reform situation.  

For example, countries such as Benin and Ghana, 

where the private sector controlled food marketing before 

liberalization, have developed better-integrated grain 

markets than countries such as Malawi and Madagascar, 

where parastatals dominated food marketing. Most of the 

improvement is the   result   of   increased   private-sector 



 
 
 

 
participationin trading activities—participation that has 

fostered the efficient transmission of information and 

prices among markets. 

 
Agricultural production 
 
The basic premise of agricultural market reform is that 
improving the incentive structure for small farmers (in the 
form of higher prices and well-functioning markets) will 
generatea positive supply response, increasing both 
agricultural output and income levels. But the average 
growth of agricultural production per capita has been 
negative in Sub - Saharan Africa since the 1970s. For 
small farmers in some countries, reform has meant the 
elimination of government input and credit subsidies—a 
loss that has kept yields stagnant or reduced them. 
Where production growth has occurred, it is the result of 
increases in the amount of land under cultivation rather 
than of yield increases. And where producers have 
benefited, the bulk of the gains have gone to export and 
cash-crop farmers with access to credit and modern 
inputs (such as fertilizer). 
 
 
Export crop production has increased 
 
Export crops have responded more strongly to liberali-
zation than food grains. Most price changes have 
favoured tradables, making export crops more attractive 
than domestic staples. Export crops were also taxed 
more heavily before the reforms, making their post -
reform response particularly vigorous. In addition, price 
control was far less effective for food than for export 
crops, so that farmers growing food crops were less 
affected by official prices (and more responsive to 
unofficial prices) than farmers growing export crops. 
Cash-crop sectors such as cotton in Benin and Mali, 
cashew nuts in Mozam-bique and Tanzania, and coffee 
inUganda have been among the most responsive to 
reforms, largely because of higher producer prices, 
exchange rate liberalization, privatization, infrastructure 
investment, and improved input supply. 
 
 
Fertilizer prices have risen 
 
A number of reforms have affected fertilizer prices, 

including the elimination of fertilizer subsidies, the depre-

ciation of the real exchange rate, and liberalization of 

fertilizer imports and distribution. The fertilizer-crop price 

ratio has more than doubled in four out of ten countries 
examined (Benin, Ghana, Nigeria and Tanzania) and 

increased at least 50% in three more (Malawi, Senegal 

and Zambia). On the other hand, the fertilizer-crop price 

ratio fell in Ethiopia. 

 

152          Afr. J. Agric. Mark. 
 
 
 
Poverty 
 
Production constitutes the most important source of 
income and employment for the majority of households in 

Nigeria. By stimulating agricultural production, market 
reforms were expected to improve rural incomes and 

alleviate poverty. In many Sub-Saharan African countries, 
rural poverty rates have declined since the 1980s. 

Although not all of the decline can be attributed to agri-
cultural reforms, this trend challenges the view that the 
rural poor have been adversely affected by agricultural 

market liberalization. 
 
 
Higher export crop prices have benefited export crop 

farmers 
 
Devaluation and export market liberalization increased 

the income of small export growers by about 20% on 
average between 1990 and1997, although, this varied 

greatly across crops. The income of poor and non-poor 
rural households has increased in several African coun-
tries. Small-scale cocoa and palm oil growers in Nigeria 

and producers of cashew nuts and tobacco have bene-
fited from higher producer prices thanks to declining 

marketing margins and the depreciation of the real 
exchange rate. 
 
 
CONCLUSION AND RECOMMENDATIONS 
 
The reform efforts of the 1980s and late 1990s have 
generated a positive response in the agricultural sector of 
Nigeria in particular and Sub- Saharan Africa in general. 
Despite the progress that has been made, however, the 
results of market reform have generally not met expec-
tations and much remains to be done. The reforms 
focused on eliminating government control and increasing 
the producer price of tradable agricultural commodities 
but placed little emphasis on developing the institutions 
needed to support private sector activity. Improving price 
incentives and liberalizing markets were expected to be 
enough to generate a supply response and create well 
functioning markets. The private sector was expected to 
take over the institutional functions the state had been 
providing. The reality has been quite different. While 
private trade has increased in virtually all agricultural 
markets, the private sector has been unable or unwilling 
to supply credit and marketing services in remote areas. 
And although the elimination of policies enforcing a 
uniform, nationwide price has been a boom for many 
producers and consumers close to markets, it has often 
left farmers in remote areas worse off than they were 
before liberalization.  

Further progress in developing well-functioning markets 

will require not  only   further liberalization but also a more 



Elumelu         153 
 
 
 
concerted effort to go beyond the withdrawal of the public 
sector from agricultural marketing. The state must 

assume a new, supportive role as market facilitator. One 
aspect of this role is to strengthen investment in public 

goods such as infrastructure, research and extension, 
and public market information. The second is to foster 
institutions required for the development of competitive 

and efficient markets. The new agenda for market 
development in Sub-Saharan Africa includes the following 

four priorities: 
 
1. Find institutional solutions to provide input credit 
to farmers: Credit for input use can be provided through 

a number of institutional innovations, including contract 
farming, credit associations, group lending and farmers‟ 
organizations.  
2. Develop a legal infrastructure for market 
transactions: This long-term step will reduce the risk of 
investment and decrease transaction costs for both 
farmers and traders by clarifying property rights, 
enforcing contracts, ensuring quality control, and 
establishing rules of market conduct, among other legal 
concerns.  
3. Increase investment in infrastructure and 
institutions: Higher productivity and effective markets 
require investment in research and extension, access to 
market information, and efficient transportation and 
communication networks.   
4. Encourage smallholder production of export crops:  

In many areas, food and export crop production are 

highly complementary and export crop production has 

positive spill-over effects on input use and food crop 

productivity. Therefore, promoting smallholder production 

of export crops should have beneficial impacts on 

agricultural production in general and on the food security 

and income of smallholder farmers in particular.  
 
 
Conflict of Interests 
 
The authors have not declared any conflict of interests 
 

 

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