Fertiliser Subsidy Faces Reform Calls to Boost Competition and Protect Farmer Choice

While this approach has succeeded in lowering prices for farmers, it has also placed the State at the centre of procurement and distribution decisions.

As of June 2025, subsidised fertiliser handled through NFSP-2 represented between 30 and 40% of all national sales – significant enough to influence the broader market.

The CAK–World Bank report points out that the shift to centralised procurement has reduced the role of private agro-dealers, who traditionally serve as the last-mile link to smallholder farmers in remote areas.

With fewer retailers participating, farmers often have limited choices regarding where to buy fertiliser and which product formulations to use.

The report notes that some farmers are forced to accept whatever fertiliser type is available at NCPB depots, even when it is not the most suitable for their crops or soil profiles.

The authors argue that this weakens the incentive for private suppliers to innovate or improve efficiency, since much of the market is locked into Government-set prices and channels.

The report proposes several reforms aimed at preserving the benefits of subsidies while restoring competition:

1. Open up the programme to more last-mile retailers: allow a wider network of agro-dealers to distribute subsidised fertiliser so farmers have more options.
2. Use transparent, competitive contracting: award supply contracts based on clear bidding processes, such as selecting firms that offer the lowest retail price or require the least subsidy.
3. Reintroduce market-based signals: even within a subsidy framework, prices should reflect actual market dynamics to encourage efficiency.
4. Improve targeting: ensure that the most vulnerable farmers, especially smallholders in high-cost regions, benefit the most.
5. Strengthen anti-cartel oversight: enhance CAK’s monitoring and enforcement to prevent bid-rigging, price coordination and other anti-competitive behaviours.

The authors stress that subsidies remain a valuable tool for stabilising agricultural production and reducing costs for farmers, particularly during periods of global volatility.

But they argue that Kenya needs to strike a balance between affordability and market health.

The report concludes that a more competitive system – whether through an improved voucher model or a more open version of NFSP-2 – would deliver better value for money and support long-term agricultural growth.