THE ROLE AND EFFECT OF SUBSIDIES ON FISHERIES DEVELOPMENT IN WEST AFRICA (Nigeria, Côte d'Ivoire, The Gambia and Senegal)

FISHERY COMMITTEE
FOR THE EASTERN CENTRAL ATLANTIC

CECAF/ECAF SERIES 90/53

A.F. Mabawonku
Senior Lecturer
Department of Agricultural Economics
University of Ibadan
Ibadan, Nigeria

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

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FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Rome, 1990
© FAO

PREPARATION OF THIS DOCUMENT

This document has been prepared by an FAO Consultant, Dr A.F. Mabawonku, in fulfilment of a recommendation made by the Fishery Committee for the Eastern Central Atlantic (CECAF) at its Tenth Session (Puerta de la Cruz, Tenerife, November 1986). Dr Mabawonku is a senior lecturer in the Department of Economics, University of Ibadan, Ibadan, Nigeria. The study was financed by the Development Planning Service of the Fishery Policy and Planning Division of FAO.

Distribution:

Members of CECAF
Other countries and interested national and international organizations CECAF Secretariat
FAO Fisheries Department
FAO Regional Fisheries Officers

ACKNOWLEDGEMENTS

The author is greatly indebted to the following persons who cooperated in providing information for the preparation of this paper, and expresses his gratitude to the Director and staff of the FAO Fishery Policy and Planning Division for their collaboration.

NIGERIA

Alhaji Duro Apanpa, Director, Federal Department of Fisheries
A. Aderonmu, Assistant Director, Federal Department of Fisheries
J.E. Tobor, director, NIOMR, Lagos
Adebiyi, Assistant Chief, Fisheries Officer, Federal Department of Fisheries
M. Onabanjo, Chief Fisheries Officer (Planning), Federal Department of Fisheries, Lagos

COTE D'IVOIRE

Luc Koffi, Directeur des Pêches maritimes et lagunaires, Abidjan
Remy Martin, Directeur Cofipêche, Abidjan
J.B. Amon Kothias, Assistant Director, Oceanographic Research Centre
Kuakou Koffi, Assistant Director, Direction des pêches

THE GAMBIA

C.O. Joof, director, Fisheries Department, Banjul
Tunkara, Central Statistics, Ministry of Finance and Trade, Banjul
Mamodou Cham, Fisheries Department, Banjul
S. Jabais, Fisheries Department, Banjul
Nicholas, Fisheries Department, Banjul
Barjoba, Ministry of Finance and Trade, Banjul

SENEGAL

B.C. Dioh, Director, Direction de l'océanographie et des Pêches maritimes, Dakar
Boran Chhun, Direction de l'océanographie et des Pêches maritimes, Dakar

ABSTRACT

The major types of subsidy existing in Nigeria, Côte d'Ivoire, the Gambia and Senegal are: (1) rebate on fishing inputs (2) provision of infrastructure and (3) fuel subsidy.

In measuring the cost of the subsidy scheme, cognizance is taken of the difference between “financial support” and subsidy. Financial support describes the total public expenditure on fisheries at any given time. It often includes expenses on subsidy and other capital and recurrent expenditure that are not directly transferred to the fishermen and sometimes involves administrative costs and others which do not directly enter into the fish production/fishing effort relationship. Subsidy is defined as that transfer payment given to the fishermen in cash or in kind to enable them to increase effort in order to secure increased output.

The mechanism of the subsidy scheme varies from one country to another. There are cases where the subsidized input attracts import duties, and when a subsidy rate is applied to the CIF plus tariff charges, the rate of subsidy is affected by the tariff to the extent that the effective subsidy is lower than the nominal rate. Where credit is subsidized by charging lower interest rates, the subsidy is measured by the difference between what could have been paid (principal plus interest rates) if the credit had been obtained from commercial banks and the principal plus interest from the subsidized scheme. Again, the subsidized input can be sold on credit at an interest rate lower than the commercial rate. In this case the value of the subsidy will be the difference between the market price of the input and the subsidized price multiplied by the difference between commercial rates and the subsidized rate.

In this study, valuation of extension services, training, research and infrastructure was not carried out because of the complications involved in pricing the services they provide.

The benefit from the subsidy is taken to mean the incremental value of fish output associated with a unit increase in subsidy. Secondary impacts from the subsidy are easy to identify but, due to lack of adequate data, difficult to quantify. Among the secondary impacts identified are (1) the increase/decrease in commercial activity of industries serving the fishery such as fishing input sellers, outboard engine repair mechanics (2) the increase/decrease in the fishermen's purchase of industrial non-farm consumer goods such as radio, television, etc. (3) the improvement in the general nutrition of the country resulting from increased consumption of fish (4) increase/decrease in national income as fish output increases (5) the increase/ decrease in employment in fish processing and handling.

For the four countries in this study there are similarities in the objectives of national development and more especially in the objectives of the subsidy to the fisheries sector. These common objectives include provision of adequate fish for domestic consumption, earning of foreign exchange through exports, provision of employment and optimal utilization of resources.

Nigeria

Subsidy for the fisheries sector was primarily directed at small-scale fishermen. The scheme involves the purchase of fishing materials and their distribution to fishermen at 50% of procurement costs. The Government provided credit through the Nigerian Agricultural and Cooperative Bank at 5–7% interest rate, landing jetties, cold rooms, refrigerated trucks for fish distribution and the establishment of training facilities for fishermen. Between 1979 and 1983 the value of inputs distributed was about ₦ 5.5 million, half of which represented a transfer to fishermen. Credit granted to fishermen averaged ₦ 14.4 million between 1980 and 1983, while the subsidy element was about ₦ 2.2 million annually.

Between 1979 and 1983 the value of fish production averaged ₦ 2 540.4 million while the value of subsidy to the fishing industry was only ₦ 2.19 million per year over the same period. It was observed that as the level of subsidy declined, so did total fish production, especially artisanal production to which the subsidy was addressed.

Tha Gambia

Through various externally financed projects, subsidy in The Gambia involves the provision of engines, nets, floats and other items to fishermen in about four locations in the country. More important was the provision of loans to fishermen by the Gambian Commercial and Development Bank. Interest was relatively lower than commercial rates, an average of 8.5% compared with commercial rate of 14.5%. Between 1980 and 1985 total lending to fishermen was D 0.69 million, although loans had been granted as far back as the seventies. Estimated transfer to the fishermen, given the differential interest rates, was D 0.09 million or 13% of the loans, assuming a payment period of two years.

Senegal

The objectives of the subsidy programme in Senegal include the maximization of fish production in order to (1) provide adequate nutrition for the population (2) generate employment (3) attain Senegalization of the industrial fleet (4) carry out resource appraisal and (5) replace ageing vessels. At present the contribution of fisheries to the GNP is 2.2% with the ultimate goal of raising this to 3.5%.

The major subsidy scheme operating in the country is the fuel subsidy, although due to pressures from external influences, this is being presently phased out. Another form of subsidy is the value-added tax and the waiving of duties on export of fish and fish products.

Between 1980 and 1985 Senegal expended a total of CFAF 14 005.8 million on the fuel subsidy, but the actual transfer insofar as the fuel was charged at normal market price was only CFAF 9 349.6 million or 66.8% of the total expenditure. Total government payment on export subsidy was CFAF 8 885.7 million between 1980/81 and 1985; that is, the total of transfer payment for the period 1980–1985 was CFAF 18 235.3 million. An important element of the Senegalese scheme was the increasing payment on export subsidy over time while the fuel subsidy was on the decline (see Table 14).

Between 1980 and 1985, the value of fish production in Senegal totalled CFAF 202 900 million. In relation to the subsidy the benefit/cost ratio is 11:1. Unlike in the Nigerian case where output declined almost at the same rate as the decline in subsidy, the Senegalese evidence shows that prices remaining constant, further increases in the level of subsidy beyond the 1982/83 level could be injurious to the fishery resources of the country.

Côte d'Ivoire

The objectives of the subsidy scheme as reflected in the objectives of fisheries development are similar to those of Senegal. But unlike other countries, subsidy schemes can be said to be non-existent especially to artisanal fisheries until recently. Even then there are no micro-level data to describe the situation in the country.

The subsidy scheme so far adopted involves the provision of smoking ovens, fuel depots, cold rooms, refrigerated trucks and a few engines to fishermen. Official sources indicated that these were sold to the fishermen at cost but also on credit. Loans for purchase of fishing materials were granted by the National Bank for Agricultural Development at an interest rate of 9% and a tax rate of 0.9%. As at 1986 loans disbursed through the bank to fisheries totalled CFAF 1.4 million.

Fuel consumption sold at CFAF 108 per litre in 1986 was 21 024 litres valued at CFAF 2 270 592. However, had the fuel been purchased at the pump price of C 245/litre the value would have been CFAF 2 880 288. The total subsidy payment on fuel and credit is estimated at CFAF 2.91 million in 1986 alone.

Fish production from both artisanal and industrial fisheries totalled 97 174 t, and, when valued at the same price used for exports, this gives an estimated output of CFAF 13 021.3 million. The benefit attributable to the subsidy when measured in net terms was CFAF 13, 018.39 million and as a ratio benefit CFAF 44 737 was obtained. Assuming that only 10% of the benefit is attributable to the subsidy scheme, the benefit will still be CFAF 447.4 million.

Although the above country-by-country evaluation indicates a strong and positive impact of the subsidy scheme, the data used were rather rudimentary. Nonetheless, the evaluation presents a probable case. Unfortunately, the data required to compute comprehensive cost and impact figures were not available. It may still be necessary for each country, using the methodology developed in this study, to carry out its own evaluation before any alternative option to the subsidy can be fully appreciated.

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1. THEORETIC AND METHODOLOGICAL FRAMEWORK

1.1 INTRODUCTION

1.1.1 The Role of Subsidy in Economic Development

1.1.2 The Form and Mechanism of Subsidy Operations

1.2 IMPACT OF SUBSIDY ON FISHERY RESOURCE EXPLOITATION

1.3 MEASURING THE COSTS OF SUBSIDES

1.4 QUANTIFYING THE BENEFITS OF FISHERIES SUBSIDY

2. EMPIRICAL ANALYSES

2.1 NIGERIA

2.1.1 Objectives of the Subsidy Programme

2.1.2 The Subsidy Scheme

2.1.3 Direct Impact of the Subsidy