Fertilizer Subsidy Policy and Dry Maize Price Dynamics in Kenya: County-Level Panel Evidence from the National Fertilizer Subsidy Program, 2021 to 2024
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Abstract
Kenya launched its National Fertilizer Subsidy Program (NFSP) in September 2022, selling NPK 17-17-17 fertilizer at KES 3,500 per 50 kg bag, roughly half the prevailing market price, with the stated goal of raising maize output and moderating consumer food prices. The program expanded to 41 of 47 counties by April 2023 and reduced the subsidy price further to KES 2,500 per bag in August 2023, at a total fiscal outlay of KES 9.3 billion in the 2022 to 2023 financial year. This study asks whether the program delivered on its food price stabilization objective, a question that existing evaluations have not addressed directly at the county market level. Using a balanced county-month panel of 45 counties observed from May 2021 to November 2024 and drawing on retail price data from the Kenya Agricultural Market Information System, AFA national fertilizer retail price records, and Central Bank of Kenya exchange rate data, the study estimates a two-way fixed effects model with county and time fixed effects and standard errors clustered at the county level. The principal finding is that the NFSP reduced retail maize prices by approximately 6.3 percent where the program was active, a result that is marginally significant at the 10 percent level. This aggregate result conceals a sharp phase asymmetry: Phase-2 counties, which entered the program at a deeper subsidy price from April 2023 onward, experienced a statistically significant retail price reduction of around 10.6 percent (p < 0.05), while Phase-1 counties showed no measurable price effect despite being first to receive fertilizer. The most plausible explanation for this asymmetry is macroeconomic attenuation. The KES depreciated 42 percent from the program start in September 2022 to its peak in January 2024, and domestic fertilizer market prices rose from a mean of around KES 3,200 per 50 kg bag in early 2021 to KES 6,350 at peak, raising upstream supply chain costs by an amount that absorbed a large portion of the subsidy benefit before it reached retail food markets. The correlation between log NPK prices and the log exchange rate is 0.52, confirming that fertilizer price inflation was substantially exchange-rate-driven during this period. The paper concludes that fertilizer subsidies can moderate staple food prices, but the transmission is incomplete and context-dependent. A subsidy that is large enough to exceed concurrent macroeconomic cost pressures, and that is deployed after the sharpest part of a global price shock has passed, is more likely to deliver consumer price relief than one launched at the peak of a global commodity crisis.
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