Post Utme Al Hikmah University 2017 Economics Question 21

The government of Nigeria has introduced a new policy to encourage the growth of the agricultural sector. The policy includes providing subsidies to farmers, improving irrigation systems, and increa\sing access to credit. However, the policy also includes a provision that allows the government to purchase excess produce from farmers at a predetermined price. This provision is likely to lead to a situation where farmers produce more than the market demand, resulting in a surplus. What is the likely effect of this provision on the agricultural sector?