Post Utme Bowen University 2018 Economics Question 6

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 requires farmers to sell a certain percentage of their produce to the government at a fixed price. This provision is int\ended to stabilize food prices and ensure a steady supply of food to the market. However, it may also lead to a decrease in the incentives for farmers to produce more, as they will be forced to sell a portion of their produce at a price that may be lower than the market price. What is the likely effect of this policy on the agricultural sector?