Presidential Fert. Ini

PRESIDENTIAL FERTILIZER INITIATIVE: REVOLUTIONIZING FERTILIZER PRODUCTION AND SUPPLY IN NIGERIA

By Ahmed Rabiu Kwa and Faizah Abdulsalam of Fertilizer Producers & Suppliers Association of Nigeria (FEPSAN).

Background - Before the Wake of the Presidential Fertilizer Initiative (PFI)

Agricultural policy in Nigeria has evolved considerably since the country’s independence. The government’s priority at the time was to boost domestic production, particularly of cash crops. This period pushed Nigeria to the position of the world’s top producer of rubber, groundnuts and palm oil, and the world’s second-largest cocoa producer.

From 1962-1968 some specialized development schemes initiated or implemented during this period which include introduction of more modern agricultural methods through farm settlements schemes, co-operative (nucleus) plantations, supply of improved farm inputs and farm implements and a greatly expanded agricultural extension service, and the National Accelerated Food Production Program (NAFPP) was launched in 1972.

In the wake of the major food crisis in the country in 1975 after oil boom, World Bank-funded Agricultural Development Projects were established; other programs such as “Operation Feed the Nation” was launched in 1976, River Basin and Rural Development Authorities were established in 1976 and “Green Revolution” was launched in 1980. These programs focused on strengthening agricultural production, providing subsidized inputs, community development, and access to credit. However, they were implemented without a transparent framework to structure action, and the successive governments did not ensure continuity. The enactment of the Land Use Act in 1978 also marked an historic turning point for land use management in Nigeria. The trend was reversed in 1987 with the structural adjustment program (SAP) that sought to reduce the national economy’s dependency on oil and promote the private sector as the engine driving growth.

In 1998 with return to democratic governance, the Nigerian government once again turned its attention to the agricultural sector. Several intervention programs were introduced to stimulate agricultural growth for improved food security, employment generation and food import substitution. The first African Fertilizer Summit was held in 2006 with the major resolution of increasing African fertilizer consumption from an average of 12kg per hectare to average of 50kg per hectare within 5 years.

Reduciing Dependence

In 2011 the Federal Ministry of Agriculture and Rural Development commenced the implementation of Agricultural Transformation Agenda (ATA). The goal of ATA is to build commodity value chains and the institutions required to unlock the country’s huge agricultural potentials.  Expected outcomes include adding 20 million MT of food to the domestic food supply by 2015, creation of 3.4 million jobs, import substitution through the acceleration of production of local staples to reduce dependence on food imports, and to turn Nigeria into a net exporter of food.

The Growth Enhancement Support (GES) Scheme a component of ATA seeks to encourage the critical actors in fertilizer value chain to work together to improve productivity, household food, security and enhance the income of the farmer. Under the GESS, government sought to withdraw from direct purchase and distribution of fertilizer, and introduce an alternative system of distribution driven by the private sector. The GES first cycle was implemented in 2012 but ended in 2014. Under the scheme, registered farmers receive e-wallet through their mobile phones to redeem agro inputs - fertilizers (one bag Urea and one bag NPK) at 50% cost and seeds (maize or rice) free from private agro dealers at ATA GES Redemption Centers. The Federal and state Governments share the remaining 50% cost i.e. 25% each.

In this regard, the implementation of GES was commendable but it lacked a meaningful policy instrument for effective fertilizer quality regulation and control, which created room for product faking, adulteration, false labelling practices and other sharp practices in the fertilizer market. Specifically the fertilizer quality control bill pending at the National Assembly was inconclusive and the National Fertilizer Technical Committee (NFTC) was in a lull throughout the period. It can be deduced that from 2001-2014 Nigeria had spent about NGN143.95billion on fertilizer subsidy alone excluding administrative charges.

FEPSAN mount ‘Advocacy for Change’

The industry players felt the need to interrogate the policy and other issues plaguing the fertilizer sector with a view to articulating a common position and addressing the issues. Towards this end, a Public-Private Dialogue on Strengthening Fertilizer Value Chain in Nigeria was held in 2015 by Fertilizer Producers and Suppliers Association of Nigeria (FEPSAN) with support of Enhancing Nigerian Advocacy for a Better Business Environment (ENABLE) a DFID Project. Concurrently, a desk review was carried out to situate the outcome of the dialogue in the historical and other contexts of the Nigeria’s fertilizer sector.

Production Process at One of the Blending plants

Production Process at One of the Blending plants

After the workshop a position paper with policy recommendations to move the industry forward was produced by FEPSAN and presented to the Federal Government, some of the policy recommendations include:

  1. In order to encourage and increase local production to meet the demands of Nigerian farmers and generate employment for Nigerians, the Federal government was required to put in place policies to encourage local production.
  2. It was recommended that the federal government withdraws from direct fertilizer subsidy administration and states that can afford subsidy cost to continue while the Federal government can still continue to support farmers through strengthening Agricultural research and extension services, provision of credit at low interest rates, rural infrastructure such as federal roads and storage warehousing etc.
  3. The government was requested to speed up the process of enacting the fertilizer law and set up a regulatory and quality control system. This will facilitate effective coordination, control and provide level playing ground for marketing of fertilizers.

The Fertilizer Producers and Suppliers Association of Nigeria (FEPSAN) initially negotiated an advocacy with the federal government to pursue the consideration and implementation of these and other policy recommendations regarding the fertilizer industry, but the effort did not materialize up to the general elections and the exit of the previous federal government administration in 2015.

Birth of the Presidential Fertilizer Initiative

With the election of new federal government administration in 2015 under the leadership of President Muhammadu Buhari, FEPSAN heightened its advocacy efforts which was considered and looked into. President Muhammadu Buhari,and under took exchange of diplomatic visits between him and the King of Morocco, His Majesty King Muhammed VI that resulted in the signing of a bilateral agreement between the governments of Nigeria and Morocco to develop Nigerian fertilizer industry.

Consequently two leading fertilizer institutions in the two countries i.e. the Fertilizer Producers & Suppliers Association of Nigeria (FEPSAN) and OCP SA (a majority state owned company registered under the laws of Morocco) executed an agreement in the presence of the President of the Federal Republic of Nigeria, His Excellency President Muhammadu Buhari GCFR and His Majesty King Mohammed VI of Morocco in December 2016, during the latter’s visit to Nigeria, identifying specific areas of collaboration between both parties therein, including securing the supply of quality phosphate fertilizer raw material from OCP SA at a concessionary price and the strengthening of local fertilizer blending capabilities in Nigeria.

President Muhammadu Buhari consequently set up the Presidential Fertilizer Initiative (PFI) to drive the process in Nigeria. The goal of the PFI is to achieve self-sufficiency in local NPK fertilizer production by 2019 starting with one million metric tons for the 2017 wet season farming and an additional 500, 000 metric tons for the dry season farming.

PFI Bag Sample at AF C Company in Kano Photo Seyi Tijani

PFI Bag Sample at AF & C Company in Kano Photo Seyi Tijani

How it works

The project is designed to:

  1. Stimulate local production of NPK 20:10:10 by reviving local blending plants;
  2. Make NPK fertilizer available to Nigerian farmers at affordable prices (for 2017 a target price of ₦5,500 per 50kg bag was set as opposed to the market price of more than ₦8,000).
  3. Ensure NPK fertilizer is available to farmers in time annually for both wet and dry season farming.

The expected benefits of the Project include:

  1. Projected foreign reserve savings of over US $200 million in 2017 by maximizing local content from <30% to >70%;
  2. Projected ₦60 billion savings in 2017 budgetary provisions for fertilizer subsidy expenditure
  3. Creation of significant direct and indirect jobs along the fertilizer value chain
  4. Enhancement of food security as a result of the expected increase in food production
  5. Reduction in food-induced inflation and stimulation of economic activities across the agriculture value chain.

Ultimately, the objective of the Presidential Fertilizer Initiative is to detour from importation of blended fertilizer status quo, by directly negotiating discounted contracts to procure the constituent raw materials used in the production of NPK fertilizer. Di-ammonium phosphate (DAP) and Muriate of potash (MOP) will be supplied under a negotiated arrangement by OCP and European suppliers respectively; Urea will be supplied locally by Indorama Eleme Fertilizer & Chemicals Company and Notore Chemical Industries both in Port Harcourt, Rivers State, Nigeria while the Granulated Limestone will be supplied also locally by the West Africa Fertilizer Company (WAFERT), Okpella, Edo State, Nigeria.

Location List Capacity of Blending plants

Location, List & Capacity of Blending plants

The blending program will be driven by FEPSAN and the Nigeria Sovereign Investment Authority (NSIA). FEPSAN will identify and select the blending plants based on technical competence and capacities to participate in the program. NSIA will through a Special Purpose Vehicle (SPV) under its National Agricultural Investment Company (NAIC) tagged NAIC-NPK fund the procurement and delivery of raw materials to the plants as well as working capital for the blending operations.

A total of eleven (11) blending plants that have met the requirements of the technical teams in respect of capacity and technical competence and other set criteria for blending fertilizer are participating in the first phase of the project.

On the financing arrangement, instead of directly releasing the intervention fund to FEPSAN, the Central Bank of Nigeria (CBN) has designated the Nigeria Sovereign Investment Authority (NSIA) to manage the 9 percent per annum fund on behalf of FEPSAN. Because managing a fertilizer fund is not the NSIA’s core mandate, it established an SPV - the National Agricultural Investment company NAIC-NPK Limited to carry this function out on its behalf.

As has been pointed out earlier, FEPSAN has already successfully negotiated substantial discounts with the suppliers/producers of the four main raw materials (the two from abroad, and the two sourced locally). For each batch raw material required under the PFI, FEPSAN makes available to NAIC-NPK Limited the invoices from the suppliers. NAIC-NPK Limited then pays the suppliers directly, on behalf of FEPSAN.

FEPSAN takes delivery of the raw materials, and then supplies these raw materials to the blending plants, which it has already signed on as contract blenders. The blending plants then produce, bag and sell the finished, packaged fertilizer to the up takers (State Governments, Anchor Borrower Programs and distributors/dealers) at ex-factory price of ₦5,000 per 50kg bag which the up takers resell to farmers at a target price of ₦5,500 per 50kg bag. The N500 is to cover the up takers’ costs for transportation, profit and other logistics.

The blending plants remit this revenue to NAIC-NPK Limited, for re-investment into subsequent production cycles. To ensure that the blending plants do not disappoint on their ends to remit revenues to NAIC-NPK, they are required to submit to NAIC-NPK performance guarantees from their banks, as payment security for the raw materials they receive under the PFI. If they default, NAIC-NPK will swiftly move to redeem the guarantees and recover its investment.

The blending plants therefore have a responsibility to ensure that they fully collect their revenues from the up takers of the blended fertilizer. Because of this, they make sure they do not sell on credit and only collect:

  1. Irrevocable standing payment orders (ISPOs) from the State Governments, certified by the Federal Ministry of Finance, and
  2. Cash advances from the distributors/dealers, and anchor borrower schemes

NAIC-NPK and the Blending Plants will only sell to a state government an amount of Fertilizer that corresponds to the value of its certified ISPO by the Federal Ministry of Finance. Some State Governments have chosen to pay cash up-front, like the distributors/dealers.

This factory price of ₦5,000 per 50kg bag at which the blending plants are mandated to sell to the up takers covers all costs to the blending plants - labor, cost of production, cost of packaging, interest costs (the 9% interest on the capital), etc, alongside a modest profit margin. The price modeling of the PFI was carefully done such that the 5,000 factory selling price covers the complete cost of production (recall that this is possible on account of the generous discounts already negotiated by FEPSAN with the raw materials’ suppliers).

Conclusion

The Presidential Fertilizer Initiative Program is a new approach to fertilizer supply and distribution introduced by President Muammadu Buhai to ensure supply of adequate quantity and quality fertilizers to Nigerian farmers on time and at affordable price. The main objective is to stimulate food and cash crop production for increased economic growth through agriculture as means of diversifying the economy from complete reliance on a mono product – petroleum. The program which has already started with eleven blending plants is aimed at ensuring adequate supply to the up takers thereby providing quality and affordable fertilizer to farmers to improve production in the farming season and making sure the initiative is growing the economy and improving food production across the country.

All hands are on deck to see that the program succeeds. The Federal Government, OCP SA, the Presidential Committee on Fertilizer Initiative (PCFI), NAIC-NPK Limited, FEPSAN, and other stakeholders involved are working to achieve the set objectives of the program. 

World Food Day 2017

fepsanfoodday3

57th Independence

happynigeria

Messages to Farmers

  • Apply fertilizer wisely to avoid wastageAttend trainings on fertilizer use and application
  • Early purchase of fertilizer saves money
  • Buy your fertilizers from the open market
  • Obtain quality fertilizers from reputable suppliers especially FEPSAN members
  • Store unused fertilizer away from children, fire, rain and entry of foreign material.
  • Form groups/associations to benefit from group/association dynamics
  • Allow your crops to fully mature to get quality and value
  • Report adulterated fertilizer to the appropriate authority

Upcoming Events

  • 3rd AFAAS Africa-Wide Agricultural Extension Week 2017, Date: 30 October to 3 November 2017. Venue: Durban, KwaZulu Natal, South Africa.  Read more
  • IFDC International Training Program, Date: November 6-10, 2017, Venue: Arusha, Tanzania. Read more
  • 5th Addis Agrofood Agriculture, Agricultural Machineries, Food, Food Technologies and Packaging Exhibition, Date: 08-11 December 2017, Venue: Addis Ababa, Ethiopia. Read more
  • Argus Africa Fertilizer 2018, Date: 26-28 February, 2018, Venue: Addis Ababa, Ethiopia. Read more

Mission

To provide a platform for the stakeholders in the public and private sectors of the fertilizer industry to develop effective public private partnerships in order to ensure timely supply of adequate quantity and quality fertilizers; and to promote professional, moral and ethical practices in the industry.

Vision

Attain improved productivity and environmental sustainability of Nigerian Agriculture through balanced and judicious use of fertilizers....Attain improved productivity and environmental sustainability of Nigerian Agriculture through balanced and judicious use of fertilizer...................................................................................................................................................................................................................................................................................................................................................................................................................................................................

Contact

2nd Floor Bank of Industry Building
18 Muhammad Buhari Way, Kaduna, Nigeria.
Mobile: +234 (803) 3174409
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2nd Floor Bank of Industry Building 
18 Muhammad Buhari Way, Kaduna, Nigeria. 
Mobile: +234 (803) 3174409...................sssss