May. 14, 2019
Demand for fertilizer is growing across the African continent, but a longstanding reliance on imported materials has kept prices prohibitively high for medium-to-small agriculture enterprises and as a result slowed domestic food production in many nations. With its well-developed oil and petrochemical refineries, Nigeria is well-positioned to serve this unmet demand, and multiple ambitious projects are now looking to boost domestic production with the aim of creating an export market that will have a resounding impact on the nation's economy.
In February 2017, then-Nigerian President Muhammadu Buhari launched the Presidential Fertilizer Initiative (PFI) with the goal of boosting local production to 1 million metric tons of blended nitrogen, phosphorus, and potassium (NPK) fertilizer for wet season farming and an additional 500,000 metric tonnes for dry season farming. The PFI initiative also sought to revive 12 shuttered fertilizer-blending plants, bringing a total of 23 plants back online in order to reduce operating costs for domestic farmers and end reliance on imported products. Though the Nigerian economy is driven mainly by oil production, agriculture currently accounts for about 20% of the nation's GDP and state support for the sector could provide much-needed financial opportunities for rural communities.
The initiative comes at a crucial period for the African continent, where annual fertilizer consumption is expected to reach 13.6mmt of nutrients by 2030, up from 7.6mmt in 2018. The continent is home to some of the largest tracts of uncultivated arable land in the world, and fertilizer use is growing rapidly in East and West Africa as citizens move away from dependency on substance farming toward larger agriculture companies seeking to boost crop yields to serve growing urban populations. Though Nigeria was once a net importer of fertilizer, domestic production has steadily grown over the years and, in 2017, the nation exported around 700,000 tons of fertilizer to West African nations, as well as, markets in North and South America.
Moving in step with the Nigerian government's initiative to close the demand gap, several private enterprises are investing in domestic fertilizer production. High profile projects include one by Africa's richest man, Aliko Dangote, who is developing a 1.5-million-ton fertilizer plant near Nigeria's largest city, Lagos. As part of his USD15 billion investment in Nigerian oil, gas, and petrochemicals, Dangote is building one of the world's largest oil refineries, which will be linked with a USD2.5-billion fertilizer plant on the same site. Expected to open in 2019, the plant will produce synthetic urea—a key ingredient for low-cost nitrogen fertilizers—and is designed to produce 3 million tons of it per year, nearly meeting existing demand from every farmer across Africa.
Dangote's fertilizer plant is part of the enterprise's broader effort to encourage domestic food production as low crop yields have forced Nigeria to spend about USD6 billion on annual food imports. The company is currently investing USD5 billion in domestic rice, sugar, and dairy products.
“Why are we still importing most of our food in Nigeria?" asked Devakumar Edwin, an executive director for Dangote Industries Ltd., in an interview with Bloomberg News. “Agricultural activity will grow and demand for fertilizer will grow."
Singapore-owned Indorama Eleme Fertilizer and Chemicals LTD is also expanding its fertilizer production in Nigeria, seeking to double its domestic plant output of urea fertilizer to 2.8 million tons per year. In May 2018, the African Development Bank approved a USD100-million loan for Indorama to boost capacity, which company executives say will target export markets and help drive down prices for domestic consumers. To date, Indorama has invested USD3.2 billion in its Nigerian operations, and has entered several public-private partnerships, most notably in a joint venture to build a multi-purpose port terminal in Port Harcourt in Nigeria's Rivers state.
Other firms are also looking to expand operations in Nigeria, including the Moroccan fertilizer giant, OCP group, which is currently building two fertilizer-blending plants in the Ogun and Kaduna States that are expected to open in September 2019. With a price tag of about USD1 billion, the two plants will produce soil and crop-specific fertilizers and help OCP move closer to its ambitious goal of cornering 40% of the world's fertilizer market by 2028.