After deliverying solid achievements in four years of the Presidential Fertilizer Initiative (PFI), the Nigerian Sovereign Investment Authority (NSIA) has restructured the programme.
The PFI was aimed at ensuring0p domestic capacity for production of fertiliser, specifically NPK 20:20:10 for delivery to farmers ahead of the wet farming season.
Under the restructured arrangement already approved by the Presidency to take effect in 2021, the sovereign wealth agency has assumed the role of upstream operator, to limit its involvement to importation, storage and wholesale distribution of raw materials to blenders.
The approval, which takes effect immediately, was communicated to the NSIA in a letter through the Office of the Chief of Staff to the President (OCOS) since November 2020.
The restructuring, the agency said on Tuesday in Abuja, is part of the steps to implement the backward integration strategy of the government towards the domestic production of key inputs, including Ammonia.
The restructuring exercise is to ensure the PFI was more sustainable considering its successes and impact over the last four years.
A review of its achievements over the period showed the production of over 1.5million metric tons (about 30 million of 50kg bags) of NPK 20:10:10 blend of fertilizer, resulting in the price reduction on fertilizer from over N10,000 per bag to below N5,5008.
Also, the NSIA resuscitated 41 fertilizer blending plants across 17 states from initial four plants at the inception of the project, while an estimated 250,000 direct and indirect jobs were created across the agriculture value chain.
The jobs included in the areas of logistics, ports, bagging, rail, industrial warehousing, and haulage touchpoints, amongst others.
The agency also realized foreign exchange savings in excess of $350million from erstwhile payments on subsidy on fertilizer and import substitution policies of the federal government.
Consequently, the NSIA ensured food security by facilitating increase in domestic food production through the provision of affordable, high quality fertilizer to farmers.
On NSIA’s new role as an upstream player under the PFI transition, its subsidiary, NAIC-NPK Limited would be transferred to the Ministry of Finance Incorporated (MoFI).
Under the new arrangement, blenders would be responsible for bulk of the activities in the fertilizer production value chain, such as the transportation of the raw materials, sourcing filler, blending the fertilizer, and selling to off-takers.
The blenders would no longer be paid blending fees by NAIC-NPK, as they are expected to recover their costs directly from selling the fertilizer to the market.
“This will balance the incentives of the business and ensure the blenders build the right capacity to actively participate in the local supply sub-sector”, the NSIA clarified on Tuesday.
Blending plants, the NSIA said, would provide bank guarantees to cover requisitioned raw materials demand appropriated for their respective production volumes.
In addition, the Federal Ministry of Agriculture and Rural Development (FMARD) would perform its statutory roles of monitoring and quality control over the blenders’ activities.
In line with the Presidential directive, the Federal Ministry of Finance Budget and National Planning (FMFBNP) and the Central Bank of Nigeria (CBN) are to engage commercial banks to facilitate lines of concessionary credits to blending plants for the purchase of raw materials.
The CBN would also ensure that the foreign exchange needed for the programme was provided as and when needed to cover some raw materials.
The NSIA said the benefits of the new approach include unlocking more development finance (loans and investments) into the country’s local fertilizer blending value chain strengthening of market systems and encouraging actor participation.
This, the agency said, would potentially result in mergers and acquisitions as well as innovation and growth across the industry, to the benefit of farmers.
Again, it would result in the reduction of food price inflation in the market as the availability of fertilizer would drive down the cost of food products.
The Chairman, Implementing Committee of the PFI and Jigawa State governor, Mohammed Badaru noted the programme’s impact, by augmenting the present administration’s policy to diversify the Nigerian economy.
Badaru said the programme has bolstered Nigeria’s industrial base, resuscitated and strengthened domestic production capacity for fertiliser, eliminated to the huge fertiliser subsidy burden on the government, created thousands of direct and indirect jobs and alleviated the plight of the domestic farmer by ensuring availability of fertiliser.
“Clearly, the programme is a strong value proposition for the nation in the agriculture space given the variety of socio-economic benefits it presents. We are grateful to Mr. President for creating this programme and look forwards to supporting the next phase as it evolves,” the Chairman said.
The Managing Director and Chief Executive Office of NSIA, Uche Orji said, with the support of President. Muhammadu Buhari, the programme has accomplished its principal objectives.
“Having fulfilled the establishment, stabilization, and market discipline phase of PFI, the primary objective of which was to revive the blending plants and create a viable domestic blending industry, we (NSIA) believe the PFI should gradually evolve into the next phase, which is a tactical withdrawal of intervention in the industry and the emergence of a self-sufficient, sustainable, and efficiently operated market.
“NSIA is pleased with the government’s decision and looks forward to seeing the innovation and creativity which will characterize the open market in the sector”, Orji said.
Chairman, Fertilizer Producers and Suppliers Association of Nigeria (FEPSAN), Thomas Etuh, described the restructuring of the PFI as a welcome development for the group, adding that the new approach would afford operators the opportunity to build recognizable and trusted brand while ramping up distribution nationwide,” Etuh said.