The global fertiliser industry is reeling from impacts of the Russia-Ukraine crisis, but for Nigerian farmers, fears of disruptions to the supply chain are being allayed with the Dangote Fertiliser Plant, being inaugurated today.
The phase one of the plant was estimated to cost $2.5 billion and is expected to manufacture three million metric tonnes per annum of urea.
The capacity is to be expanded to produce multi-grades of fertilisers to meet soil, crop and climate specific requirements for the African continent, according to a project fact sheet shared with BusinessDay and quoted in a July 2020 report.
Farmers and agric industry players interviewed at the time, two years ago, were optimistic it would be a game-changer when it started operations.
In recent interviews ahead of the inauguration, the optimism remains, except with a bit of caution now as pricing takes priority.
“I am still optimistic about it if Dangote is passionate about the country,” said Africanfarmer Mogaji, chairman, Agric & Agro-Allied Group, Lagos Chamber of Commerce and Industry.
The optimism he expressed in a recent interview builds on his previous position that the Dangote plant “will be a game-changer in the agric space when it takes off.”
Gideon Negedu, executive secretary, Fertilizer Producers and Suppliers Association of Nigeria, told BusinessDay that the fertiliser plant had been operating since last year, and the industry had been better for it.
A 50kg bag of urea fertiliser currently retails around N17,000 as prices continue to increase from N11,000 last year. Several factors have pushed prices up, and even when Dangote fertilisers hit the market earlier, pricing was at par.
Read also: Five challenges that will impact Nigeria’s 2022 agric output
However, BusinessDay learnt it helped to offset gaps that would have been created by a major local producer that preferred to export instead. The Dangote plant plans to export too, but farmers expect the local market to benefit significantly.
“Three million metric tonnes will flood the market with urea if the price will be affordable,” said Kabir Ibrahim, president of All Farmers Association of Nigeria (AFAN). “When it starts full production, we hope the market is impacted.”
In 2018, the West African Fertiliser Association put fertiliser consumption in Nigeria at 1.4 million metric tonnes, whereas the country has an estimated demand of six million metric tonnes, according to a presentation by Negedu, retrieved online by BusinessDay.
Farm output in Nigeria ranks poorly for most crops, and while output is not entirely due to fertiliser, its usage or non-usage contributes significantly to farm productivity. Generally, fertiliser usage in Nigeria is low, attributed to many factors but prominently, cost of acquisition.
In June 2006, part of the resolutions adopted by the African Union Special Summit of the Heads of State and Government in the famed ‘Abuja Declaration on Fertilizer for the African Green Revolution’ sought to increase fertiliser usage across the continent from 8 kilograms to 50 kilograms of nutrients per hectare by 2015. It is presently estimated that Nigeria only uses about 23kg (less than 50 percent of this target).
Since initial announcements that the Dangote Fertiliser Plant will come on stream (in 2021), farmers have been hoping that their days of struggling with expensive and inadequate supply of fertilisers, which at times also come at inferior qualities, would finally be over. For the Dangote fertiliser to make the desired impact, however, pricing remains key for farmers.
“It can’t change anything,” said Olufemi Abioye, who heads the Igangan Agropark Investors Association, with 39,000 hectares under Oyo state. Considering the current prices for fertilisers, he thinks it will take nothing short of a miracle for the Dangote fertiliser to make a difference.
“Right now, the prices are very much at par, but in terms of increasing supply, yes (this would be an impact),” said Negedu. According to him, it has been a trying time within one to two years to genuinely access the impact of such an investment, given that global prices have also gone up and pressures coming from the backlog of demand due to COVID-19. In terms of availability of the stock, it has increased supply, he emphasised.
As Mogaji explained, the dynamics affecting the Dangote business like others in Nigeria, particularly logistics, would be reflected in how the fertilisers are eventually sold.
For AFAN’s Ibrahim, diesel is now about N800 per litre, which means to get the fertiliser from the plant in Lagos to Katsina (where he is based, for instance) could push transport cost alone to about N1 million.
When this is factored into the price of the fertiliser, it could then go up to about N20,000 per bag, he said.
“Let us wait for the formal commissioning, see what it has to bring out and what the market forces determine in the future,” said Ibrahim.
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