The Nigeria Sovereign Investment Authority (NSIA) has said it is in talks with other suppliers of potash, as part of efforts to avert disruption to fertiliser supply as the Russia-Ukraine war tightens global supplies of commodities.
Fertiliser prices have reached new record highs as global supplies are hit by multiple factors, including reduced supplies from Russia and Belarus, disruptions to the supply chain, and a China export ban.
Russia and Belarus are the world’s second and third largest suppliers of potash – a key ingredient for fertiliser – after Canada, but the invasion, which started in February, is making global supply difficult and threatening the fertiliser supply and ultimately the entire food chain.
“For fertiliser, there is no sugarcoating it, there’s a problem. But it’s not a problem for now; it’s a problem for later. And it’s because Russia is at war with Ukraine, and our potash comes from Russia,” Uche Orji, chief executive officer of NSIA, told BusinessDay.
Prices of raw materials that make up fertiliser, including ammonia, nitrogen, potash, urea, phosphates, sulphates and nitrates, have reportedly risen 30 percent since the start of the year.
And as the global supply of fertilisers and fears of a looming food crisis heighten, Nigeria is one of those countries which now have to contend with possible shortages as it depends on Russia for potash to blend fertiliser locally.
Orji said, “For phosphate, we went through our normal circle earlier in the year, locked in five vessels of potash from Morocco – and we also normally get about five vessels of potash from Russia yearly.
“Two vessels of phosphate have arrived, one arrived in Lagos last week, another one arrived in Port Harcourt last Sunday, and three more vessels are coming. By this deal, the price has been frozen, and it’s a deferred payment; so, we don’t need to pay them until the end of the year, which makes it a fantastic deal.
“However, where we have a real problem is potash, this one that comes from Russia. Almost one-third of the world’s potash comes from Russia and Belarus.”
Russian fertiliser companies have not been hit with sanctions, but a number of their executives connected to the industry have been placed on sanction lists, and the country’s industry and trade ministry recommended in March that its producers temporarily halt fertiliser exports.
Belarus, which exports potash through Lithuania ports, was hit with export sanctions because it permitted Russian troops to stage and enter Ukraine across its borders.
BusinessDay learnt that the Russia-Ukraine war has put Nigeria’s fertiliser industry in a dire situation as some four vessels carrying raw materials have been trapped.
But Orji denied this in an interview with BusinessDay, saying: “For potash, there are no four vessels; what happened is that we have LCs (letters of credit) that we normally open early in the year. The LCs were opened and in the process of advising the LCs, Russia invaded Ukraine, the central bank assets of Russia were frozen, and they really can’t deal with anybody, and those LCs were cancelled.
“There are no four vessels, we were not even at the stage of vessel nomination. The trading process is that you have an LC, you open it, then you go and look for vessel.
“The LCs that were opened were well-advised, price negotiated, but once the war broke out and the assets of Russia frozen, those LCs had to naturally terminate because no bank will touch it.”
Orji, however, believes that in view of the level of talks between the NSIA and other sources, including Canada and Jordan, the availability of raw materials for fertiliser may not be much of a problem in the near term.
He said, “At the moment, we are chasing 10 different leads on potash like the whole world is chasing potash, and we are not the only ones.
“I am almost very confident that we will start getting fertiliser even from Russia in the next six weeks. But again, the problem is the price. The price of fertiliser is directly correlated to the price of natural gas.”
“Unless you have been living under a rock, you’ll know that natural gas is a big problem. Fertiliser companies in Europe are closing down because of the price of natural gas. Two companies closed down last year in the UK; so when people try to make it a Nigerian problem, I say no it’s global,” Orji added.
Read also: Fertiliser prices double in threat to Nigeria’s food security
According to him, the NSIA, through the Presidential Fertiliser Initiative, which it manages on behalf of the government, has restructured and stabilised Nigeria’s fertiliser industry, cut huge subsidies and arbitrage, and turned it to profit after years of losses.
The NSIA, which is solely responsible for bringing in the components needed for fertiliser, entered into an agreement in 2017 with Morocco for the offtake of Di-ammonium Phosphate at a concessionary price.
Reeling out the successes achieved so far, Orji said: “There was so much fertiliser last year, there is almost enough to make 400,000 metric tonnes or almost a million bags equivalent in the system.
“In the five years we have run this programme, we have not lost one naira. Last year, the Presidential Fertiliser Initiative turned a surplus of over N10 billion from an annual deficit of N70 billion and huge subsidies before we took it over.
“We started with four blending plants to 70. In the first year, we revived an additional seven, bringing us to 11. Now there are 70 blending plants on the programme this year as we speak.
“In the year we took it over, the programme had a subsidy deficit of N70 billion; in the next year, we cut it down to N2 billion, and then surplus subsequently. But now, it’s completely democratised; anybody can come in, and there’s competition.”
He said one of the things the NSIA changed last year was to sanitise the entire system.
“Some people used to use the name of Presidential Fertiliser Initiative to commit all manner of things, including adulterating the fertilisers. So many of them were just producing rubbish and just putting President Buhari’s face on the bags to sell. We told them to remove it, go and sell your own brand, and that cut down adulteration,” he added.
