Following its notable successes and transformative impact over the past four years, the Presidency approved the restructuring of the Presidential Fertiliser Initiative (PFI) programme by the Nigerian Sovereign Investment Authority (NSIA), starting in the 2021 cycle with various modifications.
The PFI was launched in December 2016 by President Muhammed Buhari with the aim of supporting the domestic blending of NPK fertiliser towards reducing the challenges of the Nigerian farmers. The Nigeria Fertiliser Industry possesses a blending capacity of 4 million tons of NPK annually and 2 million tons of production for Urea, with the capacity to employ over 250,000 people both direct and indirect jobs across the country.
Prior to the implementation of the PFI, only 10 percent of the production capacities of the five blending plants in operation across the country were being utilised.
This implies that most of Nigeria’s stock of blended NPK Fertiliser was shipped into the country as fully-finished products, even though Urea and Limestone, which constitute roughly two-thirds of the component of each bag, are available locally. To make the imported Fertiliser available to farmers at reasonable prices, a subsidy scheme was birthed, and which cost tens of billions of naira annually.
One key achievement of the initiative was disclosed by the Nigerian Sovereign Investment Authority, which said it has saved over $350m from the erstwhile payments on subsidy and import substitution through the implementation of the Presidential Fertiliser Initiative.
NSIA is an agency of the Federation set up to manage funds in excess of budgeted hydrocarbon revenues. Its mission is to play a leading role in driving sustained economic development for the benefit of all Nigerians through building a savings base for the Nigerian people, enhancing the development of Nigeria’s infrastructure, providing stabilisation support in times of economic stress.
The Authority commenced operations in 2012, with the inauguration of the Board of Directors on 9th October, 2012. After a series of start-up challenges, the NSIA began investment activities in the 3rd quarter of 2013, with a seed capital of US$1 billion, which was allocated as follows: 20 percent to the Stabilisation Fund, and 40 percent each to the Future Generations Fund and the Nigeria Infrastructure Fund. An additional $250 million was committed to the Authority by the National Executive Council on November 19th, 2015.
The Authority has also begun implementing the directive for the restructuring of the Presidential Fertiliser Initiative.
Under the modifications, the NSIA has been transitioned to an upstream player thereby limiting its involvement to importation, storage and the wholesale of raw materials to blenders.
The NSIA’s subsidiary, NAIC-NPK Limited will be spun off to the Ministry of Finance Incorporated.
Under the new arrangement, blenders will no longer be paid blending fees by NAIC-NPK as they will recover their costs directly from selling the fertiliser 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 Blending plants are expected to provide bank guarantees to cover requisitioned raw materials demand that are appropriated for their respective production volumes.
As part of the new structure and in line with the Presidential directive, the Federal Ministry of Finance Budget and National Planning and the Central Bank of Nigeria are expected to engage commercial banks to facilitate lines of concessionary credits to blending plants for the purchase of raw materials.
It is also expected that the CBN will ensure that the foreign exchange needed for the program is provided as and when needed to cover some raw materials.
The approval, which takes effect immediately, was communicated in a letter through the Office of the Chief of Staff to the President which was issued in November of 2020.
Under the new arrangement, blenders will be responsible for bulk of the activities in the Fertiliser production value chain such as transporting the raw materials, sourcing filler, blending the fertiliser, and selling to off-takers.
Also, the Federal Ministry of Agriculture and Rural Development will perform its statutory monitoring and quality control role over blender activities.
The benefits of this new approach include but not limited to unlocking of more development finance (loans and investments) into the local fertiliser blending value chain of Nigeria.
It would also strengthen market systems and encouraging actor participation. This will lead potentially to mergers and acquisition and innovation and growth across the industry which will benefit farmers.
The new approach would further reduce food price inflation in the market as the availability of fertiliser will drive down the price or cost of food product.
It is also expected to reduce the high rate of unemployment as more people will become engaged in the production process.
In his comment, the Chairman, Implementing Committee of the PFI and Executive Governor of Jigawa State, Governor Mohammed Abubakar Badaru said, “The programme has in many ways served to augment the administration’s policy-driven programmes to diversify the Nigerian economy.
“In the main, the programme has bolstered Nigeria’s industrial base, resuscitated, and strengthened domestic production capacity for fertiliser, eliminated to the huge fertiliser subsidy burden placed on Federal 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.”
Speaking on the development, the managing director and Chief Executive Officer of NSIA said with the support of the President, the programme has accomplished its principal objectives.
He said, “Having fulfilled the establishment, stabilisation, 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 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 characterise the open market in the sector”.
Thomas Etuh, chairman, the Fertiliser Producers and Suppliers Association of Nigeria (FEPSAN) said that the restructuring is a welcome development for FEPSAN.