Nigeria’s soaring fertiliser prices lead to second wave of food inflation

Nigeria’s food inflation rate is set to accelerate in the coming months as the country is now experiencing a second wave of high food prices owing to the recent hike in price of fertilisers.

Nigeria’s smallholder farmers are currently grappling with the rising cost of fertilisers – a major input for crop production as average price of a 50kg bag of NPK 15:15:15 – most used type by smallholder farmers — now sells for N16,000 as against N7,500 sold during the dry season farming in January/February 2020. This represents 113 percentage point increase in the price.`

Similarly, the average price of a 50kg NPK 20:10:10 varies between N7,500 and N8,000 as against N6,000 sold in early part of the year, representing 33 percent increase in price. Urea sells for N11,000 as against N6,000 sold earlier in the year, representing 83 percent increase in price.`

Even the Presidential Fertiliser Initiative (PFI) fertiliser sells between N6,500 and N7,000 depending on the location, despite President Muhammadu Buhari announcing that prices of fertilisers under the PFI would be sold for N5,000 as palliative measures for farmers.

“The prices of fertilisers have been surging and the situation has been challenging for farmers because it is even delaying planting,” Abiodun Olorundenro, operations manager, Aquashoots Nigeria, says.

“There is currently insufficient supply of fertilisers in the country. We made an order for several bags of fertilisers from Notore in May and only got our supply in late June. We are still waiting for the third truck. This is unlike before when we placed for an order and got all the following week,” Olorundenro further states.

The initial lockdown to control the spread of the COVID-19 pandemic that has infected 47,290 people and 956 in Africa’s most populous nation obstructed the supply of fertilisers to blending plants, thus causing delays in production, experts say.

Fertiliser contains nitrogen, phosphorus, potassium, and other trace minerals in various chemical forms, according to Science Direct, and it enhances growth and maturity of crops.

“We ran into a big problem because of the COVID-19 pandemic, as fertilisers supply to blending plants were delayed, and there were equally logistic constraints,” notes Gideon Negedu, executive secretary, Fertiliser Producers and Suppliers Association of Nigeria (FEPSAN). “We also had some problems with Indorama, which are the suppliers of Urea under the PFI, as they were forced to shut down operations owing to the pandemic,” Negedu points out.

He stated further that the combination of both factors resulted in an inadequate supply of the product, thus creating a rise in prices across the country.

BusinessDay’s check on Indorama website shows that a 50kg bag of Urea sells for N6,400 as against N11,000 sold by agro-dealers, while a metric ton goes for N114,000.

Jossy Nwocha, head of corporate communications, Indorama, says agro-dealers are the ones inflating prices owing to the surge in demand from farmers.

“The whole scenario is due to what is called market sentiments. Dealers, retailers, and farmers hoard their products to create artificial scarcity to increase the price,” he explains.

As a result, Nigeria is now seeing a second wave of food price increases. Prices of all food items are making rapid climbs and showing no sign of slowing.

In Mile-12 Market in Lagos, a 50kg bag of local parboiled rice now sells between N25,000 and 26,000 as against N23,000 sold a month ago, indicating 9 to 13 percentage rise in price.

A 70kg bag of drum beans now sells for N26,000 as against N20,000 sold last month, indicating a 30 percent price increase.

A 60kg bag of red garri sells for N13,200 as against N9,600 sold last month, a 37.5 percent increase, while a small bucket – popularly called painter – is sold for N1,100 as against N800 sold in July.

Similarly, a 60kg bag of white garri, which was sold N8,400 last month, now sells for N12,000, while a painter sells for N1,000 as against N700 sold previously.

For palm oil, a 25-litre keg now sells for N11,000 as against N8,500 sold in July, representing 29.4 percent increase in price. A 25-litre keg of King Vegetable Oil sells for N14,000 as against N12,000 sold last month.

The general inflation quickens to a 26-month high at 12.6 percent in June, mainly driven by the food inflation index. The composite food index stood at 15.18 percent, 0.14 percent points higher than 15.04 percent recorded in May 2020.

Nigeria had, since 2016, kick-started the PFI, which is in its third stage of implementation to improve the country’s local capacity blend while producing fertilisers to ensure timely supply of the product to farmers and conserve foreign exchange spent on importation of the product. The country currently has 35 blending plants with a blending capacity of about 5 million metric tons.

Nigeria is still not producing enough food to feed its 200 million population owing to inputs challenges and age-old problems in the agriculture sector.

Bismarck Rewane, economist and chief executive of Lagos-based Financial Derivatives Company Limited, a financial consulting firm, said on Channels TV in 2019 that high food prices in Nigeria indicated that the country was not producing enough food for a population growing at 2.6 percent every year.

“What informs rising food prices in Nigeria?” he asked, rhetorically, while explaining Nigeria’s food inflation rate.
“It is either there is high demand for foods or that we are not producing enough. But the answer is that we are not producing enough,” Rewane said.