Nigeria Sovereign Investment Authority, (NSIA), will now import and sell fertilisers wholesale to blenders who in turn will engage off-takers in new modifications to the activities of the Presidential Fertiliser Initiative (PFI).
With this new restructuring of the PFI, the NSIA subsidiary NAIC-NPK Limited will be under the Ministry of Finance Incorporated (MoFI).to further its notable successes and transformative impact over the past 4 years.
The new modification has now changed the role of NSIA under the PFI to an upstream player thereby limiting its involvement to importation, storage, and the wholesale of raw materials to blenders through the NAIC-NPK Limited
Under the new arrangements, Blenders will no longer be paid fees by NAIC-NPK, as they will recover their costs directly from selling the fertilizer to the market.
This will balance the incentives of the business and ensure that the blenders build the right capacity to actively participate in the local supply sub-sector.
Blending plants to provide bank guarantees to cover requisitioned raw materials demand 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 (FMFBNP) and the Central Bank of Nigeria (CBN), 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 (OCOS) which was issued in November of 2020.
Under the new arrangement, blenders will be responsible for the bulk of the activities in the Fertilizer production value chain such as transporting the raw materials, sourcing filler, blending the fertilizer, and selling to off-takers.
Also, the Federal Ministry of Agriculture and Rural Development (FMARD) will perform its statutory monitoring and quality control role over blender activities.
The benefits of this new approach include unlocking more development finance (loans and investments) into the local fertilizer blending value chain of Nigeria and strengthening market systems and encouraging actor participation.
This is expected to lead potentially to mergers and acquisition and innovation and growth across the industry which will benefit farmers while it further the prices of food and the attendant inflation in the market as the availability of fertilizer will drive down the price or cost of the food products.
Another benefit also is the reduction of 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, 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 of NSIA Uche Orji hailed President Muhammadu Buhari’s support to the programme which has helped in accomplishing its principal objectives.
“With the support of Mr. President, 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 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”.
Thomas Etuh, Chairman, the Fertilizer Producers and Suppliers Association of Nigeria (FEPSAN) said, “The restructuring is a welcome development for FEPSAN. The new approach will afford operators the opportunity to build recognizable and trusted brand while ramping up distribution nationwide”.
PFI is a catalytic intervention initiated by the President, underpinned by several policy realignments to revive the nation’s hitherto comatose domestic fertiliser blending industry and the underlying value chain supporting the critical sector.
Designed as a five-year rolling plan in the first instance, PFI consists of five unique stages which combine to augment the country’s domestic industrial capacity.
In the first stage, the President engineered the supply of high-quality raw materials at scale to domestic blenders. Second, the current government’s import substitution programme was scaled and gradually, restrictions were placed on the importation of finished blends of fertiliser.
As the blenders attained financial independence and operational wherewithal, the third stage – a total ban on importation of finished fertiliser products – was then implemented.
Within 4 years of the initiative, the programme delivered on key outcomes including over 30 million bags of NPK 20:10:10 equivalent spanning project period; price reduction on fertilizer from over N10,000 to under N5,500; 41 resuscitated blending plants from an initial number of 4 plants at project inception.
Also, an estimated 250,000 jobs (direct and indirect) across the agriculture value chain including in logistics, ports, bagging, rail, industrial warehousing, and haulage touchpoints amongst others.
It also saves foreign exchanges in excess of $350 million from erstwhile payments on subsidy and import substitution while facilitating food security, increasing domestic food production through the provision of affordable, and high quality fertilizer.