This move may violate a 2022 agreement with Nigeria's security services.
This move may violate a 2022 agreement with Nigeria's security services.
Urea is a vital commodity for Nigeria's agriculture and economy, making it a sensitive and strategic resource.
As the sole producer of urea in West Africa, Nigeria supplies a significant portion of its neighbours' needs. However, the substance is also in high demand by private firms and federal states, while security services work to prevent it from falling into the hands of criminal and jihadist groups, who use it to manufacture explosives.
Dangote Fertilizer, which is owned by the Nigerian businessman Aliko Dangote, and Indorama, owned by Indonesian businessman Sri Prakash Lohia, dominate the urea market in Nigeria.
Notore Chemical Industries, a Nigerian company, has experienced a significant decline in production in recent years. Combined, Notore, Dangote Fertilizer, and Indorama Eleme Fertilizer & Chemicals Limited (IEFCL) have an annual capacity of nearly 6 million tonnes from their southern Nigeria facilities. However, this year, they have failed to supply Nigeria's 36.5 million farmers with the necessary urea granules, potentially violating a March 2022 agreement.
The confidential document, seen by Africa Intelligence, mandates Dangote and Indorama to reserve at least 35% of their production for the Nigerian market.
On February 13, Munish Jindal, the Indian CEO of IEFCL, faced scrutiny at the federal agriculture ministry in Abuja. He reported selling approximately 90,000 tonnes of urea locally since the start of the year, valued at $31.5 million.
But Africa Intelligence's sources say his firm sold nothing to its Nigerian customers in January.
In early February, Indorama's fertilizer marketing manager, Surendra Srivastava, offered a mere 7,000 tonnes of fertilizer to blenders via WhatsApp groups, a fraction of the company's daily production capacity. Despite this, CEO Munish Jindal maintained that 90,000 tonnes of urea were sold between January and February, attributing the discrepancy to higher customer orders.
Market manager Malolan Sampath reported selling 10,000 tonnes in January and 7,000 tonnes in February, acknowledging some confusion but claiming no shortages from March onwards. However, Nigerian officials pointed out a significant shortfall of nearly 83,000 tonnes of fertilizer. Notably, Indorama's plant, which plans to expand its production capacity with a third train in the near future, has the capability to produce 250,000 tonnes of urea monthly, valued at $87.5 million at February's market price.
The IEFCL plant, which employs over 1,200 people, attributed its erratic production cycles to gas supply issues, despite CEO Munish Jindal denying any technical problems. However, IEFCL is not the only company contributing to the urea shortage. Dangote Fertilizers failed to supply any urea to the local market in January and February, with its Indian CEO Vishwajit Sinha citing gas supply difficulties as the reason.
The Fertilizer Producers and Suppliers Association of Nigeria (FEPAN) and the Nigeria Agro-Input Dealers Association (NAIDA) are outraged over the shortage, questioning the figures provided by Indorama and accusing both companies of prioritising exports over the domestic market.
The government considered investigating but ultimately decided against it after meeting with Indorama's management in March. The two fertilizer giants are suspected of orchestrating shortages to export more and capitalize on scarce foreign currency in Nigeria and sanctions against Russia, the main urea supplier to West Africa.
The industry is divided on geolocating containers, with Indorama ignoring the request.
Despite having three factories in operation in the country, Nigeria is struggling to stem the urea shortages.
In 2021, then-President Muhammadu Buhari expressed confidence in the ability of three firms - Indorama, Dangote, and Notore - to produce sufficient urea to meet Nigeria's domestic needs. As a result, he removed urea from the Presidential Fertilizer Initiative, a program established in 2016 to distribute fertilizer stocks nationwide.
However, the amount of urea available for the local market plummeted by nearly 500,000 tonnes between 2022 and 2023, indicating a significant shortage.
The PFI was established by the government to provide quality fertilizers to farmers across Nigeria at low rates.
On January 30, 2024, SaharaReporters reported that the Anchor Borrowers’ Programme under the Development Finance Department of the Central Bank of Nigeria was dogged by corruption, according to sources.
Also, the former Chairman of TAK Agro Group, Thomas Etuh, was accused of benefiting from the fraud and diverting proceeds from the sale of fertilizer under PFI in connivance with others.
Before the introduction of PFI by Buhari’s government in 2016, Nigeria heavily relied on imported fertilizer, which means that farmers bought it at a high cost while it also burdened the national economy.
Under the PFI, the required raw materials for NPK fertilizer – including locally sourced urea and limestone granules, as well as imported phosphate from Morocco and potash from Europe – are to be procured at reduced rates and made available to private blending firms responsible for manufacturing the final products.
However, sources said TAK, a major player in Nigeria's NPK fertilizer industry operating multiple blending plants across the country, produced substandard fertilizer for farmers.
In 2022, Singapore-based chemicals and fertilizer major Indorama acquired a 51% stake in TAK Agro & Chemicals.
With this deal, Indorama gains direct access to the NPK fertilizer market in Nigeria but SaharaReporters learnt that the management of the foreign company was shocked by the rot in the indigenous company.
Indorama was not totally new to the system; it had been supplying urea to support the PFI and private blenders since 2017.