NIGERIA: SUBSIDIZED FERTILIZER RARELY REACHES FARMERS

UNCLAS SECTION 01 OF 02 ABUJA 002169 SENSITIVE SIPDIS DEPARTMENT FOR EE/TPP/ABT/ATP SPECK DEPT PASS TO USTR-AGAMA TREASURY FOR PETERS AND HALL DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ ANESA/DHARRIS USDA/FAS FOR MAURICE HOUSE, DOROTHY ADAMS E.O. 12958: N/A TAGS: EAGR ECON ETRD EAID EFIN PGOV NI SUBJECT: NIGERIA: SUBSIDIZED FERTILIZER RARELY REACHES FARMERS ¶1. (SBU) Summary: Systemic corruption squeezes poor farmers' access to desperately needed fertilizer. Despite Nigerian government (GON) claims to the contrary, subsidized fertilizer most often ends up in the hands of crooked and politically connected middlemen. The final result is high fertilizer prices, poor farm yields and widespread corruption. End Summary. Fertilizer Problem -------------- ¶2. (U) On October 20, Minister for Agriculture and Water Resources Sayyadi Ruma told the media that failure to deliver fertilizer, seeds, chemicals, pesticides and tractors to farmers on a timely basis were largely the reason for poor agricultural yields. According to media reports, Nigeria ranks among the lowest per capita fertilizer consumers in the world. Farmers use one million metric tons of fertilizer per year, while demand is 3.7 million metric tons. Average worldwide rates are 93 kg per hectare and Nigeria is woefully behind with 13 kg per hectare. Who Gets the Fertilizer? -------------- ¶3. (U) The GON's inability to efficiently distribute subsidized fertilizer was a major constraint on grain production growth in ¶2008. Fertilizer is subsidized heavily by both the federal and state governments and all chemical fertilizer is imported. The GON's fertilizer policy is that farmers and cooperatives directly receive fertilizer; however, in practice, subsidized fertilizer is often sold to middlemen with political connections (most who have no farming operations),who then resell into the open market at a much higher price, pocketing the difference. According to agricultural experts, in 2008 subsidized fertilizer was sold by state governments between 1,000-2,000 naira ($8.50-$17) per 50 kilogram (kg). Most farmers were unable to purchase subsidized fertilizer and had to buy it in the open market at prices between 4,500-5,000 naira ($38-$43) per 50 kg. ¶4. (SBU) On October 15, EconOff and Agricultural Attach (FASOff) visited Golden Fertilizer Company Ltd (GF),one of three fertilizer importers with a contract to supply the GON. GF has offices in Kano and Lagos, and imports fertilizer from the U.S., Ukraine, Russia, �0A;Spain, Greece and Trinidad and Tobago. (Note: The other two import companies are TAK Continental and Federal Super-phosphate Fertilizer Company Ltd. End Note.) In 2008 GF imported fertilizer that the GON distributed to state governments for resale at subsidized prices. GF commented that over 70% of subsidized fertilizer sold to the federal and state governments was resold onto the open market at predatory prices due to unethical distribution methods. Despite the corruption, there were a small number of states such as Jigawa, where large amounts of subsidized fertilizer reached the farmers directly. ¶5. (U) Fertilizer quality is also a major problem, according to agricultural experts. Importers have reported that some companies are importing fertilizer, blending it down and adulterating it, then repackaging it in original or similar bags. As a result, this fertilizer is much less potent and has resulted in many farmers complaining of poor yields after applying fertilizer. Due to insufficient supplies and substandard fertilizer, among other factors, current corn yields in Nigeria remain at 1.5 metric tons per hectare, compared to nearly 10 in the U.S. Farmers Shift Planting Methods -------------- ¶6. (U) Farmers employ different methods to cope with insufficient amounts and/or poor quality of fertilizers to maximize yields, including shifting the crops they plant, intercropping, or double cropping. Reportedly in 2008 this has led to many farmers switching to plant more fields with grain crops, such as sorghum or rice, because these plants need less fertilizer. Also more farmers are planting legumes such as groundnut or soybeans either directly between rows of mostly corn (intercropping) or directly after harvesting corn (double cropping). Legumes put nitrogen back into the soil, lessening the need for fertilizer. The Future of the Fertilizer Business -------------- ¶7. (U) President Yar'Adua has highlighted the need for improving the agricultural sector in his Seven Point Agenda. On October 21, ABUJA 00002169 002 OF 002 Minister of Agriculture Ruma told the media that the federal government is considering ending direct fertilizer purchasing. He said this policy shift would reduce inefficiencies and allow the private sector to import more and provide greater supplies. Concomitantly, the GON is "making efforts to promote private sector participation, private sector manufacturing of fertilizer" as well as provide "support and incentives that are needed to sufficiently empower farmers." ¶8. (U) In 2005, the company Notore purchased the defunct National Fertilizer Company of Nigeria (NAFCON) plant near Port Harcourt. The company plans to produce half a million tons of urea initially and hopes to start up the plant at the end of 2008. If the plant starts production a large number of Nigerian farmers would benefit. The plant would be the only urea fertilizer plant in Sub-Saharan Africa. ¶9. (U) Comment: Limited availability of fertilizer for Nigerian farmers is a major constraint on growth in grain production. The 2008 harvest was better than 2007 but that was due to favorable rain patterns, not more fertilizer application. Every year, the GON promises better fertilizer delivery, attention and resources for the agricultural sector; however, much of the benefit of subsidized fertilizer has yet to reach the farmers. ¶10. (U) This message was coordinated with ConGen Lagos. SANDERS