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“I lay hands on this fertiliser and declare that you shall grow and not die”
Anyway, Uche Orji, the CEO of NSIA, read the tweets and reached out
saying he wanted, not to try to change my mind, but to present their own
side of the story. A very long (and very polite) phone conversation later, I
feel it is good and proper to share what he told me. Since I have already
said my piece on twitter, I won’t add to what he said — I will simply
present what he told me below (I took notes during the call) so you can
decide for yourselves and more importantly, to aid understanding
around this matter in any way I can.
. . .
The History
Some agriculture masterplan somewhere in Nigeria from a while ago
had plans for fertiliser blending plants across the country. 32 of such
plants were established but as with many other things in Nigeria, they
have since been abandoned. He said he toured them and they were basi-
cally abandoned buildings with broken windows and everything else.
But he also said, surprisingly, he found that the machines were actually
ok and could be restarted at very little cost.
“I wore this because they told me it can start raining anytime in Nigeria”
Phosphate is the trickiest bit of the blending because Nigeria has to im-
port it and getting it isn’t that easy. There’s also urea which curiously is
produced in Nigeria by Indorama but exported and then Nigeria imports
urea from Belarus and other places. Anyway, the Moroccans (who are
looking for something) promised President Buhari a guaranteed supply
of phosphate at reduced prices. This guarantee meant that blending in
Nigeria became possible again — with phosphate from Morocco and urea
from Indorama, most of what was needed was sorted.
Pricing
Once the supply of inputs was in place, they built a pricing model and ar-
rived at N5,000 per bag. He said that this price allowed NSIA to make 5–
7% margin on each bag. The blenders were then allowed to add N500
per bag as their own margin for a total of N5,500 per bag. Before all of
this, fertiliser was averaging N11k per bag in 2016. I give NSIA credit
here — they de\nitely brought down the price of the product. Some
farmers paid more than N5,500 for a bag but he says it was mostly in ar-
eas where the blending plants had not yet been rehabilitated.
So if NSIA had built in a pro\t margin into each bag, how did they man-
age to sell fertiliser that cost them N33.5 billion for N31.4 billion accord-
ing to the accounts? He said that Nigeria happened.
He said that their \rst cargo came in February and the ship was o`-
loaded within 10 days and distributed to the blending plants across the
country. At this point the model was working and they were making a
pro\t. But then the rainy season came and messed everything up. It
turns out that the Apapa Port has no canopy facilities to oaoad dry bulk
goods. The phosphate from Morocco comes dry and absolutely has to be
discharged under dry conditions. At one point they were unable to dis-
charge for 45 days because the problem also a`ected wheat and other
dry stu` and of course the Apapa trailer problems causing all sorts of
delays.
Other problems also showed up. He said that the economic recession in
2016 meant that almost no truck was imported into Nigeria in that year
meaning they struggled to \nd any extra trucking capacity to move
goods across the country. The Mokwa-Jebba Bridge collapsed a few days
ago (click link for photos) but it also collapsed last year (more photos in
link) and was ‘\xed’. This bridge serves as an important link between the
north and the south of the country and it caused them severe delays
added to the ones at the port. In their N5,000 per bag model, they had
built in N450 per bag for transportation. All these issues wiped out their
margin and led to it costing them about N5,200 per bag which translated
to the N2.1 billion loss they made selling the product.
He mentioned that even with all that, they had some stock unsold as
they were able to supply more than the market demanded.
As to the logistic challenges. They tried using the trains o distribute the
product from Lagos to Funtua but it took 20 days to get there. He said the
people in Funtua saw a working train for the \rst time in about 30 years.
This is obviously not a sustainable solution so they have also been trying
out the Onne Port as an alternative to Lagos. While it is a marginal im-
provement on Lagos, it comes with its own challenges. For one thing,
Onne is set up for oil and gas so they have had to make adjustments for
shipping in dry goods. They have so far been able to discharge 42,000MT
from there. Warri is not an alternative as there are so many oil pipelines
under the water meaning a ship carrying that weight cannot dock there
(it needs a clearing of 12 metres and Warri only provides 6 metres). Cal-
abar also has similar issues with the waters not deep enough.
But something he did not say occurred to me as we spoke. His \rst de-
gree was in chemical engineering which gives him a bias towards a
project like this. He spoke in very technical terms about petrochemicals
that made me realise that it de\nitely infuenced him in taking on this
project. Before leaving Nigeria, he also worked at the National Fertiliser
Company of Nigeria (NAFCON) during his NYSC. So he sees petrochemi-
cals as a platform industry playing an important role in the economy. I
will explain this further below. But suFce to say, this is a fairly big part of
the reason why the NSIA is doing this.
I asked him how much of his time as CEO of NSIA is being taken up by
the fertiliser project and he was honest enough to admit that it took up
far too much of his time in 2017. As you can see from the detail de-
scribed above (the call lasted 1 hour and 36 minutes), for the CEO of
NSIA to know the intimate details in this way surely means he spent a lot
of his time on it. But he also said 2018 has been much better and he’s so
far been spending much less time on fertiliser.
I also asked about the $3.7 billion deal OCP signed with Ethiopia in 2016
to build a fertiliser plant there. I wondered if there was an overlap with
the smelly ammonia plant he’s planning for Nigeria and he explained
that the fertiliser plant is mostly to meet Ethiopia’s local consumption.
“Trust me, once you close your eyes and think happy thoughts, ammonia actually smells
like perfume”
The point of all this is to say that even if the fertiliser project is a political
one, Uche Orji (the chemical engineer) is quite passionate about it. So,
however the decision was made to get NSIA into the fertiliser business,
he was willing to do it. It was not something that was forced on them in
my view — the whole business of mixing urea with phosphate and mak-
ing smelly ammonia is something that he cares about a lot professionally.
He did not tell me this part — it is my own conclusion I arrived at from
the conversation.
. . .
Does this answer the questions about NSIA doing fertiliser runs? I leave
that to you to judge. But he said he simply wanted to explain the NSIA’s
side of the story and accepted that asking questions as to why they are
doing this is very valid (I say again that he’s a very polite guy and even
though I took a dig at him in my 2012 post, we simply laughed it o`).
FF