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Cablegate: Nigeria: Subsidized Fertilizer Rarely Reaches Farmers

VZCZCXRO2354
PP RUEHMA RUEHPA
DE RUEHUJA #2169/01 3090801
ZNR UUUUU ZZH
P 040801Z NOV 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4351
INFO RUEHOS/AMCONSUL LAGOS 0196
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

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,
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

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