Africa needs a transformed fertiliser market
by
Photo for illustration purposes. Photo: File
DAVID MALPASS
ONE clear message from my dozen meetings last week with African leaders who were in Washington for a summit with the United States (US) government was that fertiliser prices are out of reach for most farmers, putting the crop cycle and rural stability at risk.
Across 45 countries globally, 205 million people are experiencing acute food insecurity, meaning they have so little access to food that their lives and livelihoods are in danger.
One key obstacle to food production in many developing countries is access to fertilisers, which enrich the soil with the nutrients needed for healthy crops.
Sufficient primary raw materials – nitrogen, potash, phosphate, and natural gas – and fertiliser production facilities are essential to farmers across the developing world, but high fertiliser prices are blocking the 2023 and 2024 crop cycle.
The challenge is particularly evident in sub-Saharan Africa.
Fertiliser prices have tripled since early 2020 and remain volatile, putting a stable supply of fertiliser out of reach of many smallscale farmers.
With agricultural prices high, farmers in more advanced countries can afford to plant more and order more fertiliser, benefiting from subsidies that often cover the cost of the natural gas needed for fertiliser and the diesel fuel needed for farm equipment.
African leaders used the summit to emphasise that farming families in developing countries will not be able to survive, much less compete.
The world's ability to quickly realign energy and fertiliser supply chains in ways that leave room for poorer farmers will be one of the determining factors in the length and severity of the food crisis in Africa and the displacement of rural populations already under pressure from climate change.
This entails substantial change in both advanced economies and developing countries.
The first key step is to leave room for developing countries in global natural gas and fertiliser markets.
Avoiding stockpiling and increases in production should be augmented by efficiency gains and reduced subsidies for consumption.
This applies to many parts of the energy supply chain, and also to fertiliser where application rates are an important part of efficiency.
They are much too low in sub-Saharan Africa, reducing crop yields, while staying wastefully high in other parts of the world despite high fertiliser prices.
This is partly due to crop subsidies.
Sub-Saharan Africa has an average fertiliser application rate of 22kg per hectare, compared to a world average seven times higher (146kg per hectare).
Some countries, such as China and Chile, are closer to 400kg per hectare.
On average globally, less than half of the nitrogen fertiliser applied at the farm contributes to plant growth, with the rest polluting our waterways.
There are several explanations for the excessive use of fertiliser by higher-income farmers.
The canard that more is better is one explanation.
Fertiliser is not a large cost factor given other inputs such as labour and equipment, so the amount being applied is less scrutinised.
Farming practices are hard to change.
Africa produces approximately 30 million tonnes of fertiliser each year – twice as much as it consumes.
And yet, approximately 90% of fertiliser consumed in sub-Saharan Africa is imported, mostly from outside the continent.
This reflects inefficiencies in shipping and port costs, distribution chains, information availability and other trade frictions.
Each factor needs a concerted effort by African nations to fix the system.
Better trade infrastructure and trade facilitation measures such as harmonised rules have an important role.
When technically and economically feasible, local production can complement trade by reducing transport and logistics costs.
A large urea fertiliser plant recently opened in Nigeria to convert natural gas into fertiliser, but a portion is used to subsidise inefficient Nigerian buyers, and a large portion is exported to Latin America, leaving farmers in Africa dependent on other markets.
In the meantime, several external programmes are helping on the margins.
Private fertiliser donations and shipments via the Black Sea Grain Initiative have helped to ease some supply challenges.
Other initiatives include the US$6 billion IFC Global Food Security Platform, which is providing credit access to address liquidity constraints in the private fertiliser supply chain, and the US$30 billion World Bank food and nutrition security package focused on developing countries.
The International Monetary Fund's new Food Shock Window provides a channel for emergency financing for countries with urgent balance of payment needs related to food and fertiliser.
The G7 and World Bank are also engaging in critical partnerships such as the Global Alliance for Food Security to support countries in distress and address the key issues contributing to this crisis.
We must make sure these efforts increase availability without inadvertently destroying the decades-long effort to build up private fertiliser markets in Africa.
This means continuing to support market development and enabling the private sector.
In responding, we should not miss the opportunity to build more resilient and sustainable fertiliser and agricultural markets for the future.
More efficient application rates would help reduce greenhouse gas emissions. The production and use of nitrogen fertiliser alone accounts for about 2% of global greenhouse gas emissions, so it is important to minimise waste.
There is also a need to invest in green fertiliser production and efficient use.
The technology to produce ammonia needed to manufacture nitrogen fertiliser with renewable energy has not yet been widely adopted.
Among others, in Egypt, Kenya and South Africa, green ammonia plants are in development.
Technologies to reduce nitrous oxide emissions during fertiliser use can also be more widely applied.
Increasing research and outreach efforts for digital and precision agriculture practices, technical assistance, and incentives for adopting climate smart agriculture, and investing in soil health can boost the efficiency of fertiliser application and absorption.
Importantly, we must also take advantage of existing opportunities to use public spending to build longer-term food systems resilience.
Fertiliser subsidies in both developed and developing countries can be repurposed towards measures that reduce overuse, decreasing the sector's carbon footprint, while increasing fertiliser availability.
If the countries that over-apply fertiliser reduced their consumption to adequate levels, access could increase in countries consuming well below the world average.
In sum, it's urgent to make fertilisers more accessible and affordable to avoid prolonging the food crisis.
Lives and livelihoods depend on the choices of policymakers.
* David Malpass is the president of the World Bank Group.
