WHAT YOU SHOULD KNOW ABOUT THE INDORAMA, NIGERIA-BASED UREA PLANT FEEDING BRAZIL AND INDIA
Agriculture places a critical role in the sustenance of lives and livelihoods on the continent. A 2019 McKinsey report emphasised the role of agriculture in Africa, which has a massive social and economic footprint. “More than 60% of the population of sub-Saharan Africa is smallholder farmers, and about 23% of sub-Saharan Africa’s GDP comes from agriculture. Yet, Africa’s full agricultural potential remains untapped,” the report shows. According to the World Bank, the agricultural economy employs 65–70 % of Africa’s labour force and typically accounts for 30–40 %of GDP. Most of the world’s poorest countries are found in Africa. Thus, over 70% of the continent’s poor live in rural areas, and agriculture is their most important economic activity.
But Africa is the driest of the world’s continents with 45% of its landmass falling under dry lands and 38% of this land occupied by hyper-arid or desert land, according to the United Nations’ Food and Agricultural Organisation (FAO). For its Agricultural sector to thrive, there is a need for the availability of useful resources like fertilisers.
In Nigeria, Africa’s largest economy, there are more than 48 fertiliser-blending plants. The figure rose from 7 plants in 2015 to over 48 active fertiliser-blending plants in 2022 following the inauguration of the $2.5 billion Dangote granulated urea fertilizer plant. The facility is located at the Lekki Free Trade Zone, Ibeju-Lekki, which was projected to have an annual production capacity of 3 million tons of urea and ammonia fertilizer while generating $2.5 billion in yearly revenue. But prior to this launch, the Indorama Eleme Fertilizer & Chemicals (IFL) facility located in Eleme, Rivers State, stood as the largest fertilizer producer in Sub-Saharan Africa.
The IFL was formerly Eleme Petrochemicals Company Limited (EPCL), a petrochemicals complex that was once solely owned by the Federal Government of Nigeria. The facility was commissioned by the military government of General Sani Abacha in 1996 and was built to international standards to leverage Nigeria’s abundant supplies of natural gas for the production of urea fertilisers.
As with many state-run facilities, the Eleme plant underperformed and became heavily indebted to international investors – who all waited to reap from the sales of products from the plant- to the tune of $53 million. But its total liability was $259 million as of 30th June 2005 with 63.6% of the total debt due to government agencies including the Federal Inland Revenue Service (FIRS) and state-owned oil company, NNPC. The EPCL was “designed to manufacture products for which there was consistently high demand, EPCL was never managed properly, at no time operated to its potential, and was a significant loss maker and drain on the State treasury,” wrote a local report.
But in 2006, the government through the Bureau of Public Enterprise (BPE) successfully privatised the company. 75% of its shares were sold to Indorama Group, the core investor in the bidding process who sort to revive the dying facility. The Indonesia-based conglomerate bought the facility for $225 million, without liabilities, through $150 million in financing from the International Financial Corporation (IFC) and more funds from other lenders.
In 2016, exactly 10 years after taking over the business, the Indoroma Group successfully launched the IFL phase 1 and began production. The plant had a production capacity of 1.4 million metric tons. This positioned it as a key supplier of fertiliser across some markets in the Asian, European, African and American continents. The completion and exploitation of the plant in 2016, helped turn Nigeria from a net fertilizer importer to a self-sufficient producer, and now a net exporter of fertilizer. In 2017, 700,000 tons of urea were exported to West Africa and North and South American markets.
Not long after this launch, the Indorama Group began to pursue funds from international lenders to build the IFL phase 2 complex that would be dedicated to export. “Of the total project cost of $1.2 billion, the African Development Bank (AFDB) extended an 11.5-year senior loan of $100 million and assisted with sourcing an $800-million debt facility from development financial institutions and commercial lenders,” the AFDB said. The bank was a part of the investors in IFL phase 1.
In May 2021, Phase 2 of the Eleme fertiliser complex which had equal production capacity as the first, 85% owned by the Indorama group, was commissioned- mainly for export to Brazil and India. The combined facilities positioned the complex as the world’s largest single-train urea plant in Nigeria with a total capacity to produce 2.8 million metric tons of granular urea annually in 2021.
But a recent report indicates that the Asian manufacturing behemoth is gearing to assume complete ownership of the Indorama Eleme Fertilisers facility as it is said to have bought the remaining 15% from UK-based Actis Capital for about $500 million. The acquisition values the facility at $3.3 billion. This means that the massive Indorama Fertilizer Plant now fully belongs to one family, the Lohia family, owners of the Indorama Group. The latest news is only available to closed sources. Currently, it has not been stated if the company would go public, leaving the business in full control of the Lohia family.
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