AfDB-supported trade credit guarantee project increases fertilizer access in Nigeria

In the middle of Kamba market in Nigeria’s north-western Kebbi State, hub agro-dealer Umar Sani points to a stack of fertilizer bags in Alhaji Musa’s retail shop, a sign to customers that the commodity is now available. Sani, a leading fertilizer distributor in Kamba, is, now more than ever, a dependable source of fertilizer following Covid-19 disruptions in global agricultural value chains and, more recently, the war in Ukraine.

“We can all see that the product is available in the shop of Alhaji Musa, my retailer, thanks to the support of the fertilizer trade credit guarantee,” Sani says.

Sani was referring to the credit guarantee launched by the African Fertilizer Financing Mechanism in 2019. The initiative makes it easier for agro-dealers to source fertilizer for retailers and, ultimately, for farmers. The African Fertilizer and Agribusiness Partnership (AFAP) implements the $2.4 million trade credit guarantee scheme in the country.

Under the scheme, AFAP provides a guarantee to back credit and loans used by fertilizer blenders and agri-inputs distributors to support their activities. This helps blenders and distributors borrow on less stringent terms, or purchase fertilizers and other inputs. The guarantee also offers financial institutions greater reassurance in lending.

For hub agri-inputs distributors like Sani, the trade credit guarantee program helps to significantly boost fertilizer sales.

Sani said: “When the guarantee covers our transactions with fertilizer blenders, I can sell more than 200 tonnes of fertilizer a week. Without the credit facility, I can only afford to sell 80 to 90 tonnes of fertilizer weekly. The impact of the credit facility on our business is immense.”

The scheme covers Sani’s transactions with Alelawa Fertilizer and Chemical Limited a fertilizer blender in Sokoto, a roughly three-hour drive northeast of Kamba. As of February 2022, the company had supplied 2,580 tonnes of fertilizer under the program. The scheme also helped Alelawa work with local banks, which traditionally are not comfortable lending to the blenders, as their transactions tend to be more secure under the guarantee facility.

“AFAP is using the credit guarantee program to strengthen working relationships between fertilizer suppliers and inputs distributors. The program has improved our collaboration with local financial institutions by providing other financing options. As beneficiaries, the guarantees help us buy raw materials and essential ingredients to keep our blending business up and running,” said Suleiman Abubakar, Alelawa’s General Manager.

“We hope the program will increase our blending capacity utilization and distribution more in the coming seasons,” he added.

In Nigeria, the project used the $2.4 million trade credit guarantee to sell fertilizer nearly six times, valued at $14.2 million in some parts of the country. By working with fertilizer suppliers and agro-dealers, the project also helped blend and distribute at least 39,457 metric tons of fertilizer to an estimated 38,000 smallholder farmers.

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