Lands supply agreement for 23 mln quintal of fertilizer
OCP, the Moroccan state-owned firm, has successfully secured a supply of 23 million tons of fertilizer for the ongoing 2023/2024 cultivation year.
The Ethiopian government awarded the procurement directly to OCP to address supply fluctuations in the global market.
To facilitate this direct award, the Ministry of Finance and Ministry of Agriculture revised a 20-year-old fertilizer procurement directive, which allows fertilizer procurement only through international bids.
In the past, Ethiopia has faced challenges in promptly finding suitable suppliers, leading to delayed cultivation, fertilizer shortages, and diminished productivity.
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The amendment encompasses significant changes to the board governance of the Ethiopian Agricultural Works Corporation. It grants the Corporation the authority to open letters of credit (LC) directly and select suppliers as needed. Previously, this responsibility rested with the Ministry of Agriculture.
However, bureaucratic challenges within the ministry had contributed to delays in fertilizer importation.
The new directive also empowers the Ethiopian government to procure fertilizer through diplomatic negotiations.
Girma Amente, the Minister of Agriculture, explained the rationale behind the new directive.
“We have made the new directive flexible to avoid the hassles and delays associated with fertilizer imports. Whenever China and Indonesia purchase fertilizer, it disrupts the international market. As a result, brokers purchase fertilizer from manufacturers like OCP and supply it to us at higher prices. Now, we have decided to directly engage with OCP to bypass intermediaries and reduce costs,” Girma explained.
Under the agreement, OCP will supply 23 million tons of NPS, urea, and DAP fertilizers this year. This represents a substantial increase from the 13.9 million tons imported last year.
To facilitate the complete import, a total of five letters of credit (LC) have been opened, with each lot corresponding to a specific cultivation season in Ethiopia.
In terms of pricing, the average cost of Urea this year ranges between USD 400 and USD 430 per ton, a decline from the average of USD 680 to USD 700 per ton last year.
Similarly, the price of NPS per ton has dropped from USD 650 to 500 this year.
Girma emphasized that the lower prices offered by OCP will alleviate the burden of heavy fertilizer subsidies on the government.
However, last year’s challenges in fertilizer imports resulted in shortages in Ethiopia and the emergence of a thriving black market for fertilizers. Government officials have also been implicated in grand fertilizer corruption schemes. Officials are currently investigating several cases of fertilizer theft in various regional states.
Presently, agricultural cultivation has exceeded expectations, with 18.9 million hectares of land being cultivated, surpassing the initial target of 17.4 million hectares.
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