The African Development Bank (AfDB) has approved a $100 million senior loan to Indorama Eleme Fertilizer & Chemicals Limited.
A senior loan is a loan issued to a company or individual that holds legal claim to the borrower’s assets above all other debt obligations.
Why the new capital ?
According to a release by the bank, the new intervention follows a previous loan extended to Indorama Fertilizer in 2013 for the commissioning of another urea fertilizer plant with a production capacity of 1.4 million tons per annum.
The completion of the plant in 2016 helped turn the country from a net fertilizer importer to a self-sufficient producer, and now a net exporter of fertilizer.
The new loan will be used to support the company’s plans to double its fertilizer production from 1.4 million tons of urea to 2.8 million tons per annum.
In 2017, 700,000 tons of urea were exported to West Africa, North, and South American markets. Production from the new plant will predominantly target export markets.
A release from AfDB said the project will also address the problem of inadequate fertilizer utilization, which is considered one of the principal constraints to agricultural growth and development in Nigeria, and the entire African continent.
Abdu Mukhtar, Director, Industrial, and Trade Development at the African Development Bank, noted that the new fund will help to further address labor issues in the local region wracked by poverty, inequality, and political tension by creating high paying technical jobs and will count towards climate change abatement by reducing amounts of flared gas.
According to the him
“This Project will build upon the success of Train-I in increasing the domestic supply of urea fertilizer in Nigeria, making it easily available and leading to cheaper prices for the Nigerian farmer.”
He further noted that Fertilizer production support is well aligned with regional and national priorities, as well as the Bank’s assistance strategy in Nigeria, and is an important step towards the Bank’s goal of radically transforming Africa’s agriculture sector and making the continent self-sufficient in food.
Nigeria spends at least US$6 billion per year on food imports. A contributing factor to low domestic crop yields is low consumption levels of fertilizer in Nigeria-and indeed Africa as a whole, which averages only 10-15% of global levels.
The Indorama Eleme Complex has been a success story of public-private partnerships in Nigeria, with several benefits including import substitution of raw materials to over 450 downstream industries; increased crop yields of over 30%; training of 200,000 farmers on the proper use of fertilizers expected to reach 2 million by 2021; creation of 50,000 jobs, and an annual contribution of US$2 billion to Nigeria’s GDP.
The estimated US$1.1 billion cost of the Project is to be financed with equity of US$100 million and debt finance of US$1billion which will be provided by development finance institutions. All the financiers have now provided their final Board approvals for the project.
Recently, the African Development Bank (AfDB) and African Export-Import Bank (Afrexim) agreed to invest the sum of $20 billion in two projects spearheaded by the Federal Government, in the aviation sector. The AfDB last week also announced $70 million equity investment in the Development Bank of Nigeria (DBN).
Indorama Eleme Fertilizer & Chemicals Limited (IEFCL) is a member of Indorama Corporation, a global manufacturing conglomerate operating in over 25 countries across Asia, Europe, Africa and North & South America.
IEFCL is one of the projects of Indorama in Nigeria and is the world’s largest single-train Urea – Fertilizer plant, commissioned in June 2016.
The company is located in Eleme, Port Harcourt, Rivers State, Nigeria.