Enhancing Growth through Regional Agricultural Input Systems (EnGRAIS) Project for West Africa; Structure of Logistics Costs and Fertilizer Import Procedures along 4 Corridors in West Africa

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Under the “Feed the Future Enhancing Growth through Regional Agricultural Input Systems” (EnGRAIS) project for West Africa (2018-2023), Nitidæ was commissioned by IFDC to conduct a study on the costs and the logistics involved in importing and marketing fertilizers from four ports – Dakar, Abidjan, Tema, and Lomé – and to six markets – Senegal, Mali, Côte d’Ivoire, Burkina Faso, Ghana, and Togo. This study identifies the main bottlenecks and steps that can be optimized to mitigate marketing costs and resale prices to farmers. The study reveals that the main issue affecting local fertilizer prices in West Africa continues to be the global prices of the three main nutrients used for mineral fertilizer production (Nitrogen [N], Phosphate [P], and Potash [K]). Over a period of just a few months, these prices can vary by +/- 50 USD/ton. The optimization of logistics import costs can lead to savings of +/- 30 USD/ton. However, since the fertilizer market in West Africa is relatively competitive (more than ten importers share the market in each country except Mali, where the market is clearly oligopolistic), most importers aim to optimize their logistics costs with different strategies, depending on both their financing capacity (local or international) and land base (ownership of storage facilities or blending plants). Therefore, to date, the main measures to improve import logistics have been reducing the waiting and unloading times at the port (to avoid incurring costs associated with failure to unload within the allotted timeframe, known as “demurrage”) and increasing the size of port infrastructures (development of quays capable of quickly receiving and unloading very large bulk carriers) to encourage economies of scale. Much of the possible logistical gains can be attributed to achieving economies of scale, but the main challenges in the West African fertilizer market can be summarized as follows: Market growth is limited by high resale prices to producers that discourage their investment in intensification. But a substantial drop in the cost of fertilizers seems possible only if the imported volumes are higher and the flow rates are accelerated, which would require a greater and better structured demand. Instruments to improve fertilizer importation in West Africa are detailed in the conclusion of this report, but their impact will only be significant if the size of the market increases and the form of public support for intensification changes. This includes subsidies applied on demand rather than supply and support given for the resale price of agricultural commodities at the ECOWAS level and no longer only at the individual state level.