The UK’s development finance institution is backing initiatives aimed at boosting fertiliser production, food supply and trade on the continent.
British International Investment (BII) has announced it is providing finance to support agricultural production and food security in Africa by backing a regional trade bank, and as part of a consortium financing sub-Saharan Africa’s largest fertiliser company.
For the first of these, the UK’s development finance institution (DFI) said it was providing a $100m finance facility for the Eastern and Southern African Trade and Development Bank (TDB).
TDB will use the financing to fund trade transactions, including import and export of goods, commodities, and essential services for businesses across the region it serves, promoting agricultural development and improving food security, according to BII.
This is the fourth facility signed between the UK DFI and TDB, which supports local businesses and financial institutions in its 25 member states, including Egypt, Ghana, Kenya, Senegal, Tanzania, and Uganda among others.
BII said such support was crucial, given Africa’s economic challenges, such as currency depreciation, rising inflation, growing debt problems and climate-related impacts, with the situation made worse by the consequences of Russia-Ukraine conflict and the aftermath of the COVID pandemic.
Ndaba Mpofu, BII’s director and head of financial services debt, said the investment allowed BII to focus its capital on offering strategic support to key financial institutions in countries to which the UK has a long-term commitment.
“This facility with TDB aligns with our core mission to address the financing gaps in areas that help empower local businesses to drive inclusive growth, boost trade flows, and strengthen economic resilience,” he said.
“This funding will also help to lower trade barriers so that companies across the continent are better able to expand into overseas markets, access vital resources and tackle critical challenges such as food security,” Andrew Mitchell, the UK’s minister for development and Africa, said.
These barriers had been exacerbated by the withdrawal of international correspondent banks from Africa, and a trade financing gap, which the African Development Bank estimates to be running at up to $120bn over recent years, BII said.
IFC-led $1.25bn Indorama package
BII is also supporting Africa’s agricultural and industrial sectors through its participation in a multi-investor $125bn financing package to support the expansion plans of Nigerian fertiliser producer Indorama Eleme Fertilizer and Chemicals, which is owned by the Singapore-based Indorama Corporation.
BII has committed $65m to the package as part of a consortium of DFIs, commercial investors and impact investors led by the World Bank Group’s International Finance Corporation (IFC).
Manish Mundra, Indorama’s group director for Africa described the financing as a landmark that represented “a pivotal moment in Nigeria’s journey towards becoming a major player in the global fertiliser market”.
The financing will enable Indorama, the largest fertiliser producer in sub-Saharan Africa, to build a third nitrogenous urea production line at its plant in Port Harcourt and build a new port terminal for exports. The project is expected to create 8,000 jobs, directly or indirectly.
The expansion will boost the plant’s output to 1.4m tons a year of urea, which is one of the most commonly used fertilisers around the world. It will also open up export markets for the plant, whose existing output currently serves the Nigerian domestic market.
The growth of a homegrown fertiliser industry in West Africa is seen as key to increasing food production globally and improving food security.
“Our ongoing commitment to back Indorama’s expansion will also help to elevate Nigeria’s export potential and support the diversification of its economy,” Benson Adenuga, BII’s head of office in Nigeria, said.
The country’s economy and revenue base are dominated by the oil and gas sector. The project is designed to drive a domestic agricultural sector that accounts for a quarter of Nigeria’s GDP and employs about a third of its workforce, according to the IFC.
The investment is BII’s fourth in Indorama since 2013, which, the BII said reflected its commitment to strengthening value chains in Nigeria’s agricultural sector and increasing the country’s export potential.
Other members of the financing consortium include the African Development Bank, Bangkok Bank, Citibank, Germany’s DEG, DZ Bank, the Emerging Africa Infrastructure Fund, Rand Merchant Bank, Dutch institution FMO, India Exim Bank, the Export-Import Bank of Korea, the Standard Bank Group, Standard Chartered Bank, and the US International Development Finance Corporation.
As part of the package, Indorama has committed to implementing a greenhouse gas (GHG) emissions strategy, which aims to reduce emissions at its petrochemical complex by 32% by 2026 through reductions in methane gas flaring and other improvements. Nigeria has committed to eliminate routine gas flaring from its hydrocarbons and petrochemicals facilities by 2030 under a World Bank-led initiative.
The country, which used to be one of the world’s worst offenders for flaring, has made progress in reducing overall methane emissions, which fell by 45% in the decade to 2022 from 9.6bn cubic metres to 5.3bn cm. However, this fall largely mirrors falling oil production, rather than representing a significant reduction in flaring intensity, according to the World Bank.
