Factors Affecting Urea Price Spike in the Sub-Saharan Africa (SSA)- A Dynamic Approach

The majority of Sub-Saharan African (SSA) countries are net fertilizer importer which makes the regional fertilizer market vulnerable to shocks in the global fertilizer market. With the increasing concern of food security and poverty in the region, the global fertilizer price spike seen between 2020 and 2024 further aggravated the situation by initiating a sustained fertilizer price spike in region. The study analyzes the factors affecting local urea prices focusing on global as well as local factors like global urea prices, global natural gas prices, national foreign exchange reserve, exchange rates and local diesel prices. By utilizing a monthly panel of 17 countries of SSA from 2010 to 2023, the study analyzes if there is a structural break between monthly urea prices and its key factors by using first difference model as well as dynamic panel IV model. The results suggested that there were no structural breaks between urea prices and factors studied. Among various local factors, local diesel price was found to be most significant both before and after the spike period. A 10% change in local diesel prices in the previous period was found to be significantly associated with a 0.7% increase in urea prices in the following period. In addition, macroeconomic factors like GDP per capita and political factors like election years were found to be negatively and significantly associated with monthly price fluctuations of urea. The findings of this study provide some valuable policy recommendations to policymakers in SSA to improve market efficiency via distribution and transportation costs to absorb global shocks and alleviate political influence in fertilizer pricing policies.