Nigeria Government Plans to Revive the Collapsed Textile Industry as CBN Bans Sale of Forex to Importers Of Textiles

Adedoyin Shittu
20% Complete
 08-Mar-2019

Clothes business is big business in Nigeria. These is why the textile industry in Nigeria is attractive to foreign market. Aside from the huge population Nigeria present to these foreign market, Nigerians buy clothes for every event.

Nigerians are fun loving people, hardly any day goes by that you do not hear a ceremonial jingle of a party close by. Saturdays in Nigeria is designated for parties; almost half of the population is attending a party or knows someone who is throwing a party or attending one and that is a population of over 200 million people.

From wedding party to housewarming party, to child dedication, birthday party, promotion party, burial party, property acquisition party or even party celebrated for hosting a successful party and each event usually has a dress code worn by the guest known as “Aso Ebi”.

“Aso Ebi” is a unique fabric worn as a uniform in ceremonies by family members and friends to symbolize unity and support.

“Aso Ebi” might be a Yoruba word but it is a Nigerian culture. Aside the “Aso Ebi”, the textile is popularly worn by Nigerians every day of the week. Some even sew as much as 10 yards to be worn everyday especially in the Northern part of Nigeria, so there is a huge market for textile in Nigeria.

Sadly most of the textile worn in Nigeria is either imported or smuggled into the countries from countries like Hong Kong, China, India, Switzerland  and South Korea. Many of these countries produce just to send to the Nigerian market because of the huge market the country present to them. Nigeria spends above $4 billion annually on imported textiles and ready-made clothing with a potential market size well over $10bn annually. China alone accounts for 60% of the print fabric market in Africa, with India supplying an additional 21%. West Africa itself is a large market for prints and buys around 65% of all foreign imports. Nigerian demand accounts for around 38 per cent of total imports in the region.

Gone are the days when Nigerians embraced the products of the likes of International Textile Industry (I.T.I) at Mushin, Lagos, Texlon at Amuwo Odofin, Enpee at Oshodi, Aswani at Isolo, Boujson Mercedes at Oyingbo, Sunflag at Surulere, Five Star at Isolo and many others. Virtually all the above mentioned textile companies except one have stopped production of clothing materials but re-versified to other businesses.

Also Read: The Cracked Foundations of Nigeria’s Basic Sectors on the Verge of Collapse

The History and the collapse of Nigerian Textile Industry

Before the discovery of crude oil in Nigeria it was believed that the key to economic growth was manufacturing. Foreign investors came into Nigeria from the United Kingdom in the 1960s and also Chinese investors came to the Kaduna during the same period. Kaduna became the textile capital of the country. The textile industry played a pivotal role in stemming the tide of unemployment between late 1950s and early 1990s. About 1 million workers were employed directly into the industry. Several millions of Nigerians were employed into the supply chains as farmers, processors, dealers, distributors and exporters of the finished craft.

In the 1970s, Nigeria produced not only for domestic consumption but also produced 50% of the textile used throughout West Africa. At that time, Nigeria was the largest producer of textile in West Africa and the third largest producer in Africa next only to Egypt and South Africa.  With over 250 functional factories in the country including Kaduna Textile Ltd (KTL), Arewa Textiles Plc, United Nigerian Textile Plc, Supertex, Nortex Nigerian Ltd and Finetex Nigerian Ltd. Others were Gaskiya Textiles Mill, Kano Textile Ltd, Aba Textiles, Zamfara Textiles Ltd, Asaba Textiles Ltd, African Textile Mill Plc and Tofa Textiles. At that time, Nigeria export textile to the United Kingdom. The entire sub-sector made use of between 60 to 70 percent  of all its raw materials from local sources.

In the 1980s, the textile industry was the largest private employer of labour and the second largest employer after the government. Between 1985 and 1991, it recorded an annual growth of 67 per cent and as at 1991, it employed about 25% of the workers in the manufacturing sector.

What led to the Collapse of the Nigeria Textile Industry

More than 80%  of all finished textile print are imported into Nigeria. All the things that led to the death of our industries can be traced to inconsistent industrial policy.

According to the Nigerian Textile Association, things went down on a slope in the industry when the Nigerian government signed the “World Trade Organization Agreement”, thereby lifting the ban on the importation of textile in 1997.

The Nigerian market became extremely profitable to foreign market and this led to the abandonment of the local textile by the Nigerian consumers. This may be as a result of the value Nigerians placed on foreign products. This led to reduction in profit margin in the local industries and the inevitable shutdown of the companies when they could not meet up.

As is the case in so many sectors in Nigeria, one of the key constraints facing textile producers is financing, without which capital expansions are unlikely. While other countries like China subsidised the cost of production for their textile manufacturing firms, Nigeria threw the border open and made competition stiff for local textile producers.

 

The textile industry is also powered by quality electricity and electricity counts for about 15% of production. Erratic power supply made the textile companies depend on  more-expensive backup generator which uses diesel and this inevitably increases the cost of production.

Nigeria Power Crisis has ruined a lot of industries in the country and led to close down of industries when they could not meet up with the cost of production.

Also Read: Understanding Nigeria Power Crisis

“The current currency crisis is another challenge. A ban on imported textiles in place since 2010, while nominally beneficial for the sector, also encourages informal market activity, and smuggled products account for an estimated 85% of fabric sold in the country.

Another reason the industry collapsed was due to technology. Countries like South Korea and China improved in technology and efficiency in the production of textile. This forced American and European companies to move to Asia, Nigerian companies could not compete with the level of technology with reduced the cost of production achieved by the Asia companies.

How the government have responded to the challenging the Nigerian Textile Industry

In 2009, the federal government created N100 billion ($353.4m) textile fund that made financing available at a six per cent interest rate.

Merely giving bailout funds to the textile industry without addressing the main reasons causing the failure of  the industry is like pouring money into a sinkhole. This will only increase the indebtedness of the industry to the banks. There are things the government should put in place before positive result can be felt in our local industry.

The federal government must ensure that there is uninterrupted electricity supply to textile industry, as well as other manufacturing industry.  The government should also combat smuggling of imported contrabands, including textiles. Customs have to be on duty to fight smuggling of imported banned textile goods. There should also be patronage of made in Nigerian textile goods.

The government should also assist the industry with the infrastructure challenges facing the textile industry by inviting foreign investors to invest in the textile sector. To address the issues facing foreign investors, the government is offering a package of incentives, including tax-free imports of equipment and inputs to 2019, as well as a three-year tax holiday.

There should also be a sustainable industrial policy emphasising the need to add value to cotton rather than importing finished goods or textiles from abroad. Nigeria today is facing the problem of cotton which is quite ironic but we must make the input available, in this case raw material. There should be abundant production of cotton locally. Incentives can be given to local farmers or cotton growers to see the need to produce raw materials.

How the Nigerian government plan to revamp the collapsed Textile industry

Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN) has directed commercial banks and bureaux de change operators to stop sale of forex for the import of textiles and clothing materials in the country and this directive was effective immediately. This was announced at a meeting with stakeholders in the cotton sector in Abuja on Tuesday 5th of March 2019.

He warned all forex dealers in the country to desist from granting any importer of textile material access to foreign currency in the Nigerian foreign exchange market.

He said the restriction was borne out of the federal government’s plan to revive the textile sector and create employment for millions of Nigerians and also critical in reviving the moribund textile sector.

He also noted that the apex bank would initially support the importation of cotton lint for use in textile factories, with a caveat that such importers will begin to source all their cotton needs locally beginning from 2020.

He said as part of its Anchor Borrowers Programme (ABP), the apex bank would also support local growers of cotton to enable them to meet the needs of the textile industries in the country.

Emefiele also said that the CBN would support efforts to source high-yield cotton seedlings “to ensure the yields from our cotton farmers meet global benchmarks.”

He further pledged that as regards the provision of stable electricity, the CBN would support the creation of textile production centres in certain designated areas in the country where access to electricity shall be guaranteed.

Concerning the menace of smuggling, which had often threatened efforts towards self-sufficiency, the CBN governor said the CBN will make life difficult for smugglers by trying economic solution to smuggling.

According to him, “Once government can grant tax holidays to manufacturers operating in the sector to reduce their tax burden. This will enable them have access to funds to improve their productive capacity. Government can also make foreign exchange available to enable operators import the necessary machinery needed to set up textile plants”.

Further reeling out an array of CBN initiatives targeted at restoring the lost glory of the textile industry, Emefiele disclosed that there would be financial intervention to textile manufacturers with the provision of funds at single-digit rate.

Does this mean that Nigeria will begin to produce its own textile print that can rival the Dutch or even the Chinese, only time will tell? However this is a good development and Nigerians hope the Nigerian government can bring this plan to fruition.

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