From 180 textile mills in the past to about 20 today, the Nigerian textile industry has journeyed from boom to bust. DAYO OKETOLA analyses the Central Bank of Nigeria’s foreign exchange restriction on textile imports and the implication for the ailing industry.
The Nigerian textile industry has witnessed a massive decline in the past two decades with many textile companies closing shop and throwing their workers into the job market. From a major employer of labour in the 1970s and the 80s, the textile industry has painfully become a shadow of its former self and has continued to be in the throes of prolonged depression. In fact, it appears as if it’s just waiting to die.
In its heyday, apart from the civil service, the textile industry was the next highest employer of labour.
Things have become very difficult for many textile firms and they have advanced infrastructural and technology deficit, poor power supply, lack of raw materials and spare parts, among others, as factors pushing the once-thriving industry towards the precipice of total collapse.
Being further faced with rising operating cost, weak sales due to high energy cost, smuggling of textile materials, and poor access to finance, things have fallen apart for the Nigerian textile industry and the centre, of course, can no longer hold. It is just a matter of time for the requiem of the industry to be conducted if nothing is done.
It was against this backdrop that the Governor, Central Bank of Nigeria, Mr Godwin Emefiele, during the textile industry stakeholders’ meeting in Abuja recently, decried the country’s descent from being a textile giant to a mediocre player.
He said, “As you are aware, in the 1970s and early 1980s, Nigeria was home to Africa’s largest textile industry, with over 180 textile mills in operations, which employed close to over 450,000 people. The textile industry at that time was the largest employer of labour in Nigeria after the public sector, contributing over 25 per cent of the workforce in the manufacturing sector.
“The industry was supported by the production of cotton by 600,000 local farmers across 30 of Nigeria’s 36 states. This sector supported the clothing needs of the Nigerian populace, as our markets were filled with locally produced textiles from companies such as United Textiles in Kaduna, Supertex Limited, Afprint, International Textile Industry, Texlon, Enpee and Aswani Mills, amongst several others.”
The CBN governor lamented that most of the factories mentioned had all stopped operations, as only 25 textile mills are operating today at below 20 per cent of their production capacities while the workforce in Nigeria’s textile industry stands at less than 20,000 people. (The National Chairman of the All Progressives Congress, Adams Oshiomhole, himself a former textile mill worker, during the 2019 electioneering also alluded to the reversal of the fortunes of the country’s textile industry but blamed the Peoples Democratic Party, which ruled Nigeria for 16 years, for it.)
Emefiele added, “In addition, the cotton growing sector has gone dead, thereby depriving thousands of smallholder farmers the chance to earn a living. Furthermore, a large proportion of our clothing materials today are imported from China and countries in Europe.
“It is important to consider the role the textile industry played in our country. They did more than produce cotton and textiles; they helped in sustaining the vitality of the neighbourhoods in which they operated. With the death of these industries came a rise in unemployment, insecurity and other negative social vices.”
The National Union of Textile, Garment and Tailoring Workers of Nigeria in a document made available to The PUNCH listed hundreds of textile companies across the country as moribund. It said at least 60 textile companies in Lagos with a total of 66,250 workers had closed shops as of 2016. The companies include Atlantic Textile Nigeria (African print and school uniforms – 1,000 workers); FABLON (Lace, uniforms, suiting and African print – 2,000 workers); Jaybee (Lace and school uniforms – 1,800 workers); Bhojsons (African print and other fabrics – 3,000 workers); Westex (African print- 2,000 workers); and Specomill textiles (Wax print- 3,000 workers).
In Kaduna State, at least 18 major factories with 16,800 workers were said to have closed down within the same period. The industries include KTL (5,000 workers); Arewa Textile (5,000 workers); UNITEX (5,000 workers); and FINETEX (2,000 workers).
In Kano State, six textile companies with a total of 7,600 workers were said to have closed down, including GASKIYA (3,500 workers); Bagauda Textile (1,000 workers); and NTM Kano (600 workers).
At least, 18 other major textile companies with 19,300 workers across the country were also said to have collapsed within the period. Such companies include Prospect Textile, Kogi State (3,000 workers); Zamfara Textile, Zamfara State (2,000 workers); Aba Textiles Plc., Abia State (3,500 workers); Asaba Textiles, Delta State (3,000 workers); General Cotton Mill, Anambra State (2,500 workers); and Odua Textile, Ekiti State (600 workers).
In view of the death of many firms in the textile industry, it is clear that to do nothing is to allow the remaining textile mills, which are also struggling, to disappear.
As such, Emefiele, the CBN governor, during the stakeholders’ meeting in Abuja, rolled out measures aimed at reviving the country’s textile industry and saving it from total annihilation.
Speaking to key players in the textile industry, commercial banks, and officials of the CBN at a gathering aimed at examining the challenges faced by textile operators in the country and identify promising approaches that would help in reviving the sector, the CBN governor explained that reviving the industry was vital to the country’s growth objectives and job creation (which Nigeria badly needs now.)
Emefiele said, “On assumption of office in June 2014, I indicated in my inaugural speech that one of my key objectives as governor of the Central Bank of Nigeria is to focus our energies in building a central bank that will devote its energies on building a resilient financial system that will serve the growth and development needs of our beloved country, Nigeria.
“In addition to a focus on key macro-economic concerns such as moderating inflation and maintaining exchange rate stability, we also feel that the Central Bank of Nigeria must play a more constructive role in supporting Nigeria’s economic development particularly in the agriculture and manufacturing sectors, given the constraints faced by rural farmers, SMEs and manufacturing companies.
“Our reason for adopting this posture rests on the belief that addressing impediments to their growth, will not only strengthen economic growth, but will also enable the creation of more jobs, and foster a more inclusive society.”
He explained further, “The over 60 per cent drop in crude oil prices we witnessed between 2015 and 2016 and its attendant effects on economic growth, inflation and our external reserves, provided further impetus on the need for the CBN to support measures that will drive productivity in critical sectors of the economy, while also weaning our economy from its dependence on imported goods.”
As such, the apex bank said it had identified textiles and palm oil as two critical areas in need of sound intervention with the catalytic effect of unlocking the potential the sectors held for the country’s economy.
He said, “After five quarters of uninterrupted GDP contraction (beginning from the first quarter of 2016), the economy exited from the recession during the second quarter of 2017. The recovery has been sustained for seven consecutive quarters. The pace of quarterly GDP growth has improved from five per cent in the second quarter of 2017 to 2.38 per cent in the fourth quarter of 2018. Our FX reserves today stand at above $43bn, up from $23bn in October 2016 and inflation has dropped from its peak of 18.17 per cent in January 2017 to 11.3 per cent in February 2019. Noticeable declines have been recorded in our monthly food import bill, which declined from $665.4m in January 2015 to $160.4m as of October 2018; a cumulative fall of 75.9 per cent and an implied savings of over $21bn on food imports alone over that period.
“Much progress has been made, but at the same time more needs to be done in order to ensure that we build an inclusive economy that supports domestic production of goods and services while offering job opportunities to teeming Nigerians. This is the only option that we have if we are to insulate our economy from volatility in the crude oil market and in the global financial markets. In order to achieve this goal, the CBN, together with other critical stakeholders, has identified key commodities and products such as textiles and palm oil that have the ability to support the creation of hundreds of thousands of jobs in our economy.”
Emefiele expressed a strong belief that if the CBN, along with other critical stakeholders, was able to address some of the challenges facing the textile industry, given the high domestic demand for textiles, jobs would be created, the economy would improve and local production of textiles would once again thrive. As such, the CBN placed all forms of textile materials on the forex restriction list.
The CBN governor said, “We have decided to implement a few steps which we believe will support the revival of the textile sector. These steps include: financial support to textile manufacturers with the provision of funds at single digits rate, to refit, retool and upgrade their factories in order to produce high-quality textile materials for the local and export market; effective immediately, the CBN hereby places the access to FX for all forms of textile materials on the FX restriction list.
“Accordingly, all FX dealers in Nigeria are to desist from granting any importer of textile material access to FX in the Nigerian foreign exchange market (The CBN had earlier placed restriction of access to forex for 41 items that could be produced in Nigeria.). In addition, we shall adopt a range of other strategies that will make it difficult for recalcitrant smugglers to operate banking business in Nigeria. The details of those strategies will be unfolded in due course; we shall initially support the importation of cotton lint for use in textile factories, with a caveat that such importers shall begin sourcing all their cotton needs locally by the year 2020.
“As part of its Anchor Borrowers Programme, the CBN will support local growers of cotton to enable them to meet the needs of the textile industries in Nigeria. The CBN shall also support efforts to source high yield cotton seedlings so as to ensure the yields from our cotton farmers meet global benchmarks.
“As regards the provision of stable electricity, the CBN shall support the creation of textile production centres in certain designated areas in Nigeria where access to electricity shall be guaranteed. In 2016, the CBN began discussions with the Kano and Kaduna states governments to resuscitate their textile industrial areas through the guarantee of stable electricity in those industrial areas. We will intensify efforts with these governments to see to the quick actualisation of the programmes.”
Emefiele expressed the belief that the measures would discourage smuggling, resuscitate the critically textile industry, and support the efforts at creating jobs for Nigerians.
Spending $4bn annually on imported textiles, others
According to the CBN, Nigerians currently spend about $4bn annually on imported textiles and ready-made clothing while local textile manufacturers are struggling. This has worsened as many big private schools now sourced their uniforms abroad. Even, Adire, local tie and dye fabric which used to be the exclusive reserve of Nigerians, is now being imported into the country by Chinese to the detriment of the local players.
With a population of over 180 million Nigerians, the need to support the provision of uniforms and clothing apparels for school students, military and paramilitary officers alone, according to Emefiele, highlights the potential of Nigeria’s local textile market.
“In addition, when we consider the amount spent on outfits for religious and social events such as weddings, naming and funeral ceremonies on a weekly basis, the potential market size is well over $6bn annually,” the CBN governor stated.
LCCI versus CBN
While textile industry stakeholders were still basking in the euphoria of the announcement made by the CBN, the Lagos Chamber of Commerce and Industry sounded a note of warning, urging the Federal Government to reconsider the CBN restriction of forex for textile importers.
The LCCI Director-General, Muda Yusuf, argued that given the position of Nigeria in Africa as a leader in fashion, the range of fabrics produced by the country’s textile manufacturers could not support the industry in terms of quantity and quality.
Without prejudice to the importance of the local textile industry, the LCCI boss suggested that the government should have strengthened the capacity of domestic industries, enhanced their competitiveness and reduced their import dependence before the CBN’s pronouncement.
Yusuf argued that the government should have at least improved on the power situation before going ahead with the new measures.
The Nigeria Electricity System Operator, an arm of the Transmission Company of Nigeria, had recently put the nation’s installed generation capacity at 12,910.40megawatts; available capacity at 7,652.60MW; transmission wheeling capacity at 8,100MW; and the peak generation ever attained at 5,375MW.
Yusuf said, “Today, Nigeria is clearly the leader in Africa as far as the fashion industry is concerned. Currently, the range of fabrics produced by the Nigerian textile industry cannot support the fashion industry in terms of quantity and quality.
“This vibrant industry should not be sacrificed on the altar of textile industry regeneration. This submission is not to diminish the importance of textile industries in any way or the significance of industrialisation. It is to underscore the importance of a strategic approach to industrialisation.
“The starting point is to strengthen the capacity of domestic industries, enhance their competitiveness, and reduce their import dependence as espoused in the Nigeria Industrial Revolution Plan.
“More importantly, the power issue needs to be addressed. It is almost impossible to achieve rapid industrialisation without resolving the issue of power and the deficit in key infrastructure.
“Textile production is energy-intensive. This is a high energy cost environment and it is very difficult for any energy-intensive sector to survive.”
Yusuf lamented that the CBN’s forex restriction for textile imports would not augur well for businesses in the fashion, tailoring, fashion accessories and garment industry in the country.
He said the industry was one of the fastest growing industries and had created amazing opportunities for many young Nigerians to express their creativity and innovation, adding that the sector was estimated at N5tn, with about 500,000 jobs.
He said, “The industry provides significant value addition to fabrics, whether imported or domestically produced. The policy contemplation of the CBN will put all of these at risk.
“Hundreds of thousands of women and men make a living in the marketing of textiles. The policymakers cannot afford to ignore this segment of economic players. The traders are the bridge between the producers and the consumers.
“It is, therefore, very important for policymakers to take into account the full ramifications of the consequences of policies and collateral outcomes.”
Yusuf also recalled that the textile sector had benefitted from several fiscal incentives and protectionist measures over the years but had remained stagnant.
He said, “Some of them have even gone into receivership as they could not repay their loans. The lesson is that we should deal with the fundamental issues of production competitiveness in our economy. The textile industry needs to be saved from the excruciating burden of high operating and production cost.”
CBN governor fires back
But Emefiele responded to the LCCI saying the measures announced by the apex bank to revive the cotton, garment and textile sector was well thought out to reposition the sector for job creation and economic growth.
He said, “The issue he (LCCI DG) raised here is that we need to have a strategic approach to the measures. Whereas one will agree with his view on strategic approach, but I begin to wonder what Muda means when he talked about strategic approaches.
“In the past, the country has adopted what he calls a strategic approach and that strategic approach to my understanding is that he seems to say allow them to continue to import, let them continue to dump, let them continue to smuggle into the country, they will build these factories and industries
“When we address these issues weeks ago, I had said that at a time in this country, Nigeria had 180 textile mills, today they are dead. Three weeks ago when we held a meeting, there were only 15 textiles companies out of the 180 in the 50s and 60s in the country.
“Jobs have been lost, and that is why we know that while there is unemployment in our country, we ignore an industry that is the largest employer of labour after the public sector.
“The strategic approach had never worked. I want anybody to quote me; it has never worked. What is the policy we are talking about? Increase in duty. Today, duty on textile is 45 per cent.
“I have data here that tell me that textile officially imported into Nigeria in 2015 was $9m. In 2016, $6.9m; in 2017, $7m; and in 2018, $9.7m. Is that the quantity of textile that came into Nigeria? My answer is no. And yet people say they pay duty , my answer is no. Because if you paid duty , then we will not have a record that places import of textile into the country at $9m.”
IMF’s warning and CBN’s response
The International Monetary Fund, in its 2019 Article IV Consultation on Nigeria, urged the CBN to discontinue its direct intervention in the economy (such as what it wants to do in the textile industry) and focus on its price stability mandate.
“Directors also urged ending direct central bank intervention in the economy to allow focus on its price stability mandate,” the IMF had said.
But the Director, Corporate Communications, CBN, Mr Isaac Okorafor, in an interview with The PUNCH on the sidelines of the 2019 IMF and World Spring Meetings in Washington DC, said the CBN would ensure that adequate support was directed to support producers of products such as rice, fish, tomato, wheat, textiles, palm oil and the range of items in the list of 43 items excluded from forex in Nigerian forex market.
Speaking specifically on textile, he said, “If you look at what we did in rice under the Anchor Borrowers’ Programme, we know that Nigeria has the potential and everything that is required to produce rice. And we looked at it and we felt that rice was taking a large chunk of the foreign exchange spending, and so what we did simultaneously as we were putting rice on the 41 forex restriction list, we were funding farmers to go into rice farming. We also told Nigerians to eat Nigerian rice because it has better nutritional value; it is fresher and ultimately, it will become cheaper. That’s what we did and we have succeeded.
“The textile industry was the largest employer of labour after the public service and it also earned a lot of foreign exchange. We feel the cotton, textile, garment value chain has the potential to earn a lot of foreign exchange for Nigerians and employ millions of our people. And so, it is within our strategy to ensure that we supply them credit and that’s what we are doing. We cannot supply them credit and fail to provide a market for them.
“Remember that we do not have enough foreign exchange to be giving people to import textiles. So, we are telling Nigerians to wear Nigeria and patronise our own. We are not banning anybody, we are only saying that we cannot use our hard earned foreign exchange to give to people to import textiles from abroad and create jobs abroad. Whereas, our own textile mills are idle. Most of our cotton farmers are dying. So, we are saying let us provide jobs for them; let them go back to their farms and supply those who will process the cotton into textiles. We know that millions of jobs can be created when we revive the textile industry.”
Textile industry stakeholders react
A textile manufacturer and Chief Executive Officer of Haffar Industrial Company Limited, Dr Michael Adebayo, commended the CBN for the policy, saying that it would boost local manufacturing.
He advised the government to equally formulate policies to check the smuggling of textiles.
He, however, pointed out that the effect of the policy might not be immediate because importers had stock of textiles and it was only when they sold all they had that they would start buying locally.
Also commenting, the President, Textile Manufacturers Association of Nigeria, Mrs Grace Adereti, said the move was laudable adding that if importers were not given forex to bring in textile garments, local manufacturers would be able to compete better.
She said, “We produce materials but people don’t buy from us because they get cheap garments from outside the country. With this policy, we will be able to compete for more.”
The General Secretary, Senior Staff Association of Textile, Mr Foly Owolabi, couldn’t hide his excitement about the CBN’s plan to give loans to the operators at a single-digit rate, to enable them to retool and remodel their machinery.
He noted that the textile mills that were still in existence currently operated below 20 per cent capacity, but with the CBN’s intervention, he hoped to see them move up to between 70 and 80 per cent capacity.
He said, “The restriction of forex to textile importers by the CBN will boost the local textile industry, in terms of increase in production capacity. Currently, they are operating below 20 per cent; I am hopeful that after the CBN’s intervention in providing the loans, their production capacity will move up to between 70 and 80 per cent.”
In the same vein, the General Secretary, National Union of Textile and Tailoring Workers of Nigeria, Chimezie Sylvester, is also optimistic about the CBN intervention, saying that no country survives by depending on importation.
He said, “The rate of dumping of textile materials produced by other countries in Nigeria is extremely high, not to talk about the phenomenon of second-hand clothes. The textile industry in the past used to be the second highest employer of labour. Now, the industry is down, meaning unemployment has risen. So with the restriction on Forex for textile imports is obviously going to help energise the industry once again because over-dependence on foreign textile does not augur well for our textile industry.”
He, however, advised the government to fix the country’s power supply problem saying depending on the alternative power supply to run the textile industries might make nonsense of the CBN gesture.
“The government has to also work very hard to eradicate smuggling by ensuring that smuggled textile materials don’t find their way into the Nigerian market,” Chimezie added.
The Director-General, Nigeria Employers Consultative Association, Mr Timothy Olawale, said, “We are totally in support of the CBN for the restriction of forex for textile imports. Essentially, the CBN’s measures would lead to the resuscitation of the nation’s moribund textile industry; it would make them competitive and lead to the provision of employment for Nigerians.
“As employers, we have many employers involved in the textile importation. The government is not saying it has banned the importation of textiles. What the government is saying is that it will no longer offer forex to the importers of textiles. So, they will have to source their forex through other sources.
“To really boost local production, the government must take decisive action on the issue of electricity.”
But a business mogul and legal practitioner, Jimoh Ibrahim, decried that the textile industry hadn’t accounted for the lifeline, running into billions, given to it by the past administration. However, he advised that operators must increase standard and seek foreign partnership to revive the textile industry.
He said, “One of the past governments gave N70bn lifeline to the textile industry. They didn’t produce anything. You are talking about encouraging local production, there is globalisation, unfortunately. So, people want to have a choice of buying their textiles where they want to buy them. If you are in the US now, you want to buy a tie here but if they say a tie is produced in Aswani, you are not interested because the standard is not there. So, again, this opening in economic boundaries will affect government policies in terms of encouraging local production of textiles.
“What we can do is probably to look for collaborative efforts with international institutions or international companies in that sector that can take over or partner with the local companies and make mass production. Even if you encourage the local industries to produce these textiles, you cannot compel the local people to buy it. The only way out to me is to recognise that there is globalisation. Standards must be improved. There must be regular power supply.”
Published On : 25-04-2019
Source : Punch
