Nigeria’s moribund textile industry has received a boost in a Central Bank of Nigeria policy measure, restricting the sale of foreign exchange to importers of textiles and other clothing materials in the country.
Announced recently, the directive takes immediate effect. The strategy is aimed at stimulating economic growth, reviving the sub-sector for job creation and reducing the current unemployment rate of 23.1 per cent.
This is a welcome development, given the $4 billion the country spends annually to import textiles.
Unfolding the plan with key operators in the sector in attendance, the Governor of CBN, Godwin Emefiele, added that the successful Anchor Borrowers Programme on rice production would be extended to cotton farmers to help them produce materials for local industries and the export market.
Besides, the CBN would offer credit at a single-digit interest rate to enable them “to refit, retool and upgrade their factories.” Bank lending interest rates for the manufacturing sector, as published by the CBN in newspapers last week, range from 20 to 42.5 per cent, thus stifling production capacity increase.
Textile manufacturing had collapsed to the extent that at the dawn of 2018, only 27 textile mills were in operation, as against the 175 that existed between 1985 and 1991, said the Minister of State for Industry, Trade and Investment, Aisha Abubakar. A year after, it further reduced to 25, with less than 20,000 combined workforce, says Emefiele.
The minister said, “The significance of the textile industry and its impact on the nation’s economy is best illustrated by the fact that, at its height, the sector had created over 800,000 jobs, representing 25 per cent of the total number of jobs in the manufacturing sector, second only to the government in the employment of labour.”
But buffeted by multi-faceted challenges in epileptic power supply, difficulty in accessing credit and unstable foreign exchange rate, all of which culminated in low capacity utilisation, the sunset for this sub-sectoral economic giant began in the 1990s. But the influx of cheap Chinese textiles into the country and vicious activities of smugglers, aided by tainted Customs officials, crippled Nigeria’s textile manufacturing. In one fell swoop, for instance, Customs seized N315 billion worth of contraband in Kano in May 2015. Details given by the then Comptroller-General of the Nigeria Customs Service, Abdullahi Dikko, showed that the seizure was made from 75 warehouses. Each of them had materials valued at N4.2 billion. A few years earlier, 400 trailer-loads of smuggled textiles were burnt in Lagos and another 200 in Kano.
The ongoing Sino-American tariff war arising from an attempt by the United States to protect its advanced economy, exemplifies the fact that responsible nations do not stand aloof when their economies are deluged by foreign imports. The BBC reported in December that the US Department of Commerce had so far carried out 122 investigations into anti-dumping and countervailing tariff regime valued at $12 billion. On their radar are 31 countries, with China and Canada very prominent. Therefore, President Muhammadu Buhari’s government should also engage in critical thinking on how to crush foreign trade obstacles to achieving the repositioning of our textile industry.
For the CBN intervention to succeed, it must be well-thought-out and followed through. The success of its credit facility to rice farmers notwithstanding, it is imperative that the credit scheme extension to textiles should be guided by the lapses and complaints of beneficiaries of the N100 billion Cotton Textile and Garment Industry revolving loan, which began in 2009. With the gross failure of the N300 billion Aviation Intervention Fund, also released by the CBN and similar polices, scepticism now trails stimulus packages. About N120 billion of the fund was reportedly diverted, just as some of the recipient airlines have either folded up or suspended operations.
It is not only through loans that the CTGI can be incentivised; even more transparent and less susceptible to abuses are tax moratorium and import duty waivers on their machinery. The Dangote Cement Plc reaped handsomely from this policy, according to Forbes.com, as it enjoyed $247 million tax credits in 2018, from its pioneer status on its Ibese and Obajana production lines.
Very encouraging is the CBN’s discussions with the governors of Kano and Kaduna states – two havens of the textile industry in the country – on how they could assist in ensuring stable electricity for the renascent factories, promising to support them in creating production clusters. This is critical against the backdrop of the revelation by the President of Manufacturers Association of Nigeria, Frank Jacobs, that its members’ daily electricity demand in February was 14,888 megawatts. This mismatch between demand and the 5,000MW available for the entire country is ridiculous. MAN member companies spend N126 billion on gas to power their generators, and this spikes the cost of production.
Forex restrictions will not be the magic bullet to the textile industry conundrum in the country until it is matched with a brutal war against smuggling. This is a tough task for the Hammed Ali-led NCS. Greater diligence in border control and deployment of technology in Customs operations will make a lot of difference. This is why the non-use of scanners or shortage of them in clearing goods at our ports is a well orchestrated economic sabotage that should engage Buhari’s immediate attention.