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March 7, 2016

Nigerians used scarce forex to kill textile industry

By Omoh Gabriel

In the early 1970’s through to the 1990’s, the Nigerian industrial horizon was dotted with textile manufacturing industries. In the Kaduna-Kano axis, one recalls with nostalgia several large textile companies employing thousands of Nigerians. It used to be an intriguing experience to be close to a textile mill. At the close of business, several employees will be trooping out of the premises of a textile company. It was like a market that has sold out all its wares.

These textile mills were using local materials that further employed millions of farmers. At the same time, Nigeria was exporting an estimated 25 to 30 per cent of production, making the industry an important earner of foreign exchange for Nigeria. At that time, instead of being a consumer of foreign exchange, the textile sector earned the country some foreign currencies that added to the build up of the nation’s external reserves. Looking back on those golden years, the Central Bank of Nigeria (CBN)’s Annual Report for 1995 showed that out of 13 sub-sectors in the Manufacturing sector, the Textile sector (Cotton, Textile and Synthetic Fabrics) accounted for a significant proportion of the overall growth of manufacturing production.

The sector was saving a lot of foreign exchange for the country as between 60 to 70 per cent of the raw materials used in the industry were sourced locally. As the sector is labour-intensive, it provided an estimated employment of around 1,500,000 direct jobs for Nigerians.

During this period, the textile industry was at its peak with 124 companies in existence. But there are only 30 textile companies in existence in Nigeria today. This is a shocking reduction of 70 per cent. Despite the fact that global textile trade is booming, these industries are gradually diminishing in Nigeria. The reason behind this is the influx of smuggled foreign textile products into Nigerian markets. Huge quantities of both new and second-hand garments from Asian countries flood the Nigerian markets. Domestic markets are facing a major threat from smugglers importing cheaper textile fabrics from other countries and selling them at a price, which is lower than the market price of garments manufactured locally.

Where do these smugglers get their foreign exchange from? Of course, the parallel market which many Nigerians are now using as the reference exchange rate. This anti-social behaviour has led to the closure of 90 textile mills and a layoff of about 1,500,000 workers during the last decade. Data quoted by a Nigerian Garment union states that more than one million people, whose jobs were indirectly related to the textile industry like cotton farmers, traders, suppliers etc have lost their source of revenue as a result of these shutdowns.

It is unfortunate that there are only about 30 operational textile mills which are running at an average of 40 per cent of installed capacity in Nigeria today. The influx of cheaper fabrics from China and India has been highlighted as one of the reasons for underperformance in this industry. Based on trade data from the National Bureau of Statistics, Nigeria spent about N24.7 billion on textile imports between July and September last year. This represented a 17 per cent decline in naira terms from the N29.8 billion recorded in the corresponding period of the previous year.

Nigeria had placed a ban on textile importation in 2010 in order to encourage domestic production. However, this led to increased smuggling. Textiles also feature in the CBN’s circular of June 2015 specifying 41 import items for which foreign exchange from official sources is not available. Smuggled imported textiles account for over 85 per cent of fabrics sold locally. It is Nigerians that are buying these imported goods, killing the local industry, sending several Nigerians out of jobs while increasing the job opportunities in Asia, Europe and America by patronising their products. It is the same Nigerians that are using the country’s scarce foreign exchange to import these goods. Yet, they bend backwards to accuse government and CBN of not making enough foreign exchange available to private sector operators.

The annual global output of textile firms is estimated at $400billion. China’s production accounts for half of this figure. According to the CBN’s 2014 Statistical Bulletin, the value of cotton production in Nigeria contracted by -1.1 per cent year on year in 2014 and accounted for 5.1 per cent of crop production GDP in the same quarter. The Bank of Industry blames state governments’ failure to implement the National Cotton, Textile and Garment policy in their respective states for the collapse of textile companies across the country.

It is the shame of a nation that government officials from Turkey are currently visiting Nigeria and Turkey happens to be an important cotton producer and has a well-developed domestic textiles industry. Maybe this government wants to learn from Turkey, how to grow cotton and develop the textile industry that was once booming in the country. Now that Nigeria is cash-strapped, anything in the name of diversification goes. What a shame, what a pity, what a nation to weep for.

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