One of the textile factories in Nigeria
With N150 billion in intervention fund pumped into the sector, operators and analysts in the textile industry insist the revival and growth of the sector require a holistic approach, writes Olaseni Durojaiye
The recent disclosure that the Central Bank of Nigeria (CBN) has approved another N50 billion intervention fund for the textile industry appears to be rekindling the hope that rescue is on the way for the once thriving industry. Notwithstanding, it has emerged that the sector is up against systemic challenges that could render several intervention funds meaningless, or fail to return the sector to its lost glory days. The intervention fund is the second in recent times coming after the N100 billion released to the sector in 2009 specifically for retooling and modernising production machineries in the sector.
At the height of its boom between 1985 and 1991, with about 180 textile mills in operation, the textile industry recorded an annual growth rate of 67 per cent and as at 1991, employed over 350,000 people which were approximately 25 per cent of workers in the manufacturing sector.
The opposite is the case today. That once booming textile industry, is currently struggling to get back on its feet under the weight of myriad problems. The problems, operators in the sector lament include infrastructure deficit, cost of production, and cost of borrowing, inclement business environment which allows bootlegging, smuggling, and penchant for imported fabrics among others.
The N50 Billion Fund
The N50 billion intervention fund, THISDAY findings revealed, was meant to facilitate the takeover of the existing debts to provide additional long-term loans and working capital to existing companies in the Cotton, Textile and Garment (CTG) sector.
Acting Managing Director of Bank of Industry (BoI), Waheed Olagunju, who spoke on the fund at a recent cotton, textile and garment stakeholders forum in Abuja, had stated that, “A total of N13.37 billion has been disbursed to various beneficiaries as at September 30, 2016.”
“It is meant to provide additional funds to kick-start operation and keep operation going and most importantly to retain the staff they have and possibly employ more.
“We need more and more intervention, as we all know the economy is officially in recession and in recessionary times like this, there is need for interventions to help the private sector overcome the challenges,” he stated.
Though the fund was meant for entire value chain in the cotton, textile and garment sector, THISDAY gathered that only 11 businesses have benefitted from the fund out of about 40 that applied for the facility.
Association of Textile Manufacturers of Nigeria (ATMA) Hamma Kwajaffa, stated so while welcoming the latest intervention even as he lamented that the sector had been denied proceeds from the statutory textile industry development levy.
But a Lagos-based economist who preferred not to be identified told THISDAY that the problem bedeviling the sector was systemic and while interventions funds are welcomed, it may not solve the problem that the sector is faced with.
“Interventions are welcomed, it will help to keep the sector alive but it may not bring about the desired turnaround in the sector. The problem of the sector is systemic and requires a holistic approach. You will recall that the government intervened in the sector in 2009 with N100 billion textile and garment intervention fund. The fund was disbursed at six per cent interest rate to textile; seven years later and with disbursement of about 70 per cent of the funds, the sector has only recorded a modest success rate and that is because the beneficiaries spent little on capital investments like replacing old machinery and switching from diesel to gas plants. They simply refinanced their outstanding loans, which helped cut their interest rate cost. While this has helped keep some of these firms in business, but has not really galvanise the potential in the sector.
Assistant General Secretary, Nigeria Union of Textile, Garment and Tailoring Workers, Ismail Bello, also welcomed the interventions and argued that it has “stabilised the decline” in the sector. He insisted that without the financial support the sector would have been worse.
Problems in the Sector
It would appear as though the most formidable problem confronting the sector is infrastructure deficit but other problems including activities of smugglers, low purchasing power, continued influx of foreign textile fabrics and penchant for foreign products have all combined to keep the sector down on its knees.
The government in 2010 responded by placing a ban on importation of textile fabric. Unfortunately, the policy failed to bring about the relief that was intended; instead it became a boost for the smuggling industry and influx of textile fabrics continued. Today, the smuggled imported textiles account for over 85 per cent of fabrics sold locally but they brought no revenue to government.
“We’re not competitive, we can’t export even within Africa; production cost is higher here. Take electricity tariff for example; in South Africa and Egypt, electricity cost three cents per kilowatt, whereas in Nigeria it costs over 20 cents. That is just one problem; there is also the issue of smugglers, who bring in low quality fabrics and labelled it made in Nigeria. 95 per cents of textile materials in the market are imported,” he lamented.
Bello aligned with Kwajaffa. According to him, “There is the problem of electricity, there is the issue of smuggling and there is also the issue of low patronage of made in Nigeria goods. There is the need to check smuggling,” he noted, adding that, “There is also the attitude of Nigerians towards made in Nigeria goods which is also a major problem facing the sector. The problem of the industry requires a holistic approach,” he stated.
While respondents to THISDAY enquiries welcome the intervention, findings revealed that even with the interventions, the sector lack competitive edge and could not export due to high cost of production among other challenges.
“We welcome the latest interventions it is a good initiative that will keep the industry going but the lasting solution to the problem of the sector goes beyond intervention. Total textile importation into the country last year was about $4 billion; the policy of paying textile industry development levy when textiles are imported is still in place but we don’t get the 10 per cent, if the sector were getting the 10 per cent we won’t even need the intervention funds from government,” Kwajaffa argued.
In his own opinion, Bello suggested that to revive the sector and set it on the part of sustainable growth, government must look at the problems of the sector “in a holistic manner”.
“If the cotton, textile and garment sector must witness revival and growth, the problems confronting the sector must be addressed in a holistic manner. The sector is capable of becoming the second largest employer of labour after government, as it used to be. The sector used to export with the support of Export Expansion Grant (EEG), and earn foreign exchange for the country; to bring back all of that the sector needs massive investment.
“We need investment to the tune of hundreds of billions of naira. We need the kind of intervention that government pumped into the financial services sector; it was massive investment with far less jobs than what the textile sector can generate. When United Textile Limited, Kaduna reopened in 2010, it did so with 1,000 workers on the first day; that tells you the capacity of the sector to generate employment.” he explained.
“The way to revival and growth in the sector require massive investment in the development of agriculture especially cotton production, we need to invest in technology for production and skills development. There is also the need to get it right with the country’s foreign exchange policy because we use imported chemicals for manufacturing. The lasting solution that will guarantee revival and growth is in taking a holistic approach to the problems facing the entire sector,” he concluded.