Textile imports into Nigeria have doubled in two years as the industry remains in the doldrums despite the federal government’s protection policies aimed at reviving local production.
Data from the National Bureau of Statistics show that the subsector of textile, apparels and shoes last recorded positive growth occurred in 2018.
Since that time, the Federal Government, via the Central Bank of Nigeria, has implemented a number of intervention programmes. This includes financial support, foreign exchange restrictions, and training for all types of textile materials on the official market.
NBS data shows that imports of textiles and textile products rose 100.3 percent in 2022 to N365.5 Billion, which is the highest since at least 15-years, up from N220.5 Billion in 2019.
“The CBN has not implemented what they planned to do three years ago because people are still importing even more than before. And with this surge in imports, how do we prepare to reap the benefits of the African Continental Free Trade Area agreement,” Hamma Kwajaffa, director-general of Nigerian Textile Manufacturers Association, told BusinessDay.
He claimed that the central bank was trying to boost foreign investments through the freezing of accounts for importers, forcing them to build factories instead of just importing. “But the country’s high cost of production, which is making us uncompetitive, discourages such investments.”
Kwajaffa claims that the country is home to at least 24 textile factories, but only 3 are operating properly. This is because certain ministries patronise them. Otherwise, they would be closed long ago.
It is important to note that the textile industry plays a significant role in any economy. This industry can create a lot of jobs for both unskilled and skilled labourers, increase exports, bring in foreign direct investment, reduce poverty and generate a great deal of income.
In the 1970s and early 1980s, Africa’s most populous nation had over 180 textile mills that employed more than one million Nigerians. United Nigerian Textile Limited was one of them. Others were Aswani Textile and Afprint.
In the 1990s these companies disappeared because they could not compete against a smuggling atmosphere, an uncontrolled importation of goods, an inadequate supply of power, inconsistent policies by government and insecurity.
In 2008, to revive the textile industry, the government banned imports of fabrics and textiles. In 2015, however, this ban was lifted and a duty of 35 percent was imposed on imports.
The CBN then imposed a FX limit on textiles and textile material imports into the country.
“We will provide financial support to textile manufacturers with the provision of funds at single-digit rate, to refit, re-tools and upgrade their factories in order to produce high-quality textile materials for the local and export market,” Godwin Emefiele, governor of CBN, said.
Since the beginning of its interventions in this industry, the bank has invested N120billion in various sectors of the textile, cotton and garment industry. They have also improved the production capacity in ginningeries from 19% to 50%.
The report said that between 2019 and 2020, more than 620,000 jobs direct and indirect will be created.
“It is not a disappointment that the CBN did not achieve success because all the variables that were necessary to make the industry succeed were not addressed,” said Gabriel Idahosa, deputy president of Lagos Chamber of Commerce and Industry.
“One of such was that the country was not producing cotton, the primary raw material at a competitive price relative to countries like China, Bangladesh and several other countries that produce cotton at a far lower price than Nigeria,” he said.
The cost of producing textiles is high, he said, because they are energy intensive.
“Also, the depreciating value of the naira made the importation of machineries and cotton much higher than the price of textile products of other countries,” he said.
According to Idahosa, these factors completely knocked out the industry’s capacity to compete worldwide.
Nigeria ranks among West Africa’s top producers of cotton. According to the United States Department of Agriculture, the country’s cotton production rose to 1.6 million metric tonnes in 2020 from 920,000 metric tonnes in 2019.
“The market of foreign textile in Nigeria is around 80-90 percent. Imports are the mainstay of this market. And even if you restrict or ban, it does not guarantee local production because the borders are very porous, making a lot of smuggling to still be going on,” said Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise.
“And even if there is local production, the high inflationary environment will make the products less affordable in a country where there is so much poverty.”
“Many textile firms have shut down despite the many protectionist measures,” he said. “All the intervention funds, many of the manufacturers have not been able to pay them back.”
Idahosa from LCCI stated that the government needs to identify threats or challenges facing the textile industry in order for it to be competitive and improve its local production.
“We need to address raw materials and the cost of power in a very significant manner, not this very little effort here and there that does not have a critical mass,” he said.
According to a recent report from the Oxford Business Group, building up the capabilities of Small and Medium Sized Enterprises will help boost the entire industry.
“This can be done through training programmes in priority areas (including supply, quality control and marketing of textiles), preparing investment profiles to attract foreign direct investment in the textile sector and providing information for micro-enterprises and SMEs in the region and buyers outside of Africa,” it said.
Read also: CBN’s tight monetary policy no remedy for cost push inflation – KPMG
Textile and garment industry in Bangladesh, Cambodia and other countries that share similar characteristics with Nigeria (such as large youth population) has helped reduce poverty.
Bangladesh’s over 5,000 Ready Made and Garment(RMG) factories employ over 4 million people. The South Asian country is one of the world’s largest garment exporters, with the industry accounting for 84 percent of its exports.
Exports Promotion Bureau of Bangladesh reports that ready-made garments exports were $27.4 Billion for July to January 2022/23 compared with $23.9 Billion the previous year.
World Bank documents show that the proportion of the population living below $1.90 per day has decreased by half in the last 20 years.
Cambodia’s textile industry is also the biggest employer of labour with over 600,000 people. The apparel industry dominates the country’s exports, with 16.5 millions people.
In the early 1990s, the Cambodian government took various measures to boost the industry’s competitiveness in the international market, which prompted foreign investors to direct their attention to the country.
The garment industry has continued to be a major economic driver in the country for more than 20 years, generating jobs and attracting foreign direct investment.
