Angst over lifting of import ban on textiles, furniture items
Anxieties now rule the waves among local textile and furniture manufacturers, following the delistment of their items from the import prohibition list by the former administration, through a directive in April, with the Nigeria Customs Service now set for its implementation.
Meanwhile, in the absence of a Federal cabinet and silence from top officials of relevant ministries and agencies, the position of the current administration remained unknown over the import policy issue.
The unbanning of the items, may have however been manifestly undermined by a recent directive from the Central Bank of Nigeria (CBN) over access to foreign exchange.
While the apex bank has stopped sale of forex to textiles and wooden products importers, among others, the Customs has stated in its directive that with the Economic Community of West Africa States – Common External Tariff (ECOWAS-CET) regime, some items including furniture and textile had been removed from the prohibition list.
Already, manufacturers have expressed fears that the removal of the commodities from the prohibition list could result in a further drop in capacity utilization of local industrial plants from an all-time low of 30 per cent.
Indeed, with the decision, the Federal Government stands the risk of not recovering at least N50 billion of its intervention fund from the sector, if undue exposure to imported commodities is not checked.
At an all-time low of 30 per cent in capacity utilisation, compared to a textile market presently saturated with over 85 per cent of imported printed fabrics, Nigerian textile and garment manufacturers have expressed fears of potential closure of their firms.
For the manufacturers, the pronouncement is no news as importation ban on printed fabrics had been lifted since April 11, 2015, even though manufacturers have had to contend with the prevailing circumstances of influx of imported sub-standard fabrics from Asian countries and neighbouring African countries since 2010 when a ban was placed on such goods.
The manufacturers blamed weak efforts of the NCS in checking influx of the goods in the country, thereby limiting their competitiveness in the market, while also attributing continued patronage of cheaper printed fabrics to consumers’ low purchasing power.
Presently, 44 projects are being financed by the Bank of Industry (BoI) under the Cotton, Textile and Garment (CTG) intervention fund, with a loan profile of N46.89 billion, while five projects under the wood and leather sector have attracted access to N1.93 billion funding.
Indeed, recovery of these funds may pose a threat to the Federal Government if the Customs remains ineptitude to implementing tariff and duties on the commodities as well as stem smuggling of printed fabrics.
To salvage the sectors and aid loan repayment, the Bank of Industry had restructured the loan facilities of many of the projects under the CTG by reducing the interest payable on the loans to four per cent, from an initial six per cent while the tenor of the facility was increased from five years to between 20 and 22 years for them to consolidate their operations given the challenges being faced by the sectors.
Director General of Nigeria Textile, Garment and Tailoring Employers Association (NTGTEA), Jaiyeola Paul Olanrewaju, told The Guardian, that although, the impact of the intervention fund might not be clearly visible to non industry operators, it helped to curtail the wind of liquidation that blew across the sector during the pre-intervention era.
According to Olanrewaju, many of the companies that benefited from the intervention fund either used it as working capital or to refurbish their equipment. “Before the fund came into being, many companies were at the point of liquidation”.
He added: “We have been aware of the removal of ban on printed fabrics since April, this year, even though the industry has been unduly exposed to huge imports of banned fabrics since 2010.
“With a volume of at least 85 per cent of imported printed fabrics dominating the markets amidst an industry operating at less than 30 per cent of its capacity, we are at a price disadvantage. Consumers’ purchasing power is very low, production costs are high while smuggling has also continued unabated.
“With the directive by the Customs, are we sure that they will be efficient in implementing levies and duties on the commodities in order to discourage importation? This is the key question that should be answered if local industries would be protected”.
The CBN, had in a circular dated June 23, 2015, stopped the sale of foreign exchange to importers of rice, textiles, wood products, tomato paste, poultry products and 35 other times, stating that the implementation of the policy would help to conserve foreign reserves and facilitate the resuscitation of domestic industries as well as generate employment.
The circular, which was signed by the Director, Trade and Exchange, CBN, Olakanmi Gbadamosi, stated that it was imperative to exclude importers of some goods and services from accessing foreign exchange at the Nigerian foreign exchange market in order to encourage local production of the items.
It read in part, “In the continuing efforts to sustain the stability of the forex market and ensure efficient utilisation of forex and the derivation of optimum benefits from goods and services imported into the country, it has become imperative to exclude importers of some goods and services from accessing foreign exchange at the Nigerian forex markets in order to encourage local production of these items.
“The implementation of the policy will help conserve foreign reserves as well as facilitate the resuscitation of domestic industries and improve employment generation.
“For the avoidance of doubt, please note that the importation of these items is not banned, thus importers desirous of importing these items shall do so using their funds without any recourse to the Nigerian foreign exchange market.”
However, the Comptroller General of Customs, Abdullahi Dikko, explained that under the new CET regime, some items including furniture and textile had been removed from the prohibition list.
Represented by Zone ‘A’ Coordinator of Customs and an Assistant Comptroller General of Customs, Victor Gbemudu, Dikko said the banned items are now being accommodated under the Import Adjustment Tax (IAT) in the new CET.
He explained that the CET is subject to review every five years, adding that by 2020, no item would be on the prohibition list after the harmonisation exercise.
However, poultry products, according to the Customs boss, remain banned; pointing out that the Federal Government cannot allow their importation into the country.
Dikko said: “If you go through the Common External Tariff, you will see that a lot of items have been removed from the prohibition list mostly furniture, textiles and the rest of them, most of them will now pay duty and will have Import Adjustment Tax (IAT).
“The CET is not new, it embraces about 15 countries which include Nigeria. All we are just doing is to bring stakeholders to understand what the CET is all about. To a large extent, it comes with some adjustments for member countries”.