Why textile sector remains on brink despite interventions
• ‘Executive Order 003 of 2017 only on paper, govt major culprit’
• Fewer than 25 of over 300 textile companies in operation
• Why Nigeria cannot export raw cotton despite boom
• With consistent policies, Nigeria has huge potential, says Ogunlesi
• WTO exposed Nigerians to cheaper textiles
Despite years of intervention, Nigeria’s textile industry is a departure from the ideal, owing to challenges of huge appetite for importation, poor patronage, policy implementation and a broken value-chain.
According to stakeholders, if only 10 per cent of the yearly import bill of $4 billion textile fabrics is re-invested into the textile industry, the country would be a net exporter and expand its revenue from programmes like the African Growth and Opportunity Act (AGOA) of the United States.
Stakeholders say the problem of the industry transcends funding, because interventions so far, have helped to increase capacity to access raw materials like cotton and retooled machinery, but poor patronage draws back the gains.
Cotton grows in 26 of Nigeria’s 36 states and West Africa is the fifth-largest producing region globally. With CBN’s intervention, operators noted that Nigeria now produces excess cotton but lacks an industry and market regulation that will uptake the raw materials for production. Exporting raw cotton creates further problems for the industry as value-added products continue to dominate importation.
Industry data showed that in 2019, 18.6 per cent of all imported cotton worldwide ended up in China, the largest exporter of textiles and clothing products in the world. Chinese imports currently account for 60 per cent of the print fabric market in Africa, with India supplying an additional 21 per cent. West Africa itself is a large market for prints and buys around 65 per cent of all foreign imports. Nigerian demand accounts for around 38 per cent of total imports in the region.
Specifically, they noted that the Executive Order 003 of 2017 signed by President Muhammadu Buhari has remained active on paper as Ministries, Departments and Agencies (MDAs) of government still import their uniforms from abroad despite local capacity for such apparels.
Similarly, the procurement of school uniforms from abroad by many private schools and rising dependence on used clothing and apparel by many Nigerians continue to undermine the growth of the textile sector. For African prints like Ankara, operators noted that distributors have broken the value-chain and now import directly from China with made-in-Nigeria labels.
Data from the National Bureau of Statistics confirmed that Nigeria’s importation of textile materials has been on the rise, with the country recording N200.6 billion worth of goods as at Q3 2020. The country exported N5.05 billion worth of goods during the same period.
Last month, the manufacturing PMI for the textile, apparel, leather & footwear sub-sector remained stationary, as against the recovery in November.
The Central Bank had last October, said it provided cotton producers with more than $300 million in loans in recent years to support the domestic textile industry, once Africa’s largest.
From about 600,000 local farmers across the country that grew and supplied cotton to the Cotton, Textile, and Garment (CTG) industries, today’s reality showed that less than 25 of the over 300 textile companies that were scattered across the country are still in operation, performing below capacity, as the country depends heavily on importation.
Despite the ban on imported finished textiles to protect local manufacturers and designers, having cost the economy at least $4 billion yearly, smuggled goods continue to make inroads into the country through the Benin Republic, Chad and Niger borders.
With the implementation of the African Continental Free Trade Area (AfCFTA), there are concerns about the country’s capacity to compete in an environment where imported ready-to-wear garments, especially, uniforms dominate the market.
According to Euromonitor report of 2019, the African fashion market is worth $31 billion, with Nigeria accounting for about $4.7 billion (15 per cent) of it. The figure is lower than South Africa’s current share of ($14.4 billion), despite Nigeria’s huge population and market size for fabrics.
The Euromonitor report also puts the estimated value of Africa’s share of the global fashion industry market at about $2.5trillion.
However, some designers and stakeholders in the industry believe that Nigerian couturiers would only get a sizable part of the market if different tiers of governments partner with them to remove all bottlenecks that are crippling the sector, and stopping it from emerging the leader in the sub-Saharan market.
With the successes recorded through mask production, the Founder & Chief Responsibility Officer of Ruff ‘n’ Tumble, Mrs. Adenike Ogunlesi, had during a webinar organised by the Lagos Chamber of Commerce and Industry (LCCI) said the garment industry was able to produce one million masks when access to face masks became challenging.
In 2018, the global face masks market was valued at about $32.76 billion and was forecast to reach over $50.9 billion by 2025. Meanwhile, the global disposable face mask market size exceeded $74.90 billion in Q1 of 2020 and is expected to grow at a compound annual growth rate of 53.0 percent from 2020 to 2027.
“The garment industry was seriously affected by the pandemic but the sector has risen to the local needs when the supply chain was destroyed. A million masks were produced in the course of the pandemic. We have not been able to produce a million things before now. We need to sustain this trend with policies.
“Nigeria has the capacity to become the manufacturing hub of the continent and even globally. However, we need consistent policy intervention to address this. The local market is there in terms of volume and demand. The machines that we have are computerised but access to power is also a great constraint. There is a huge opportunity in the garment industry. Nigeria can take the advantage. COVID-19 is a double-edged sword that can be used to our advantage,” she added.
In a chat with The Guardian, the Director-General, Nigerian Textile Manufacturers Association (NTMA), Hamma Kwajaffa, explained that a large percentage of textiles sold in the country are smuggled and imported, putting the country at a loss in potential yearly Value Added Tax (VAT) revenue from such activities.
He added that if the 10 per cent levy from textile importation was properly invested in the sector, it would have grown and developed capacity to tackle competition.
He identified the suspended payment of Export Expansion Grant (EEG) claims as adding to the woes of operators, thus limiting their capacity to export and even improve production, since the markets have been dominated by foreign clothing.
According to him, operators have been selling below production costs and this has remained unsustainable, noting that five of the 25 remaining firms are into fabrics while the others are in the allied sector.
“Our numbers are being decimated daily. Distributors no longer buy from manufacturers but go to China to import. This is a country that used to have 867 textile mills in the 80s. Today, we have excess raw materials but low capacity to uptake for production as the market depends on foreign goods.
“The executive order 003 is inefficient. No one is complying with the law. No one is addressing the decayed infrastructure and overhead costs. Energy costs are also huge and affecting operations of manufacturers. The textile development levy has also not been diverted to the sector for growth. The levies are supposed to be used to support the industry rather than seeking loans. We are running only one shift rather than three shifts and this has also affected capacity utilisation cum employment,” he lamented.
He also traced the origin of the problems to 1995 when Nigeria replaced the Multi-fibre Agreement (MFA) with the World Trade Organisation’s (WTO) Agreement on Textiles and Clothing (ATC).
With the replacement, Nigeria had to remove all protection of its local textile industry, rather than securing special arrangements with the WTO, such that the local textile industries would be protected until they were independent.
According to him, the WTO agreement opened the Nigerian market to cheaper textile imports, predominantly from China, as well as second-hand clothing from the United States and Europe.
However, before the expiration of the MFA, the United States had introduced the African Growth and Opportunity Act (AGOA), an initiative that opened up the American market to African countries to export to the U.S., but instead of African countries enjoying the window opened to them, China with its textiles proved stronger and took over the U.S. market.
Some of the stakeholders disclosed that Nigerians and not Chinese are to be blamed for the sector’s woes because it is Nigerian businessmen that usually take the samples of local fabrics to China to reproduce.
MEANWHILE, officials of the National Union of the Textiles and Garment Union of Nigeria (NUTGWN) have blamed collapse of the Industry on non-implementation of policies initiated by the Federal Government to salvage the ailing sector.
The President of NUTGWN, John Adaji lamented that the few surviving textile factories that are producing less than 50 per cent of installed capacity are downsizing as a result of redundancy.
Adaji, who spoke with The Guardian on the poor state of the textile industry, said government did not take advantage of the existing huge to address the problem of unemployment and youth restiveness.
He blamed government for non-implementation of the Cotton, Textiles and Garment (CTG) policy, which it initiated, to the letter, particularly the Executive Order 003, meant to ensure that Nigerians patronise made-in Nigeria fabrics. He said full implementation of that Order would have boosted the manufacturing activities of the existing factories and pave way for revival of the industry.
He said: “They came out with an Executive Order, called 003. It was meant to address the problem of patronage. Which means that all government parastatals would be encouraged to patronized locally produced goods. That is what the executive order is meant to address. And if that has been taken seriously, the story today would have been different for us in the Textile sector.
“Like we always say that the leadership is supposed to lead by example. So, if they see these policies as problem solving, you then start the implementation from the top. Direct the Federal Executive members, even if it is once in a week or twice in a week to ensure that what they wear is made-in-Nigeria. There should be a legislation to back it up.”
“The legislators will also obey the Order. Then you see, the chunk of it all is through the implementation by the Nigerian Army, Police, Air force, Navy and other paramilitary forces. We also have customs, immigration, federal road safety commission, civil defence, unity school, and NYSC. The uniforms of all these organizations are enough to provide 50 per cent boost and market to the local producers in Nigeria, but the Government has refused to implement the Order.
“This is the miracle of South Africa. And it should be imbibed here in Nigeria. We borrow policies from other countries, but we don’t have the political will to do the same thing here. This, I tell you will produce 50,000 direct jobs into the sector. So, the executive order is meant to address it.”
To revamp dormant textile industries, the Bank of Industry (BoI) had in 2010, released N30b as a grant to the textile industry, as part of the Cotton, Textiles and Garment Industry Revival Scheme passed at the end of 2009.
With very low success recoded from the intervention, the Central Bank of Nigeria (CBN), in 2019, placed a restriction on the sale of foreign exchange to importers of textiles and other clothing materials in the country, stating that the measure would reposition the textile, cotton and garment industry to provide jobs, create wealth and ginger the economy.
In addition to this, the government said it would provide loans at 4.5 per cent interest rate to textile manufacturers to enable them to retool and upgrade their factories to produce high-quality textile materials for the local and export markets.
Last year, the Central Bank of Nigeria (CBN) said it would continue its efforts to support the Federal Government’s economic diversification efforts by focusing on the textile sector.
CBN’s Development Finance Department made this known at the stakeholders’ meeting with Cotton Garment and Textile (CTG) players organised by the bank in Abuja.
The bank expressed worry that most of the textile factories in Nigeria had folded up in spite of Nigeria’s huge potential in the sector.
The Director, Development Finance Department, Yusuf Yila, said the apex bank was committed to revamping the sector by supporting farmers to cultivate quality cotton lint being the major raw material for the industry.
He said that though a lot had been achieved over the last few years, more still needed to be done.