The Nigerian textile industry, which was once a vibrant sector of the Nigerian economy, is gradually grinding to a halt. Despite government promises to revitalise the sector that holds numerous potentials for the economy, not much has happened. Nigerians who are not aware of the forces that have brought the once flourishing industry to its knees are wondering what might have struck the sector. Fred Itua examines the factors behind the rot in the industry.
In any developed or developing economy, the indices used in judging growth is primarily based on the producing power of that country. Industries form the bulk of these indices. In Nigeria for instance, more than 80% of all finished consumer products are imported.
Nigeria relies more on import while its once vibrant industries are facing near extinction. The textile industry particularly attracts serious public debate basically because of the pivotal role it played in stemming the tide of unemployment between late 1950s and early 1990s.
The first modern textile industry in Nigeria, the Kaduna Textile Mill, started production in 1956. The primary reason for setting up the mill was to process the cotton being produced at the time, in the northern part of the country. By the 70s and the 80s, the Nigerian textile industry had grown to become the third largest in Africa. A report by the United Nations University (UNU) for instance stated in 1987 that there were 37 textile firms in the country, operating 716,000 spindles and 17,541 looms. This was the golden period of Nigeria's textile industry. Between 1985 and 1991, it recorded an annual growth of 67%, and as at 1991, it employed about 25% of the workers in the manufacturing sector. Sadly, this once cherished national cash cow is now at the verge of collapse, due to a number of factors.
One of the factors that has become a thorn in the flesh of the industry has to do with fibre.
The MFA was a system of quota that could be imposed by developed countries on the amount of textile products that developing countries could export. This was interpreted largely as a protection of developed countries' textile industries from China.
The MFA was replaced by the WTO's Agreement on Textiles and Clothing (ATC) in 1995. Under these agreements, the textile industry was brought into full compliance with the General Agreement on Tariffs and Trade (GATT) rules, and all quota restrictions were rolled back by January 1, 2005. The quota restrictions were not applicable to some countries, one of which was Nigeria.
Reacting, a seasoned industrialist, Mr Victor Eburajolo, blamed the decline of the textile industry on the hasty accession of Nigeria to the WTO in 1995. According to him, in accordance with WTO rules, Nigeria had to remove any protection of the local textile industry, among others. He argued that it would have been better for the country to secure special arrangements with the WTO, such that the local textile industry would be protected until it was surer on its feet.
Before the expiration of the MFA, textile products were one of the fastest growing exports to the US under AGOA. However, Chinese exports increased rapidly and proved to be stronger competition than African companies could handle.
This signalled the beginning of the dearth of the textile industry in African nations, particularly Nigeria. According to a presentation made to the US-China Commission by Princeton Lyman, a former United States ambassador to Nigeria, African countries suffered from the increase in exports from the Chinese textile industry on two fronts.
Cheap exports from China were undermining local textile industries. At the same time, the growth of Chinese exports to the United States was making it almost impossible for African countries to compete with China for the US market.
Beyond that, the entry of Nigeria into the WTO in 1995 compounded the woes in the textile industry as it opened the market to cheaper textile imports, predominantly from China, as well as second-hand clothing from the US and Europe.
Though there is an existing importation ban on finished textiles to protect domestic manufacturers, smuggling is still widespread. According to the Nigerian Textile Manufacturers Association, around 85% of textiles sold in Nigeria are smuggled and the country loses around $325m in potential Value Added Tax revenue annually due to smuggling. Benin Republic, Nigeria's closest neighbour, appears as trading post for most of these materials. Most of the Malaysian and Chinese second-hand good pass through that country. The border agreement between the Nigerian government and Republic of Benin further compounds the problem of smuggling and impacts negatively on the deteriorating industry.
High operating costs and lack of basic infrastructure are a bane of the textile industry. Frequent power failures did serious damage to the system, as many of the factories were shut over the past years. A survey of Nigerian manufacturers by the UN Industrial Development Organisation indicated that most industries in the country barely get electricity up to three days in a week, a development that severely limits production capacity. Presently, there are fewer than 30 textile factories operating in Nigeria, down from 250 in the 80s.
Many of these factories are producing under capacity which has also lowered their employment capacities. Exports of textile products dipped below $11m in 2008 from $44m five years earlier. Currently, manufacturing accounts for less than 5% of GDP, compared to 14% in South Africa.
Nick, an ex-textile industry worker, recounts his ordeal since he lost his job in 2008. "I put over 28 years of my entire life into serving a company that laid me off sometime in late 2008. No special thought or consideration was given to how I would survive after the layoff. Life has been tough since then as I am above the age to hit the street again to source for jobs that do not exist," Nick lamented.
He however absolved the company of any blame, saying that it could fold up without urgent intervention. "The company is seriously distressed and their plant in Kaduna has been shut down. Their operating plant in Lagos is struggling to survive as cheap and substandard fabrics have taken over the Nigerian market. These fabrics are smuggled through the Benin borders and sometimes through Niger borders in the northern region. The Nigerian Customs aid and abet these crimes", he lamented.
A trader in Oshodi market in Lagos who once flourished on the sale of made -in- Nigeria fabrics popularly called 'Ankara', also recounts how her business folded up three years ago.
"In the early 90s when I started this trade, life was good. I trained my two daughters in the university with the proceeds from Ankara business. But trouble started early this year when cheap fabrics from China smuggled through the Benin border began to flood the Nigerian market. I struggled to keep with the pace but gave up the business when I was not making sales again," the trader recounted.
She said that the textile industry might collapse if urgent steps were not taken to check smuggling of sub-standard materials into the country.
As a wakeup call to the dwindling fortunes in the textile industry in the country, the Bank of Industry in August 2010, released N30b as grant to the textile industry, as part of the Cotton, Textiles and Garment Industry Revival Scheme passed at the end of 2009. In total, N100b was expected to be injected into the industry. As the centre of the Nigerian textile industry, Kaduna textile industry received the lion's share of N24b.
At the ceremony that marked the re-opening of the industry, the Vice President, Namadi Sambo and managing director of the Bank of Industry, Evelyn Oputu were present.
In their separate remarks, they applauded the initiative and stated that more than 2000 Nigerians would be put back to work in Kaduna by the initiative. However, almost a year after the re-opening, not much has been heard about the progress made at the factory.
Nigeria's unemployment profile is swelling daily. The Nigerian government is not oblivious of the opportunities inherent in this sector. For a government that coutinues to promise jobs to its natives at every forum, this vital, yet neglected sector of the Nigerian economy should be given priority attention by the administration. For instance, Ghana, whose population size is smaller than a geo-political zone in Nigeria, exports finished goods to Nigeria while toothpicks and machetes for local farmers are still being imported Asian countries. Government's alleged intervention in the textile industry is yet to bring any meaningful impact to the textile producers, giving the impression that there is more than meets the eye concerning the N100b intervention fund.
The Federal Government has announced the plan to remove the fuel subsidy from January 2012. The issue has generated widespread public outcry. According to goody Egbuji, the Executive Secretary of petroleum Products Pricing and Regulatory Agency (PPPRA) the cost of fuel has become a national challenge. He added that there was the need for the government to withdraw subsidy from oil and allow petrol petrol sell at commercial prices. However, the Nigerian Employers Consultative Association (NECA) has distance itself from the government's proposed fuel subsidy removal. The Secretary General of the National Union of Textile Garment and Tailoring Workers of Nigeria (NUTGTWN), Isa Aremu, said that the proposed plan has exposed the Governments "insincerity and lack of openness" on the issue. He commended NECA for distancing itself from the alleged support of the organised Private Sector (OPS) on the issue.
Originally Published in New Cloth Market, November-2011
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