Vanguard, Nigeria
Written by Franklin Alli
The much anticipated N70 billion funds was an outcome of series of lobby put up by the Organised Private Sector (OPS), and other stakeholders in the sector to accelerate rebirth of firms that had closed shops over the years, sustenance of the ones still operating though sick, and growth of the industry.
Financial Vanguard, authoritatively gathered that about 300 firms in the sector both old and new ones have queued to access the N70 billion finance window which government promised to make available to beneficiaries since 2014 through the Nigerian Agricultural Cooperative and Development Bank, but now through the Nigerian Import -Export Bank (NEXIM).
Sources close to NEXIM, told FV that the jostle for a piece of the fund was getting keen as more applications are being received.
Sources further disclosed that government has put in place a number of incentives for investors such as gas supply at a concessionary rate for the first five years to encourage operators in the sector to convert to gas as source of energy; five years tax holiday for new and existing textile companies ; waiver on import tariffs on textile equipment and raw materials, as well as anti-smuggling activities such as immediate destruction of all seized textile goods.
But Industry watchers while urging disbursement of the funds without further delay, however, suggested that NEXIM should not grant the credit facility to new textile companies that are just emerging.
Looking back, steady decline in the fortunes of the biggest African Textile Industry located in Nigeria, started in the 1970s through the 80s.
From a buoyant industry employing over 250,000 workers in the past 20 years it has declined to an alarming point that it is now managing to keep about 10,000 staff as at 2014 while factories dropped from 175 to about 20 textile mills.
Production also nose dived from 1.5 billion meters to 400 million, according to recent statistics courtesy of the Nigerian Textile Manufacturers Association.
In fact, if the late Alhaji Sir Ahmadu Bello (1910-1966), the first premier of Northern Nigeria was alive today, he probably would weep over the demise of textile mills at Kakuri industrial estate, Kaduna State.
Ahmadu Bello , was a leader who struggled hard to get foreign investors to established a number of textile companies in the State.
FV learnt that his dream was to make Kaduna, “Manchester of Africa,” in textile productions. But today, Kakuri Industrial Estate which was bubbling with industrial activities is now a ghost town due to closure of Kaduna Textile Limited. (KTL) said to had been the first textile company in the country and the West Africa sub region, Arewa Textiles Limited, Finetex Limited, Supertex, Nortex Limited, among others that have kissed the dust.
Secretary General, Nigerian Textile Garments and Workers Union, Mr. Isa Aremu, said the second most active in the economy next to agriculture in terms of employment generation and contribution to GDP .
The problems of the industry , he maintained remained unabated due to policy inconsistencies, half-hearted commitment to policy implementation, smuggling , high rate of exchange, high cost and scarcity of black oil (low pour fuel oil).
The problem of Low Pure Fuel Oil (LPFO), popularly referred to as black oil, contributed a lot to the collapse of the industries. It was scarce and expensive. In fact, when an official of a textile company was explaining the severity of the problem faced by UNTL, which is the same thing faced by other textiles in the state before their eventual closure, he said:
“Black oil is scarce and expensive. The one being imported by HYCINTH, a subsidiary of Nigeria National Petroleum Corporation (NNPC) is being sold then at N74 per litre in Lagos. When it comes to Kaduna it becomes N80 per litre and when it gets to Kano it is N90 per litre. We in UNTL used about six to seven trucks of the black oil per day when we were still operating. Can you imagine the millions of naira that adds to? That amount has already gone into the production cost. To that, add the cost of PHCN and water bill, salary and wages of staff, chemicals, cotton and then diesel for our generators, because 40 percent of our production is done with generators. Put all these together and you will see that it is impossible to make any profit at all.”
Apart from redundancy and loss of jobs, Financial Vanguard’s investigation further revealed that the country has not been benefitingfrom $400 billion (about N50.4 trillion) global textile trade.
“Of the $400 billion value of global trade in textile and textile related businesses, Africa’s market share as at June, 2014 accounted for $200 million of the $400 billion, a very minute fraction of the world trade. Of this account, Kenya takes $79m. South Africa, Egypt, Botswana and Lesotho are also visible on the chart,” said Obia Ofem one of the facilitators at a seminar on textile industry.
Ofem, who spoke on ‘A Global Perspective’, told stakeholders that as a matter of fact, while many of these African countries are trying to make the most of the opportunities created by African Growth and Opportunity Act (AGOA) and its other preferential trade conditions by EU, the Nigeria industry is actually struggling to find a space in the local scene.
She pointed out that despite the country’s vast resources and the teeming market of more than 140 million, the country has not featured on the export chart.
She stated that AGOA is America’s way of helping economic growth for developing countries.
“By this Act, textile imports of African origin are duty free to make them very competitive in the vast apparels and textile market of America.
Ironically, however, the level of exports from the developing countries is increasing even in the face of high tariffs and quantitative restrictions by economically developed nations. South Africa, Ethiopia, Madagascar, Lesotho, Cote’D Voire, Morocco, Tunisia, Namibia, Senegal and Mauritius are taking home something.
“It is sad though to note here that Nigeria has not as a matter of deliberate economic policy, made any move towards taking this opportunity to grow this sector of the economy,” she lamented.
She foresees that by the year 2014, there might be a total collapse of the textile factories in the country if nothing is done to reverse the descent.
Meanwhile, statistics indicate that the global textile production will grow by 25 per cent by 2020; and the Asian region will largely contribute in this regard.
True to the predication, Asia has become a hub of textile trade after the abolition of the quota regime, since the start of 2005.
This is due to the fact that major exporting countries of the region instead of importing yarn from Pakistan as the developed countries did, have invested heavily in their spinning industries to produce yarn.
China, India and Bangladesh who have solid value added textile base have invested heavily in the spinning sector to cater to the increasing yarn needs of their textile.
Of the $400 billion investment in textile from June 1999 to the October 2014, more than 50 per cent went to spinning. 25 per cent went to fabric and a major chuck of the remaining to dyeing and fishing. Only nominal investment was made in the knitting or garments sectors.
Currently, most of the textile trade is concentrated in Asia, with low cost countries like China, India, Bangladesh, Vietnam and even Cambodia rapidly capturing the value added textile market vacated by developed nation due to high cost production.
World Trade Organisation (WTO) has taken so many steps towards uplifting this sector. In 1995, WTO had renewed its commitment an adopted Agreement on Textile and Clothing (ATC), which made provision that all quotas on textile and clothing will be removed among WTO member countries.
Nevertheless, Industry watchers believe that the country can revive the sector if commitment , political will, and synergy between public and private sectors is channelled into concrete action, especially as stakeholders await outlay of the N70 billion textile funds.
NEXIM should go beyond giving out the money, by ensuring strict use of the funds for what it’s meant.
