Nigeria’s troubled textile industry

BY YEMI OLAKITAN 

The nation’s textile industry has been brought to its knees by a combination of huge infrastructural deficits and cheap imports from Asia. Attempts at reviving the sector through fiscal policy and monetary intervention seem to go nowhere.  Ag, Head of Investigations, Yemi Olakitan examines the issues behind the parlous state of the Nigerian textile sector and the way forward.

The textile industry was one of the booming sub-sectors of the economy in the post independence years. Fed by locally grown cotton and with huge demand for clothing by a fast growing population, it provided direct and indirect employment to hundreds of Nigerians for several decades.

In the golden era of Nigeria’s textile industry between 1985 and 1991, the sector recorded an annual growth of 67 per cent and as at 1991; it employed about 25 per cent workers in the nation’s manufacturing sector.

Some of the textiles companies that enjoyed the boom then include Kaduna Textile Ltd (KTL), Arewa Textiles Plc, United Nigerian Textile Plc, Supertex, Nortex Nigerian Ltd and Finetex Nigerian Ltd.  Others were Gaskiya Textiles Mill, Kano Textile Ltd, Aba Textiles, Zamfara Textiles Ltd, Asaba Textiles Ltd, African Textile Mill Plc, Tofa Textiles and several others.

In that period the functional textile companies numbered around 180, employing about a million people, it accounted for over 60 per cent of the textile industry capacity in West Africa, empowering millions of households across all the geopolitical zones of Nigeria.

The story however changed in the early nineties and the sector took a massive dive into an industrial abyss. At a point during the crisis in the sector, from about 180 thriving textile companies, the number came down to almost zero, with textile giants such as United Nigerian Textile Company bowing to the pressure imposed by a hostile operating environment.

The Federal Government in 2009 set up the N100bn intervention fund for the textile industry. The Textile and Garment (CTG) Intervention Fund is managed and disbursed by the Bank of Industry (BOI). However, the fund is yet to bring the textile industry back to his former glory.  According to the Coalition of Closed Unpaid Textiles Workers in Kaduna an estimated 600, 000 people are still rendered jobless in the industry.

These companies began to close down one after the other. Some of the Textile firms that have closed down most recently include the International Textile Industry (ITI) with factories in Isolo and Ikorodu, both in Lagos, with 800 people losing their jobs. First Spinners Limited, Ikorodu, Lagos, with about 500 employees; Bhojr Textile Industry with about 700 people and Reliance Textile, Ikeja, Lagos, with about 500 employees have also folded.

The list also includes Fahibdayekh in Kano, with more that 1,000 people sent into the labour market and Atlantic Textile Mill also in Lagos, which finally closed in 2008 with about 800 people losing their jobs.

Sunday Mirror investigations reveal that the loss of jobs in the sector hit about 100,000 when the largest textile company in the country, the United Textile Mill in Kaduna State closed down with about 5,000 people forced into the labour market. The collapse of the industry was driven largely by smuggling at the borders, failed government policies, high cost of doing business arising from high-priced raw materials, energy costs, and a plethora of challenges, which plagues the investment climate in Nigeria.

In 1995, World Trade Organisation, WTO, adopted certain agreements on Textiles and Clothing, chief of them was that that all allocations on textile and clothing will be removed among WTO member countries. The main beneficiary of the policy was China. The global textile market is said to worth more than $400bn at present. According to China Customs, the export value of China’s textile and garment alone amounted to $206.5bn.  The Nigerian textile industry was one of those that suffered, because of the cheap exports from China. Nigeria used to be the major supplier of (Ankara) good quality wax-resist textile. However, in the early 2000s, cheap imitations of these products were produced and exported from China to West Africa. Some would be slapped with Made-in-Nigeria labels and then sold in Nigeria.

Investigations reveal that Nigeria imports about N300bn worth of textiles and garments annually according to the National Union of Textile Garment and Tailoring Workers of Nigeria. Most of the textiles and garments were imported without paying the required duties and taxes. Smuggled textiles have taken over 90 per cent of the Nigerian market.

A garment and clothing trader based in Lagos Island, who spoke with Sunday Mirror on the subject confirmed that most of the textile been sold in the Nigeria market come from China.

According to her, some are imported from Pakistan and Dubai. She was quick to point out that buyers also prefer foreign materials because of superior quality. “If the buyers demands foreign products we cannot deny them the right to have them because we are in the market to make money. The global textile and garments industry is very competitive and Nigeria cannot live in isolation. Nigerians travel and they see what they like. There is always a demand for foreign materials. Nigerians are fashionable people.  Though, I also sell Nigerian textile; it depends on what the customer wants, it is not all about high cost of production alone. Demand and supply contribute to the market situation,” she said.

Investigations have shown that most of the substandard textile goods in the country, which are mostly from China, are smuggled into the country from neighbouring countries like Benin Republic and Niger Republic.  Most worrisome is the fact that some of the imported products are of inferior quality.  Reports say, some of the people behind the smuggling of textile products are employees and operators of the textile firms that have closed shop in Nigeria. Some of them have found an abode for the trade in the North, using Kaduna and Kano as bases.

According to the Secretary General, National Union of Textile Garments and Tailoring Workers of Nigeria, NUTGWN, Comrade Isa Aremu, “Smugglers have disregarded the government’s orders banning importation of finished textile products by sneaking them through the borders into Nigeria”.

Aremu said that in order to reposition the sector, the issue of funding needed to be given more priority.  He said the current N100bn textile intervention fund should be increased to about N500bn and made available to the operators in the sector at zero per cent interest rate, which should be repaid within 20 years.

He pointed out that no fewer than five textile companies in Lagos State have stopped production in the last five months. One of such, Bhajaraj (with an estimated staff strength of over 1000), closed operations. The four firms that have joined the long list of moribund textile manufacturing firms in Nigeria are Four Spinners located in Ikorodu area, ITI factories in Isolo and Ikorodu and Reliance Textiles.

The five companies were all based in Lagos and employed about 9,000 people. The sad news, however, is that some of the textile firms that are closing shops in Nigeria are shifting operations to neighboring West African countries. Some of the countries that are benefiting from the fall of Nigeria’s textile industry are Sierra Leone, Ghana, and Guinea among others.

The President of the National Union Textile, Garments and Tailoring Workers (NUTGTWN), Comrade Oladele Hunsu, said the textile industry in the 1980s used to be the second largest employer of labour after the federal government. “However, over the years, there was a steady decline in operations of the textiles firms and then an eventual collapse of the industry, which has led to loss of jobs, dearth of skilled manpower, low capacity utilization and drop in government revenue due to lack of excise duties”, he noted.

He called on the government to engage Asian government on best trade practices and chart a new course for reviving the textile industry.

Speaking further he said the Federal Government was losing about N75bn annually on customs duty and Value Added Tax as a result of smuggling of textile materials into the country stressing that the performance of the textile industry remained at low ebb in 2014 due to lack of enabling environment and inconsistency in government policy.

According to the union leader, the capacity utilisation in the industry remained below 50 per cent and the growth had been stagnant. Cost of manufacturing textiles in Nigeria is high and this gives room for cheap foreign goods. The price of gas was increased by 15 per cent from January 2014; adding that the price of black oil remained high due to scarcity. It stated that textile industry deserved concessional pricing like other industries such as cement, saying that government’s response, however, has been inadequate.

While commending the Federal Government for the intervention fund set up for the textile industry, but noted that financing was just one out of the numerous challenges facing the textile industry. He pointed out that the key problems of the sector remained infrastructural inadequacy, raw materials shortage, unreliable electricity supply, and smuggling, counterfeiting, faking, among others.  There is also lack of patronage of made in Nigeria textiles due to lack of effective policy enforcement. Indeed, most government ministries and agencies such as police, customs, immigration and army still prefer to use imported fabrics for uniforms rather than sourcing them locally.

Other African countries have been highly supportive of their textile industry to improve their competitiveness. Ethiopia, for example, had attracted foreign direct investment in the textile and garment industry in recent years creating 28,000 new jobs as a result.  Ivory Coast had one large textile mill; its government however had taken effective steps to check imported counterfeit textiles to protect local industry. Ghana on its own part had three large textile mills and only allowed import of all raw materials, dyes and chemicals and spare parts at zero per cent duty. The union called on the Federal Government to take necessary measures and put in place similar policies that would support and protect the nation’s textiles industry.

Speaking with Sunday Mirror on the subject, President, Nigeria Textile Manufacturers Association, Olarenwaju Jaiyeola, attributed the problems of the textile industry in Nigeria predominantly to infrastructure.

“If we address the problems of infrastructure, half of the problems plaguing the sector would have been solved. The problems of electricity, high costs of production are very basic problems facing the industry.’’

According to him, the smuggling of cheap textiles from abroad, which the local industry is unable to compete against, higher costs of production, high interest rate, and dumping of cheap Chinese wax and African prints, power failure and high cost of fuel are the problems have been identified time and time again.

“The rising cost of Automotive Gas Oil, AGO, popularly called diesel has teamed up with failing infrastructure to put the final mix to make operation difficult for the surviving textile industries in Nigeria even the current epileptic supply of electricity leaves manufacturer with no options than running a generating plant. Take, for instance, a textile company consuming one million litres of diesel in a month and three million litres of fuel oil a month, the increase in the prices of the fuel will definitely reflect on the price of their products. How then can local companies compete with the cheap materials coming from China? The deterioration in the sector can also be blamed on the weak linkages in the value chain,” he said.

On the Intervention Fund, he admitted that the Fund has stabilised the situation.  He said, “The fund has not established new factories though, but it has brought some life into the industry. The problems of smuggling and counterfeiting are still robbing us of the expansion we would have enjoyed and cheap imported products still continue to litter the country. These problems are so damaging such that those who have taken the loans could not pay back. Foreign companies have dominated the scene. The cost of electricity is very high. Costs of production are generally very high.”

The Bank of Industry has said about N60bn has been disbursed to various beneficiaries under the intervention scheme and had resulted in the re-opening of United Nigeria Textiles Limited in Kaduna.

According to the bank, “Over 8,070 jobs had been saved through the intervention, adding that capacity utilisation for most beneficiaries has increased from below 40 per cent to about 61 per cent at the time while over 50 per cent of those making losses has started reporting profits.”

On the issue of local patronage, he noted that a bill has been sent to the National Assembly on the matter and the bill is there since 2003.

“As you know we are in a democracy, the bill is following the process, it has gone through second reading. It is because the problem of local patronage has not been backed by law that is why all the agencies of government are still doing whatever they like otherwise we would have seen a remarkable improvement in the industry. The central point of the bill is that all the agencies of government should patronise the textile sector for their clothing and textile needs. The bill says before you look outside look inward first. There is a ray of hope that when the bill is passed the textile industry will further improve to an extent,” he said.

Speaking further, he emphasised the gains of the intervention of the Federal Government through the Textile Fund, which he said had significantly assisted in reviving some of the dead textile companies. He however urged the government to give additional incentives to the textile manufacturers to enable them increase their productivity and create more jobs for Nigerians.

According to him, the production of cotton for domestic utilisation and exports should be strengthened, adding that existing players in the sub-sector should be supported to expand their current operations in order to attract strong brands as well as enable operators to set up local manufacturing plants in the country.

Speaking with Sunday Mirror, Director-General, Lagos Chamber of Commerce and industry, Mr. Muda Yusuf, said, “The problems with the Nigerian textile industry is high cost of production, smuggling, technology, and logistics. All these factors have led to the collapse of the industry. The fact is that the global textile industry has moved on from where it used to be years ago and we can no longer compete with bigger brands. We cannot continue to use obsolete technology and expect to compete effectively with the rest of the world. It has now become survival of the fittest.  There is also no enforcement of fiscal policy to ensure protection of the industry. The whole country is flooded with substandard and even contraband textile materials. The exchange rate and even the interest rate are not helping matters. What the Federal Government has done is throw money into the industry. The intervention fund alone cannot help matters because it is not a money problem alone. As long as the problems remain and if the cost of production is as it is, we cannot compete globally in the industry. If the enforcement of fiscal policies put in place for the protection of the industry is effective then there would be satisfactory changes.

The Federal Government itself needs to patronise the industry. Look at all the police uniforms, military and paramilitary uniforms that government procures from abroad. If there is a policy that says that they must patronise Nigerian textile companies, it will keep the industry busy and then this will in turn create employment for thousands of Nigerians. It is not a question of throwing money at them; some of the companies are already facing receivership. When you collect money from a bank and you cannot pay back, they are going to come after you. They will collect all the assets of your company and this will further weaken an industry that is already on its knees.”

According to the Yusuf, the Chamber of Commerce had met with government agencies on these issues but nobody is implementing these policies. “This has further contributed to the situation we found ourselves,’’ he said.

The Lagos Zonal chairman of Nigerian Textile Workers Union, Godspower Irobo, said the folding up of textile industries in the country poses a major threat to government’s efforts to reduce unemployment among Nigerians.

He disclosed that over a huge percentage of commercial motorcycle riders are textile workers that were disengaged by the moribund firms.

“It is difficult for a textile worker, especially those in production line, to adapt to other fields. It is also difficult for them to begin their own businesses because they do not have enough resources to do so. So, most of them end up as commercial motorcyclists,” Irobo said.

Adebola Fayemi, CEO of Fayemz Fashions Label, said the major challenge that we face in the industry concerns the lack of basic infrastructure particularly inadequate power supply.

He said, “What affects me the most as a designer is power. I donate half of my income to power generation. We are on diesel all the time. If the government must help the textile industry which is directly linked to the fashion industry, they must improve power supply.  This is what will benefit every entrepreneur and have a multiplier effects on the economy because there will be jobs. If entrepreneurs do not spend their money on power generation, the cost of production will be greatly minimised. This is the major obstacle that most Nigerians face. If government can take effective charge of power and provide adequate power supply, then we can concentrate our creative efforts on other areas, which will contribute immensely to the growth of our national economy.   The way I see Nigeria and this includes everybody, I see a malnourish child who has tremendous potential but is not flourishing. Nigerians are very resourceful even with the situation Nigerians have shown that they can perform wonders; given a conducive environment. Look at our Ankara textile materials, which for many years were a favorite of designers in runways all over the world in the fashion industry.

Our textile factories started manufacturing it in the 80s but it has been highjacked by Asian companies. Some have even claimed that it did not originate from Nigeria and that it was somehow imported from Asia to Nigeria and that we copied it from them. This is because of the stagnancy in the Nigerian textile sector. If the industry had continued to grow at the rate it was growing in that period. No one could say that.   The solution is clear infrastructure, infrastructure, and infrastructure.” he said.

Mrs. Fadekemi Ahmed, a textile and clothing trader on Lagos Island, also pointed out that the problems of the textile industry are that there are too many Chinese materials in the market and they are often cheaper than Nigerian made textile materials. “We don’t know how those Chinese manage to produce them at such cheaper prices. It is not true that the imported clothes are inferior quality. I can tell you that many of them are of very good quality. When you have a good quality product at a cheaper price imported massively into the country, who wants to buy another product with a lower or equal quality but higher prices even if it is produced in Nigeria by Nigerians.”

On how she gets her goods, she said, ‘I don’t travel out to import them myself; they come here to supply me. I have heard that some people travel out to bring their goods. I don’t, I have people who supply me. The business is good.”  She explained that government should do what it should do to help the industry as “we will take goods from whoever is profitable since this is where we get our daily bread.

“I have been in this business for the past 10 years and this is what I use to send my children to school”, she said.

All hope may not be lost for the industry as falling oil prices have again underlined the need for economic diversification. The issue has also featured in ongoing election campaigns.
President Goodluck Jonathan during his campaigns efforts for 2015 elections has made a pledge to revive the textile industry one of his cardinal focus.

According to him, he hopes to generate employment and boost the economy through that sector. At the PDP presidential election rally held in Kaduna, the President had said, ‘With improvement in power supply, we will work closely with farmers and manufacturers to ensure that the textile industry is back to life, thereby reclaiming his lost glory.”

The governorship candidate of All Progressive Congress, APC, in Kaduna state, Mallam Nasir El-Rufai also assured that if elected, his administration will revive the moribund Kaduna Textile Limited and other collapsed factories in the state.  Analysts say, these comments show that government is fully aware of the problems in the sector and that one can only hope that the campaign promises would be fulfilled.