Moribund textile companies in the country are to be given a lifeline by the Central Bank of Nigeria, with its constitution of a panel to oversee the implementation of the policy. The bank has a self-set target of reviving 50 of such firms by 2023; and 20 of them will rebound this year, says the bank’s Governor, Godwin Emefiele. This is laudable; but a tall order, achievable only with utmost scrupulousness.
The latest initiative came on the heels of the CBN’s inclusion in March of textiles on the list of items (now 42), excluded from accessing foreign exchange from the official window, which the stakeholders commended, against the backdrop of the fact that the country has become a dumping ground even for substitute goods produced locally.
For the scheme to succeed, the panel has been mandated to examine the binding constraints: determine the power requirements in each textile hub in each state and develop a framework for generation and transmission within the hub; effective pricing of gas and diesel; identifying the smugglers with a view to naming and shaming them; and fashioning strategies to stamp out smuggling. The team comprises the Nigeria Incentive-Based Risk Sharing for Agriculture Lending, ministries of Power, Finance, Agriculture and Rural Development, Trade and Investment, Nigeria Customs Service, Nigeria Export Promotion Council, as well as Kaduna and Kano state governments.
Under the project, 200,000 hectares of cotton farmland will be cultivated by 2020, with inputs distributed to cotton farmers and cultivated in 23 states of the country. The power design is to ensure that 50 megawatts of electricity are delivered to textile manufacturers. “It’s no secret that the past 20 years have been very difficult for the cotton, textiles and garment sector. Today, most of the textile factories have all stopped operations and the workforce in Nigeria’s textile industry stands at less than 20,000 people,” Emefiele noted.
The CBN strategy no doubt has the potential to stimulate economic growth and revive the sector for job creation, thus reducing the unemployment rate, which spiked to 23.9 per cent in the first quarter of this year. Nigeria spends $4 billion annually to import textiles, according to official statistics. But smuggled textiles haemorrhage the country $2.2 billion annually.
Challenged by obsolete production lines, high cost of production, inadequate cotton availability, difficult access to credit, lack of electricity and multiple taxes, most textile firms have, therefore, shut down permanently. Apparently, heavy capital injection into the scheme is under way in the form of credit facility. Emefiele says a single-digit interest rate is important for them “to refit, retool and upgrade their factories.” In fact, many businesses suffer because of high interest rates that vacillate between 20 and 42.5 per cent. It is a clear disincentive to firms with revival plans.
The successful Anchor Borrowers’ Programme on rice production, which had offered N150 billion to rice farmers, is a likely model for the financial intervention. However, credit facilities to companies to catalyse key sectors of the economy are often abused, evidenced in the fate of the CBN N120 billion Aviation Intervention Fund in 2010. One of the beneficiaries allegedly collected N35.5 billion and diverted it. There is also the N50 billion for Cotton, Textiles and Garments firms, out of which N13.37 billion had been disbursed as of September 2016.
The recovery of these loans is always difficult if not impossible because of the base and irresponsible assumption that government’s credits amount to free funds, to be taken but never to be repaid. This is why the Managing Director, Bank of Industry, Kabiru Mohammed, decried this practice at a recent interaction with Soya Beans Farmers Association of Nigeria. As a result, the bank enlisted the intervention of the Economic and Financial Crimes Commission in the recovery of N60 billion owed it. In the first quarter of this year, only N300 million was recovered.
As the challenges involved in reviving collapsed textile firms are more daunting than rice and cotton farming, and therefore more capital intensive, the CBN should have water-tight guidelines for access to its credit and utilisation so that the set objectives will not be defeated.
Textile manufacturing was a major pillar of the economy in the past as 175 of such firms provided over 800,000 jobs. This represented “25 per cent of the total number of jobs in the manufacturing sector, second only to the government in the employment of labour,” said a former Minister of State for Industry, Trade and Investment, Aisha Abubakar, between 1985 and 1991. But by the dawn of 2018, only 27 textile mills were in operation. Just 25 of them with a workforce of less than 20,000 currently exist.
Among the most brutal constraints are the influx of cheap Chinese textiles and the activities of dare-devil smugglers. This is why the inclusion of customs in the technical committee is significant. To “name and shame” those involved is not the appropriate sanction as the committee was mandated to do. Smuggling is a criminal offence. Invoking the law against the suspects is the only reasonable course of action. But more diligence in border control and deployment of technology in their operations should be ramped up. Anti-smuggling measures on textile or any other item will remain hogwash until the non-use of scanners in clearing goods at our ports or land borders is reversed.
The danger of unfair foreign competition is much in evidence in the seizure of N315 billion worth of contraband in Kano, May 2015. The then Comptroller-General of Customs, Abdullahi Dikko, said they were sequestered in 75 warehouses. Each of them had materials valued at N4.2 billion. Under Olusegun Obasanjo’s administration, 400 trailer-loads of smuggled textiles were once burnt in Lagos; and 200 in Kano.
The success of the CTG sector rebirth, therefore, requires absolute fidelity of both the monetary and fiscal authorities to the project. While the CBN has laid out its own plan, the government too should respond in equal measure; and it should include, among others, high tariffs for imported textiles.
Nigeria must initiate pragmatic trade policies to protect its economy. This is what responsible countries do. The ongoing trade war between the United States and China over trade deficit against the former, for which it has slammed a $200 billion tariff on Chinese goods; and China’s retaliatory measures, exemplify protectionist consciousness; Nigeria should consider its interest first. With a tottering economy, it should not be indolent on such matters.
