Years later, questions surface about FG’s multi-billion naira textile revitalization fund

EDIDIONG IKPOTO writes that not even a multi-billion naira fund set up by the federal government has been able to revitalize the textile sector, which once employed over a million Nigerians.

Nigeria’s textile industry, like several manufacturing sub-sectors, has suffered a rapid implosion over the years, falling from a prosperous segment of the economy in the 1980s to one that is now literally crying out for help.

According to the available records, in the early to mid-1980s Nigeria had well over 180 garment factories employing more than a million people. These factories included: United Nigerian Textile Limited, Aswani Textile, Afprint, Asaba Textile Mills and Edo Textile Mills, among others.

During this period, the textile industry was able to produce a wide range of products including printed fabrics such as wax and African prints, guinea brocade, lace/embroidery, shirts, upholstery fabrics and towels, blankets, tarpaulins, carpets, fishing and mosquito nets.

It was also known for different types of yarns such as cotton, synthetic, rayon and sewing threads among others. Unfortunately, today most of these products are historical fragments that have become beautiful memories.

Today there are fewer than three fully fledged textile mills in Nigeria, a near-seismic implosion of an industry that was a major contributor to the Nigerian economy three decades ago.

But how did that happen? How could the once virile Nigerian textile industry quickly slow down and hibernate like a boxer suffering a brutal knockout? The answer to that question is perhaps as complicated as the series of events that led to the industry’s demise.

According to experts, with the passage of the Structural Adjustment Program in 1986 by General Ibrahim Babangida’s regime, the economy was severely deregulated, leading to the gradual decline of a once booming sector.

This industry downward spiral has been so constant that it has lost virtually all profits over the past 30 years. Today Nigeria stands miles apart from its contemporaries like China, India and others who have evolved over time to build a strong, dynamic textile industry.

Other factors believed to be major contributors to the textile industry’s demise are smuggling and the long-running import culture, which has shifted the limelight from production to consumption.

However, over the years the government has made a number of attempts to revitalize this ailing sector and bring it back to the days when it was a thriving economy.

One such effort came in April 2016 when former Minister of State for Industry, Trade and Investment Aisha Abubakar toured some remaining textile mills in Lagos state. Abubakar visited Spintex Mills Nigeria Limited, Lucky Fibers Plc and Nichemtex Plc, all in Ikorodu, Lagos State.

Their mission was to critically assess the state of the industry and take the pulse of key players on the challenges facing the industry to develop viable solutions.

This visit did not turn out to be the life wire industry’s hoped-for success as there was (immediately after the visit) no tangible government gesture to address the issues it had come to assess.

The government’s first real attempt to cover up the cracks came in 1986, when the government set up the N100 billion Cotton, Textile and Garment Revival Fund to revitalize the sector. This fund was realigned during the Olusegun Obasanjo administration.

Serious efforts were made during Goodluck Jonathan’s regime to bring the sector back to life.

In 2013, Comrade Issa Aremu, then Vice President of the Nigerian Labor Congress and Secretary General of the National Union of Textile, Garment and Tailoring Workers of Nigeria, said that over 38 firms had benefited from the fund and 8,070 jobs had been saved.

Even the Bank of Industry, BOI, which manages the fund, said about 60 percent of the fund has been paid out. However, the more the fund was paid out, the more the textile and clothing sector died.

In 2020, the Central Bank of Nigeria announced a N50 billion special fund to revitalize the ailing textile industry.

The funds were to be managed by the BOI at an interest rate of 4.5 per cent and would use any of the interest-free instruments approved by CBN for project refinancing, long-term financing for plant and machinery acquisitions and working capital for beneficiaries.

The announcement was made via a statement containing the guidelines for the resuscitation pill, tagged “Central Bank of Nigeria – Non-Interest Guidelines for Intervention in the Textile Sector”. It was signed by CBN Director of Fiscal Policy and Regulation Department Kelvin Amugo.

Apex Bank said the funds would be used to revitalize the ailing textile sector, restructure facilities and provide more facilities for textile companies in real need of intervention.

According to CBN, the seed fund, which is a one-off intervention, would expire by December 31, 2025, with the maximum funding amount limited to N2 billion for a single borrower for new facilities and N1 billion for refinancing would be fixed.

The regulator said the plan to overhaul the textile sector was perfected at the Aug. 7 meeting between CBN Governor Godwin Emefiele and textile mill owners.

Resolutions reached at the meeting were that textile mills should articulate the status of their BOI cotton textile and apparel loans, detailing their outstanding balances, tenors, interest rates, interest payments and the assistance requested from CBN.

The CBN listed activities to be covered by the intervention as activities in the CTG value chain. These included: cotton ginning (fluff production), spinning (yarn production), textile mills and integrated garment factories (for military, paramilitary and schools and other uniformed institutions).

The eligibility criteria for participation in the program stated that any textile company with an existing facility on the books of BOI under the CTG program, any textile company with existing facilities in Deposit Money Banks/Non-Interest Financial Institutions, textile companies that do not Participations under the Fund for Small and Medium Enterprises/Restructuring/Refinancing would qualify, while projects funded prior to June 2009 (start of BoI-CTG loan) would not be eligible.

Therefore, the CBN was once again a rebalance of the CTG fund.

The focus will be on facilities that have demonstrated weaknesses due to maturity, structure or cash flow difficulties.

However, despite this intervention, the industry continues to move at a lethargic pace. In fact, what is often considered to be a textile in Nigeria today includes, but is not limited to: rug, rug, cap.

Nigerian Textile Manufacturers President Hamma Ali Kwajaffa has shed light on Nigeria’s decline in the textile ecosystem.

He said: “100 mills have closed since 1980 to date. If you go to the market now, we don’t even have access to our local market and we can’t export. The counterfeiters from Asia, especially from China, if you go to the market now, they’ve taken our designs, filled our markets and are selling them cheaper. We’re using backwards integration in textiles, which means we’re using cotton, but they’re going to introduce polyester clothing, which is cheaper.

“The way forward is to have bilateral ties with China to tell them they bring cheaper options to flood our market. To make matters worse, they also give them export incentives. When they export to other countries, their governments incentivize them to come here and sell cheaper and still make huge profits.”

When asked if the industry could challenge its Asian peers in terms of productivity, he said: “Yes, exactly, but we can’t at the moment because our infrastructure is deteriorating. South Africa, Ethiopia, Egypt to name a few in Africa all have lower electricity tariffs than Nigeria.”

According to the NTMAN president, the government needs to take conscious steps to ensure there is an enabling environment for local manufacturers to operate.

He continued, “They have committed a $100 billion fund to industry through the Bank of Industry. The thought was that we produce poor quality and not high quantity. The machinery we used was blamed for being outdated. The government gave this fund to convert our machines. They provided the machines to produce quality and quantity but then we don’t have market access because goods come from China and India.

“Even in the AfCFTA, they look at Nigeria with a huge population like Nigerian market, but we manufacturers in Nigeria don’t have access to Nigerian market because cheaper materials are pouring in from China.

“Nigeria should be able to improve infrastructure. South Africa has about 50,000 MW of electricity. Nigeria attempts to manage 5,000 MW. How can we compete in Africa? And we call ourselves the economic giants of Africa? In most of these countries they even have industrial parks, they have textile parks in Ethiopia and their goods can compete with those in Europe. The key issue is tackling Nigeria’s infrastructure degradation and selling on par with our competitors.”

Similarly, an economist at the Panatlantic University in Lagos, associate professor Olalekan Aworinde, blamed poor infrastructure and weak trade policies as the main reasons why the cash injection into the industry was not producing the expected results.

According to him, the government should intensify its efforts to create a favorable production environment for manufacturers through improved energy supply and security in order to boost the confidence of industrial players.

He said: “This is due to poor trade policy in Nigeria. Based on what is happening in the industry people are coming in with cheaper products and production is not cheap for textile manufacturers in Nigeria.

“Regardless of the interventions in the sector, these people without sufficient electricity supply still become expensive producers because they have to drive on diesel, and all this has a corresponding cost. It will affect manufacturers’ production costs, and what they produce also determines what they sell. If they produce and people don’t buy because of high prices, there’s a tendency that what they produce might not be of the quality that’s coming from China and the rest.”

A market analyst, Mr. Ike Ibeabuchi, noted that Nigeria should focus on areas with competitive advantages and urged the government to support those in those areas with competitive and comparative advantages.

He further said that the country is currently unable to produce textile products at competitive prices and stressed the need to focus only on areas where it is competitive.