Nigeria loses 120 textile firms after pumping N500bn public funds

By Odinaka Anudu
Posted on Friday, 2 September 2022 12:31

Textile-weaving machines are covered at a closed-down textile factory in Kaduna, Nigeria November 3, 2016. REUTERS/Afolabi Sotunde

No fewer than 120 textile companies in Nigeria have ceased to exist after the government pumped billions of public funds to rescue them. The Nigerian government has floated a series of funding schemes totalling over N500bn ($1.18bn) in the last 30 years to salvage the local textile industry, according to public information from government institutions, including the Central Bank of Nigeria (CBN).

Olusegun Obasanjo’s administration (1999-2007) launched a N70bn Textile Development Fund to revive the ailing industry. This was followed by a N100bn Cotton, Textile and Garment Fund during the tenure of the Musa Yar’adua/Goodluck Jonathan government (2007-2015).

Similarly, Muhammadu Buhari’s government has launched at least three textile industry intervention funds since 2015 when he became president, including a N225bn fund, N50bn Revival Fund and another N19bn Cotton Fund.

Prior to 1999, there had also been finance schemes by the military governments of Ibrahim Babangida and Sani Abacha, but many of the textile companies shut down even after the government handed out public funds to them.

Power supply was erratic; textile products were being smuggled into Nigeria; traders were bringing in cheap Chinese goods and we were not sure they were paying import tariffs.

Some of the funds were grants while others were loans, but industry players, such as Dr Michael Ola Adebayo, a director at Haffar Industrial Company, says most of the loans were never repaid.

“[…] it is a lack of due diligence on the part of the government,” Hamma Kwajaffa, the director general of the Nigerian Textile Manufacturers Association, says in an interview with The Africa Report.

“It was clear from the outset that money was not even our problem, and has never been our problem. The major challenge that needed to be addressed was the tough business environment in which the textile companies operated. Power supply was erratic; textile products were being smuggled into Nigeria; traders were bringing in cheap Chinese goods and we were not sure they were paying import tariffs,” he says.

The cost of production in Africa’s most populous nation was ‘prohibitive’, making textile companies less competitive, he adds. Meanwhile, a report by The Economist says $2.2bn worth of textiles are smuggled into Nigeria annually. “We do not have access to our market really because we can’t compete,” he says.

No fully integrated textile companies

The country has lost its textile companies, such as Asaba Textile Mills,  Aswani Textile Mills, United Nigerian Textile Limited, African Textile Manufacturers Ltd, Afprint Nigeria Plc, Nigerian Textile Mills Plc, Aba Textile Mills, Edo Textile Mills, and Tofa Textile Ltd, among others.

These were full-fledged textile companies involved in backward integration and production, according to the Nigerian Textile Manufacturers Association.

Only 24 textile companies exist in the country today, says the Nigerian Textile Manufacturers Association, but none of them are fully integrated textile companies. Many are involved in trade or production of rugs, carpets and caps.

“The textile industry is struggling because of high production costs. There were recent intervention loans floated by the government, but only very few of the players took them. Even those who took them are unable to pay back,” says Adebayo.

“If you want to bring back the glory days, then you must deal with multiple taxation in the industry […], provide energy subsidies and enforce a policy to increase local patronage,” he says.

Microcosm

The challenges of the Nigerian textile industry are microcosms of issues facing the general manufacturing sector. Industry players tap major issues, such as wrong tariff structures, absence of foreign exchange to import inputs, high cost of funding, multiple taxation, high operating costs and policy flip flops.

[…] textile products are easy to smuggle into the country and corrupt officials in the customs service allow that to happen.

Some economists argue that Nigeria should focus less on the textile industry and more on areas where it has both competitive and comparative advantages, such as leather, food and cement.

“[…] global technology has overtaken the Nigerian textile industry,” says Muda Yusuf, an economist who is also the CEO of the Centre for the Promotion of Private Enterprise.

“The Nigerian textile industry requires a lot of investment in technology and equipment. As a highly-intensive industry, how will they be able to get diesel and gas to run textile firms at their current prices? They also import cotton with the scarce foreign exchange, so how will they be able to sustain these?” says Dr Yusuf.

“[…] textile products are easy to smuggle into the country and corrupt officials in the customs service allow that to happen. You cannot talk about the textile industry of the 1970s and 19980s in this century [unless] you are able to deal with the fundamentals; even the surviving ones have gone into receiverships.”

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