The troubled textile industry

Some 25 – 30 years ago, the story of the Nigerian textile industry was that of boom, growth and hope. That was the period when the industry had about 180 mills in operation, an annual growth rate of 67 percent, and employed over 350,000 people who constituted 25 per cent of workers in the manufacturing sector.

That same story, when told today, would sound stranger than fiction because the industry has lost almost all save 25 mills most of which are running at less than 40 per cent of installed capacity and employing just 25,000 people.

That this industry which held out much hope for the industrial growth of this country has been allowed to ‘die’ leaves a sour taste in the mouth, more so when the circumstances and/or factors that brought about its sorry-situation are not beyond the control of the managers of the country’s economy.

It is sad to note that the major ‘killers’ of this industry which included smuggling, cost of funds, power infrastructure etc, are problems which a government that believes in industrial revolution could solve without much ado, but have been allowed to thrive and even to kill the industry.

We are not unaware of government’s response to the sickness in the industry in 2010 by placing a ban on importation of textile fabric, but like most restrictive trade policies in this country, this failed to bring about the relief that was intended but boosted the smuggling industry which made continued influx of textile fabrics into the country possible. The industry appeared to be booming, but that was mere motion without movement because, though smuggled imported textiles accounted for over 85 per cent of fabrics sold locally, they brought no revenue to government.

The smuggled goods were cheaper than the locally produced ones and the reason was that the cost of financing from local banks was so high that while interest rate on loans in Nigeria was close to 30 per cent, similar loans in China could be obtained at less than 6 per cent rates, making it much easier for Chinese firms to acquire new equipment and produce at cheaper cost. Added to this is the unreliable electricity supply which pushes manufacturers to opt for costly independent power supply sources and, according to data from the International Textile Manufacturers Federation (ITMF), power accounts for about 15 per cent of production cost.

We are not out to cry over spilt milk, which the textile industry in Nigeria seems to be, because the country can still awaken this giant by looking at the bigger picture and getting determined to leverage the opportunities in both continental and  global markets to revive the industry.

It is fascinating to note that the annual global output of textile firms is estimated at over $400 billion, half of which comes from China. A variety of fabrics are used by different regions and cultures. The most popular fabric type among sub-Saharan Africans is the African print fabric. This fabric is an integral part of African culture with annual sales volume of 2.1 billion yards at average production cost of $2.6 billion and retail value of $4 billion.

We believe that, with the right environment and appropriate policies, Nigeria can lead this market. It is worrisome that China and India account for 60 per cent and 21 percent respectively of African print fabric production. It is all the more worrisome that, on the consumption side, West Africa accounts for 65 per cent of the market with Nigeria accounting for 38 percent of total demand for African print fabric.

As the drive for diversification of the economy gathers more attention in the wake of dwindling oil revenue, it is pertinent that our national economic planners beam their searchlight on the textile industry given its enormous potential for job creation. Though it seems unlikely that the country does not have a good comparative advantage in textile manufacturing as local textile firms have failed to thrive in the midst of the influx of foreign textile, yet a close look at the cost determinants shows it has a competitive edge in textile manufacturing over the largest textile producers in the world.

It is this competitive edge we crave the indulgence of the government to take seriously in the present quest for diversification. And the time to do so is today.