Opportunities for small business arising from the new Cotton, Textile and Garment (CTG) policy
Last week, a new policy on the cotton, textile and garment industry was launched by the Minister of Industry, trade and investment- Mr Olusegun Aganga. The thrust of the policy is to ensure that this critical sector of the economy gets the required boost in order to create jobs and save foreign exchange for the country. In the 1960s and 70s, the textile industry was the highest employer of labour in the country after the civil service.
But over the years this industry has suffered a slow down due to unfavourable policies, dumping of products, lack of skills, unfavourable operating environment amongst others. The new policy seeks to address all these issues across the entire value chain. It doesn’t just focus on one aspect of the chain, say cotton growers, ginners or retailers, but it addresses every aspect of the chain, that’s why it’s christened “From farm to fashion”.
The policy was reached after extensive and prolonged consultations involving Government, the private sector, research institutions, the academia, international development agencies and the media. Specific items which the policy intends to achieve include
•A rise in direct and indirect employment in the sector from 24,000 people and 650,000 people respectively to 100,000 and 1,300,000 people by 2017.
•Significant foreign exchange savings by reducing the estimated USD 2 billion currently spent importing the bulk of our textile and garment needs.
•Increased export earnings of a t least USD 3 billion annually
•Increased foreign Direct investment (FDI) into the sector by about USD 1.5 billion over the next 5 years.
•Increase in seed cotton production from 200,000 MT in 2013 to 500,000 MT by 2015
So what are the aspects of the policy and what opportunities exist for businesses?
•The creation of Industrial Textile and garment parks.The policy seeks the creation of specific industrial parks for use in the textile and garment industry. These parks will be located in strategic areas across the country that is close to the key raw materials’ and markets as the case may be. These parks shall either be fully private sector led or on a Public, Private Partnership (PPP) basis. The creation of these parks presents opportunities for developers and those in the construction industry. There will be common infrastructure like water, roads and captive power. Again this presents opportunities for those that will provide these services to the parks.
•Tax waivers and holidays. The new policy advocates that all investors who invest In the sector from 2015- 2019 will be able to import plant and machinery, spares, dyes, chemicals and packaging material duty and VAT free. There is also a 3 year tax holiday for major textile manufacturers. This is a sort of upfront financial benefit meant to encourage foreign and local investments into the sector. This should ensure that operators are able to set up, start production and become competitive from the outset.
•Investment incentive. Investors who invest a minimum of USD 10 million or N 1.8 billion in the sector and employ a minimum of 500 direct Nigerian staff can import fabrics equivalent to 50 % of their output from their Nigerian operations levy free for a five year period, after which they will have to commence the local manufacture of such fabrics. While the amount needed to benefit from this incentive is fairly large, but companies can come together, partner and form a single entity that enjoys this benefit which will increase their competitiveness. This also allows companies to employ direct Nigerians in their operations.
•Financing. The President approved the conversion of the existing Cotton, Textile and Garment (CTG) industry intervention fund set up in 2010 and administered by the Bank of Industry (BOI) from a loan to equity. In essence BOI is able to give longer tenured loans and low interest rates to operators in this industry. Furthermore, it is recommended that all levies/supplementary taxes collected on textile imports in Nigeria should automatically be transferred to the BOI for use in developing the CTG industry in areas like creation of integrated textile parks and provision of long term loans to textile operators. This portends opportunities for companies involved in the entire CTG value chain to obtain long term credit to fund expansion and growth
•Export promotion and trade strategy. The GTG sector is a major area to increase Nigeria’s foreign exchange earning potential and businesses can pick this area and focus on exports of finished products. Nigerai has existing favourable trade deals with a number of countries- the chief being with the United States under the African Growth Opportunity Act (AGOA). Under this new policy, the Nigeria, Export Promotion Council (NEPC) will prioritize ready-made garments (RMG) as a key export driver for Nigeria. The NEPC is already in the process of securing orders in the United States and Europe for potential local textile manufacturers.
•Local Patronage. The policy specifies that all military and para military agencies and Government schools are to patronise ONLY Nigerian made textiles and garments for their uniforms once the requisite standards are met. In addition, private schools and private organisations will be encouraged to source their materials locally. This portends massive opportunity for those involved in this sector as they have a ready market for their products. These institutions possess huge purchasing power and are repeat buyers.
Other areas in the policy include improvement in overall skill level, maintenance of standards and measures to check smuggling.
Overall, huge opportunities exist for those in the CTG value chain. However, current operators and potential operators need to organise themselves to tap into these benefits. This will involve entering into partnerships, putting their business plans in place, intensifying their technical capacities, improving product quality and human resource base in order to be positioned to take advantage of the explosion that we believe this policy measure will bring for this critical sector.
Oguche Agudah