Cash-strapped textile firms battle higher production cost, insecurity
Nigeria’s struggling textile firms are currently battling production costs that have continued to rise in the face of an increasingly tougher business environment. They are also reeling under the heavy weight of Boko Haram insurgency that has affected their production activities and supply chain.
Most Nigerian textile firms are in the northern part of the country, notably Kano and Kaduna states. Though the impact of Boko Haram insurgency is felt more in the north-eastern states of Adamawa, Borno and Yobe, supply of textile materials and products from Kano and Kaduna to the rest of the north has been limited. Cotton farmers in many parts of the northern Nigeria have also fled, thus making raw material access difficult for textile makers.
Local textile and fabric makers are also crimped by lack of patronage from domestic consumers and the government. Even the ongoing Common External Tariff (CET), which began last month, also puts products of these firms at price disadvantage when compared with imported ones.
“Our cost of production is very, very high now,” Paul Jaiyeola Olarewaju, director-general, Nigeria Textile Manufacturers Association (NTMAN) told Real Sector Watch.
“None of the textile companies knew the Boko Haram insurgency could be this problematic. Nobody wants to do business in the affected areas and it is difficult to sell,” Olarewaju said, in a telephone chat.
The Federal Government established a N100 Billion Cotton, Textile and Garment (CTG) Fund to enable 34 members of the NTMAN and other textile players to access loans for expansion.
Though firms have accessed the CTG Fund from Bank of Industry (BoI), which manages it, they are struggling to pay back, due largely to insecurity and tougher operating environment.
“They are paying back gradually, but it has been difficult,” MTMAN DG said.
When asked why textile firms fail to diversify, Olarewaju said it is not easy to do so given the nature of the sector.
“If you are saying that a producer of African prints should move to khaki, then this is possible. But to move to other businesses is difficult due to the nature of the business and our operating environment,” he said.
He said government contractors handling uniforms of security agencies prefer to source same from cheaper environment than Nigeria, where the products are costlier owing to high production cost.
The World Bank estimates that textiles smuggled into Nigeria through Benin are worth $2.2bn each year, compared with local Nigerian production, which has dropped to $40m annually.
Number of textile makers in the country has crashed from over 200 in the 1980s to about ten. The few survivors include African Textile Manufacturers Limited, Adhama Textile Limited, Angel Spinning and Dyeing Limited, Spinners and Dyers Nigeria Limited and Tofa Textiles Limited, among others.
Policy somersault and lack of research and development have crimped the industry. Closure of ginneries has also stunted the growth of the sector.
“People are no more in the business of cotton production. Only few ginneries are now involved in cotton,” Usman Garba Saulawa, director-general, Kaduna Chamber of Commerce and Industry, told Real Sector in 2014.
ODINAKA ANUDU