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By Merit ibe
Poor perfomance of the nation’s textile and garment industry amidst huge government’s financial interventions, has drawn the ire of some observers who have accused operators in the sector of mismanagement of the funds.
According to them, the operators had rather than go into actual production continued with the importation of already made textiles.
Attempts at reviving the sector by the government through fiscal policy and monetary interventions seem not to have delivered the expected results with some analysts alleging that some companies were merely trading with the funds meant to revamp the ailing industry. But Chairman, Textile Group of the Manufacturers Association of Nigeria (MAN), Ilyasu Saleh, who refuted the allegation of forex roundtripping by textile companies, said it was unfounded.
He said “as chairman of the Textile Group of MAN, if I hear any company doing that, that organisation will be sanctioned. Companies don’t even have the working capital to do that. If it had happened, CBN would have known and done something but it is unfounded,” Saleh emphasised.
The Nigerian Textile Industry used to be the largest employer of labour, second only to public sector and has always been a major player in the manufacturing sector of the economy.
Regrettably, it has ceased to be an important contributor to foreign exchange earnings and employment generation in Nigeria due to inadequate power supply, inconsistent government policies, rampant smuggling of foreign textiles, insecurity and forex scarcity among others.
Meanwhile operators have said the challenges facing the industry are multifaceted and its revival would require a strong political will, commitment and sincerity of purpose by the government.
Lamenting the state of the textile industry, Saleh said that a large per centage of textiles sold in the country are smuggled and imported, putting the country at a loss in potential yearly Value Added Tax (VAT) revenue from such activities. He identified the suspended payment of Export Expansion Grant (EEG) claims as adding to the woes of operators, thus limiting their capacity to export and even improve production, since the markets have been dominated by foreign clothing.
According to him, operators have been selling below production costs and this has remained unsustainable.
Government agencies , armed forces no longer buy from local manufacturers but go to China to import.
“The executive order 003 is inefficient. No one is complying with the law. No one is addressing the decayed infrastructure and overhead costs. Energy costs are also huge and affecting operations of manufacturers.
He pointed out that low patronage was seriously affecting the textile industry. “The Nigerian agencies and MDAs , despite the executive order 003, the MDAs are not patronizing, they rather import. Right now the prices of import has gone up. The cost of doing. Business is high.
“Lack of forex is hindering the industry too. We import our raw materials since we don’t produce them here. NNPC used to produce paraffin wax but they no longer do that so we have to import. With the scarcity of forex we can’t even import again. That is why the textile industry is still in comatose.”
Speaking on the interventions by the CBN, he said the textile companies cannot pay back due to lack of sales . “We cannot pay what we borrowed in terms of the intervention because the funds given to industries is tied down to two key issues; low patronize of the local textile and high cost of electricity. The interventions also came with some promises that are yet to be fulfilled.
“ We bought new machines with the funds and raw materials, yet we cannot sell considering the high cost of production so we are at a fix. It has not been easy and possible to pay back the funds.
Saleh also disclosed that the Federal government promised to revamp the value chain that is production of cotton, spinning and weaving” but the intervention only stopped at the production of cotton.
‘ Even with the production of cotton insurgency has made it difficult for farmers.
Last year I bought cotton for #520, today it is selling at #1,600. And I cannot pass this high-cost to the consumers it’s going to be very expensive.
The government is a key customer but they’re not patronizing the industry, they rather import substandard from China. I produce standard tarpaulin that is hundred percent cotton. But they prefer to import tarpaulin that is plastic, that is wrong and not encouraging.
“Most industries are not really producing up to the capacity.. Though the fund really helped in retooling the textile industry, we were able to modernize our textile machinery. The funds should go round the value chain so others can benefit. . If government and consumers can patronize the industry, 80% of the problem will be solved.”
“ The price of diesel is #800 per litre it’s not favorable. Electricity issue is not encouraging making the industry to rely more on diesel, all this make our products uncompetitive. They keeps complaining of high price of our products which is due to harsh business environment, the environment should be improved on, it will make our products competitive.
“If government patronises the local industry, it will save our scars forex. Government also promised to set Ajaokuta in order so we can buy our chemicals but all that did not work. Things are really bad. So we hope that government will do the right thing. We are also looking inwards.
Low patronage is affecting the industry. Government needs to let the MDAs who use uniforms to buy locally made ones and also revive and reactivate our refineries for cheaper diesel and chemicals. Government should make sure our cotton production is sustained to a level so that price can come down. Insecurity is also an issue because cotton farmers cannot go to farm. Cotton production is under threat due to insurgency.
The CBN started with a loudable plan but they could not sustain it. It needs to fund farmers to produce enough cotton, fund spinners to buy cottons and fund weavers to buy from spinners for the finished products . And then urge Nigerians, government agencies and other to patronize made in Nigeria goods. The armed forces, uniform agencies even schools need to patronize the products. By this you upgrade the value chain and then it works because government is still a big buyer we are not shifting all the blames on government but they’re important buyers. Egypt subsidized electricity and made sure that duties on imported product are so high that citizens have to look inwards rather than import. Government fiscal and monetary policies can help shore up the industry to revive it.
On the issue of misuse of intervention funds, Chairman, Apapa branch of MAN, Frank Onyebu, noted that manufacturers operate within the imperfect environment and so there are, no doubt, a few bad eggs within the association might engage in forex trading, adding that “most bona fide manufacturers would not obtain intervention funds and plough them into trading either in forex or other enterprise.
“The garment industry has been frustrated over the years by bad policies and government’s insensitivity. The sector used to thrive at a point in time but began to deteriorate because of certain unhealthy policies of government. I believe that the sector would be booming by now if it had received a bit of protection years ago. There’s no way the sector could survive an unfair competition with traders who import mostly substandard and sometimes secondhand products from countries with better business environment.
Onyebu, however reiterated that no amount of intervention funds would make meaningful impact without the right policies. It is still possible to revive the sector if the government deems it fit not only to put in place the right policies but to see to its proper implementation.
For Chairman, SMEs Group of the Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson-Okezie, the allegation of textile companies trading in forex, was confirmed by most members in the textile industry. Some dealers were involved in racketeering
“Some of them diverted the funds to trading in forex.
They wanted to remain in business, so the quickest way was to trade with the funds.
A good number bof businesses did not pay back. The CBN is still battling to recoup its money.
Dickson-Okezie also disclosed that in the disbursement of funds, most companies in Aba ,in Abia state complained of not getting the funds. “Aba is a textile hub. It is a big player in the textile industry. The volume of business is high there. The funds were disbursed more to the North and North East.
“When stakeholders in the eastern chambers of commerce met, they said Aba was exempted in the funds.” Absence of transparency is the bane of growth of our industries and intervention funds .
He said the recent funding of the CBN did not achieve the desired goal because sometimes the process of accessing the funds were too tedious and some of those who intend to access the funds are usually frustrated and abandon the pursuit for the funds.
“The CBN programme did not achieve the desired goal because of the issue of absence of transparency in the disbursement of the funds. A lot of Nigerians particularly the organised private sector have always questioned the distribution of intervention funds. It is one thing to come up with an intervention fund to help certain sectors of the economy or businesses but one fact remains that there is Lack of transparency in the distribution of the funds. It’s one thing to come up with an intervention fund, it’s another thing to disburse to the right companies and persons . These questions should be asked ; Who did we give out the funds to. Which companies have benefitted from the funds, what were the funds actually used for .Funds disbursed among cronies of concerned persons are most likely used to trade forex, that has been the experience. The organised private sector has always questioned the rationale behind disbursement of funds . Several recommendations have been made to the CBN at various fora that the ops needs to be involved so that there will be adequate transparency of the disbursement of intervention funds but this has not been heeded to by the apex bank.
He said other reasons why the industry did not thrive include the issue of poor local patronage.
“There is need for a high level of patriotism on the part of citizens. Government should take the lead in encouraging Nigerians to buy made-in-Nigeria products. Unfortunately that has not been the case. if only all the security and military and paramilitary agencies in Nigeria ranging from customs immigration, prisons, the police the army Air Force, will buy made in Nigeria materials for their uniform, you can imagine the kind of positive effect it will have on the textile industry but unfortunately that is not the case. “Multiple taxation, epileptic power supply, insecurity and more are all hindrances to the ease of doing business and the growth of the textile industry in Nigeria
